RAM MEHAR ,NEW DELHI vs. ITO, WARD-3(1), GURGAON

The relevant facts as culled from the material on records are as under :

Assessee is an individual who filed its return of income for A.Y. 2018-19 on 04.09.2018 declaring total income at Rs.8,83,768/-. The return of income was processed by Centralized Processing Centre (CPC), Banglore u/s 143(1) of the Act by order dated 30.10.2020 determining total income at Rs.15,76,219/- by inter alia making addition of Rs.6,92,451/- on account of alleged late payment of Employees’ contribution towards EPF/ESI by invoking the provision of Section 36(1)(va) of the Act.

Aggrieved by the order of AO, assessee carried the matter before the CIT(A)-NFAC who vide order dated 02.12.2021 in Appeal No. NFAC/2017-18/10014551 dismissed the appeal of the assessee. Aggrieved by the order of CIT(A)-NFAC, assessee is now in appeal and has raised the following grounds:

“That the intimation order passed U/s 143(1) and Order passed U/s 154 are illegal, bad in law, without jurisdiction and against the principle of natural justice.

Without prejudice to the above, the CIT(A) has in view of the facts and circumstances of the case, grossly erred in law and facts in making an addition on the ESI/PF which was deposited within the grace period allowable by the relevant authorities.

On the date of hearing none appeared on behalf of the assessee though the notice of hearing was sent to the assessee which was returned undelivered by the postal authorities with the remark that the ‘No such person’. Assessee has not placed on record its changed postal address. In view of these facts, I proceed to dispose of the appeal ex-parte qua the assessee after considering the material on record and after hearing the Learned DR.

Before me, at the outset, Learned DR submitted that though the assessee has raised several grounds but the sole controversy which is to be decided is with respect to addition of Rs.6,92,451/- on account of delay in deposit of employee’s contribution towards provident fund and ESI fund.

Before me, Learned DR submitted that addition of Rs.6,92,451/- has been made in the intimation issued by CPC, Bangalore u/s 36(1)(va) of the Act for the reason that the contribution received towards PF/ESIC by the assessee from its employees was not deposited before the due date.

Learned DR supported the order of lower authorities and also placed reliance on the decision of Delhi Tribunal in the case of Vedvan Consultants Pvt. Ltd. vs DCIT in order dated 26.08.2021. He also submitted that the amendment brought out by Finance Act 2021 would be applicable to the present case as by the amendment it has been clarified that provisions of Section 43B of the Act shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub clause (x) of Clause (24) of Section 2 applies.

I have heard the Learned DR and perused the materials available on record. The issue in the present ground is with respect to the addition made u/s 36(1)(va) of the Act on account of delayed deposit of PF/ESIC contributions. The material on record demonstrates that though there has been delay in deposit of the PF/ESIC Contributions but all the amounts have been deposited with the appropriate authorities before filing of return of income by the assessee. I find that the various Benches of the Tribunal at Delhi and other Tribunal have held that the delayed deposits of PF & ESIC before the date of filing of return is an allowable expenditure and for which reliance was placed on the decision of Hon’ble Delhi High Court in the case of AIMIL Ltd. (supra). As far as reliance by Learned DR on the amendment brought out by Finance Act 2021 is concerned, “notes on clauses” to the Finance Bill 2021 clearly states that the amendment will take effect from 1st April 2021 and will apply in relation to the A.Y. 2021-22 and subsequent assessment year. In such a situation, I am of the view that the amendment brought out by Finance Act 2021 does not apply to the assessment year under consideration. As far as the reliance of Revenue on the decision of Vedvan Consultants Pvt. Ltd. (supra) is concerned, I find that the various division Benches of the Delhi & other Tribunal have held the delayed deposits of PF/ESIC Contributions to be allowable expenditure if the same are deposited with the appropriate authorities before filing of return of income by the assessee. Further, it is settled law that when two judgments are available giving different views, then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 82 ITR 192 by the Hon’ble Supreme Court. I therefore, following the decision rendered by Hon’ble Apex Court in the case of M/s. Vegetable Products Ltd. (supra) and AIMIL Ltd. (supra), are of the view that no disallowance u/s 36(1)(va) of the Act is warranted in the present case. I therefore direct the AO to delete the addition. Thus the assessee’s ground is allowed.

In the result, appeal of the assessee is allowed.