CAPACITE INFRAPROJECTS LIMITED,MUMBAI vs. ACIT/DCIT CENTRAL CIRCLE 1(2), MUMBAI, MUMBAI

The present appeal preferred by the Assessee against the order, dated 15/10/2024, passed by the Commissioner of Income Tax (A)- 47, [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Penalty Order, dated 24/02/2024, passed under Section 271(1)(c) of the Act for the Assessment Year 2016-2017. 2. The Assessee has raised following grounds of appeal : “Ground of Appeal No.1: Levy of penalty on Disallowance of Employees contribution towards PF and ESIC is bad in law: Assessment Year 2016-2017

The relevant facts in brief are that vide order, dated 24/02/2024, penalty of INR.54,51,888/-was levied on the Assessee under Section 271(1)(c) of the Act in respect of disallowance of INR.1,57,53,261/-, made under Section 36(1)(va) read with Section 2(24)(x) of the Act. The appeal preferred by the Assessee challenging the levy of the aforesaid penalty was dismissed by the CIT(A) vide order, dated 15/10/2024. Being aggrieved the Assessee has preferred the present appeal before the Tribunal.

We have heard the rival submission and have perused the material on record. During the appellate proceedings before the Tribunal it was contended on behalf of the Assessee that the issue was debatable and the assessee had claimed deduction by placing reliance upon the binding judgments of the Hon’ble Bombay High Court. Therefore, penalty levied under Section 271(1)(c) be deleted. Assessment Year 2016-2017

Perusal of the record shows that deduction of INR.1,57,53,261/- was claimed by the Assessee under Section 36(1)(va) read with Section 43B of the Act in respect of employees’ contribution towards Provident Fund (PF) and Employees’ State Insurance Corporation (ESIC) by placing reliance upon the judgment of the Hon’ble Bombay Chemicals Ltd. [2014] 366 ITR 1 (Bombay) and the judgment of the Hon’ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC). In the aforesaid judgments it was held by the Hon’ble Courts that employees’ contribution towards PF/ESIC deposited before the due date of filing return was allowable as deduction under Section 36(1)(va) read with Section 43B of the Act (even though it was deposited after the expiry of the statutory time period specified in the applicable statute). However, subsequently, the Hon’ble Supreme Court in the case of Checkmate Services Private Ltd. v. CIT-1:[2022] 448 ITR 518 (SC)[12/10/2022] had taken a contrary view and had held that deduction for employees’ contribution towards PF/ESI shall be allowed as deduction only if the deposit is made by the employer on or before the due date specified in the applicable statute in view of Section 2(24)(x) read with Section 36(1)(va) of the Act. The fact that employees’ contribution towards PF/ESI has been made before the due date of filing of return of income would not entitled the Assessee to claim deduction under Section 36(1)(va) read with Section 43B of the Act. Clearly, the issue was debatable and was finally settled by the Hon’ble Supreme Court after examining the contrary views taken by the different high courts on this issue. Thus, given the facts and circumstances of the present case we hold that the Assessing Officer erred in levying penalty under Section 271(1)(c) of the Act. Our view Assessment Year 2016-2017

In result, in terms of paragraph 5 above, the present appeal preferred by the Assessee is allowed.

In result, the present appeal preferred by the Assessee is allowed.