PRAKASH ROAD LINES CORPORATION LTD.,KOLKATA vs. DCIT, CPC, BENGALURU, BENGALURU

The present appeal has been preferred by the assessee against the order dated 15.11.2021 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The assessee has raised the following grounds of appeal: “i. For that in view of the facts and in the circumstances of the case the assessment made by the AO(CPC) u/s 143(1) dt. 15.11.2021 of the IT Act is wholly bad, unjustified, illegal and void ab initio and as such, the order is liable to be cancelled/ quashed. ii. For that in view of the facts and in the circumstances, the AO(CPC) is wholly unjustified in disallowing Rs.30,85,283/- being the Employees' Contribution to PF/ ESI and that was much before the prescribed due date u/s 139(1). Such addition by AO(CPC) u/s 2(24)(x) read with sec. 36(va) is bad in law and the impugned sum is fully allowable particularly in view of the judgments of Jurisdictional Tribunal as well as Jurisdictional High Court and other Courts across the country, the disallowance so made is liable to be deleted and it may be held accordingly. iii. Without prejudice to Ground No. 2 above, the amendment so made vide Finance Act, 2021 is prospective in nature and in view of the judgments of Jurisdictional Tribunal as well as Jurisdictional High Court and other Courts across the country and the sum so added is liable to be deleted and it may be held accordingly.

Though the Registry has pointed out that the appeal is time barred, however, in view of the decision of the Hon’ble Supreme Court in the case of Miscellaneous Application No. 665 of 2021 in SMW(C) No. 3 of 2020, the period of filing appeal during the COVID-19 pandemic is to be excluded for the purpose of counting the limitation period. In view of this, the appeal is treated as filed within the limitation period.

Brief facts of the case are that the assessee is a company and filed its return of income for the assessment year 2018-19. While processing the return of income for the assessment year in question u/s 143(1) by CPC on 31.01.2020, intimation was served upon the assessee on 06.02.2020 wherein a sum of Rs. 30,85,283/- u/s 36(1)(va) r.w.s. on account of failure of the assessee to deposit employee’s contribution to ESI & PF which were admittedly not paid on or before the prescribed due date and the said amount was disallowed. Further in the intimation also stated that addition of Rs. 1,50,855/- from assessee’s profits and gains from business / profession as income to be considered under the head other income u/s 115BBF. As the assessee did not show such income was offered in the other source of income. Therefore, the amount was reduced from profit & loss account but not offered under other income as per ITR has been duly added back u/s 143(1) of the Act by CPC.

Aggrieved by the above order passed by the ld. CIT(A), assessee is in appeal before this Tribunal.

At the time of hearing, the ld. AR submitted the ground no. 1 to 3 involved in this appeal are in respect of delayed payment of ESI & PF in respect of employee’s contribution and he fairly submitted that the issue is now squarely covered by the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs CIT in Civil Appeal No. 283 of 2016 dated 12.10.2022 wherein Hon’ble Supreme Court has categorically held that if the employees contribution to PF & ESI has been paid beyond the time limit prescribed under the relevant PF but the same is not allowable u/s 43B even after payment has been made before due date of filing of return under the Income Tax Act. On the other hand, ld. DR has not objected on such submission made by the ld. AR of the assessee and we have considered the submission of the parties and going through the judgement rendered by the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) has categorically held that employees contribution to PF/ESI to the extent does not paid within due date prescribed under PF Act is not allowable u/s 36(1)(va) of the Act. The Hon’ble Supreme has admittedly held that the provisions of section 43B would not apply to the provisions of section 36(1)(va) of the Act in respect of employees contribution. Respectfully following the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra), we are of the considered view that the delayed payment in respect of contribution to PF & ESI is not allowable accordingly grounds raised by the assessee are dismissed.

The ld. AR further submitted that the remaining grounds, ground no. 4 & 5 in respect of addition of Rs. 1,50,855/- on account of LTCG by the AO of CPC which is bad in law and liable to be set aside as the assessee offered sum of Rs. 1,50,855/- as a part of income from other sources. Therefore, the action of AO (CPC) adding such 4 AY: 2018-19 M/s. Prakash Road Lines Corporation Ltd. sum as capital gain amounts to double addition, therefore, the impugned order passed by the ld. CIT(A) is bad in law and required to be examined afresh by the AO.

We have considered the rival submission and perused the material on record as well as going through the orders of the authorities below to substantiate its claim submitted before us and a copy of computation of income from which we find that the assessee itself has shown an amount of Rs. 6,50,855/- under the head of LTCG (STT) (charge) and dividends from mutual funds of Rs. 1,25,000/-. However, the claim of assessee was not considered by CPC while processing the return of income and added sum of Rs. 1,50,855/- stating that this amount was reduced from the profit and loss account but not offered under the head of other income by the assessee. We, therefore, to arrived at the correct calculation of allowance claimed under the capital gain we remit the issue to the file of AO with the direction that since the assessee has already offered a sum of Rs. 1,50,855/- as a part of income from other sources in its return, therefore, the claim of assessee required to be considered. While doing so reasonable opportunity of being heard should be given to the assessee. It is needless to mention here that the assessee should cooperate with the AO by furnishing necessary documents to substantiate its claim before the ld. AO. In terms of above, the appeal of the assessee is allowed for statistical purposes.

In the result, the appeal of the assessee is allowed for statistical purposes.