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Facts
The assessee filed an appeal against the disallowance of Rs. 7,72,180/- under Section 36(1)(va) for late deposit of ESI and PF contributions for AY 2020-21, made by the CPC and sustained by NFAC. The assessee contended that the due date for deposit should be reckoned from the month of salary disbursement and challenged the addition as beyond the scope of Section 154 read with Section 143(1).
Held
The Tribunal observed that coordinate benches have previously restored identical issues to the Assessing Officer (AO). Following these precedents, the Tribunal restored the issue of determining the due date for ESI and PF deposits to the AO for re-examination, instructing the AO to provide the assessee an adequate opportunity to present relevant information.
Key Issues
Whether the disallowance of employees' contribution to PF and ESI for late deposit under Section 36(1)(va) is valid, considering the proper reckoning of the "due date" from the month of salary disbursement, and if the addition under Section 154 read with Section 143(1) was within jurisdiction.
Sections Cited
154, 143(1), 36(1)(va), 139(1), 37, 234A, 234B, 234C
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Income Tax Appellate Tribunal, DELHI BENCH “E” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI AVDHESH KUMAR MISHRA
सुनवाईक�तारीख/ Date of hearing: 07.04.2025 09.04.2025 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER SHRI C.N. PRASAD, J.M. This appeal is filed by the assessee against the order of the Ld.CIT(Appeals)-NFAC dated 18/07/2024 for the assessment year 2020-21. Assessee has raised the following grounds: - 1. “That the rectification order dated 15.12.2022 passed under Section 154 read with Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year (‘AY’) 2020-21 by the Assistant Director of Income Tax, CPC Bengaluru (hereinafter referred to as ‘CPC’) and the disallowance made are illegal, bad in law and without jurisdiction. The National Faceless Appeal Centre (hereinafter referred to as ‘NFAC’) vide order dated 18.07.2024 has also grossly erred in sustaining the said disallowance.
2. That in view of the facts and circumstances of the case, the CPC has erred on facts and in law, in making the disallowance on account of late deposit of ESI and PF under Section 36(1)(va) of the Act amounting to Rs. 7,72,180/- during the relevant Assessment Year. The NFAC vide its order dated 18.07.2024 too has grossly erred in sustaining the same.
3. That in view of the facts and circumstances of the case, the CPC has erred on facts and in law, in not considering that the addition has been made under Section 154 read with Section 143(1) of the Act and the same is beyond the scope of the said provision and as such the CPC had no power/authority/jurisdiction to make the said addition u/s 143(1) of the Act. The NFAC vide its order dated 18.07.2024 too has grossly erred in sustaining the same.
4. That in view of the facts and circumstances of the case, the CPC has erred on facts and in law, in not appreciating that no disallowance is called for where employee's share of contribution is paid before the due date of filing the return under Section 139(1) of the Act. Therefore, the disallowance amounting to Rs.7,72,180/- made on this account is illegal, bad in law and liable to be deleted. The NFAC vide its order dated 18 07.2024 too has grossly erred in sustaining the same.
5. That in view of the facts and circumstances of the case, the NFAC has erred on facts and in law, in not considering that the month in which the salary is actually disbursed to the employee should be considered as the relevant month of deduction for the purpose of calculating the due date of deposit of Employee 2
Provident fund and Employees' State Insurance as held in various judgments. 6. That in view of the facts and circumstances of the case, the NFAC has erred on facts and in law, in interpreting the judgments quoted in its order dated 18.07.2024 passed against the assessee.
That in view of the facts and circumstances of the case, the CPC as well as NFA have erred on facts and in law, as they have failed to provide any opportunity to the Assessee and the same is in violation of principle of natural justice and hence, the impugned orders are liable to be set aside on this ground alone.
Without prejudice, in view of the facts and circumstances of the case, the CPC well as NFAC have erred on facts and in law, in not considering that the expenditure incurred, being a business expenditure, ought to have been allowed under Section 37 of the Act.
That in view of the facts and circumstances of the case and in law, the CPC as v as NFAC have erred in charging interest under Section 234A, 234B and 234C the Act. The charging of interest is illegal and excessive and has been wrongly worked out. It cannot be justified by any material on record.
That in view of the facts and circumstances of the case and in law, the CPC as NFAC have erred in not considering the material placed and available on record and have failed to judicially interpret the same as the same do not justify addition/disallowance made.
The Assessee craves leave to add to, alter, amend and/or withdraw any grounds of appeal either before or during the course of bearing appeal.”
2. Ld. Counsel submits that the only issue in appeal is in respect of disallowance of employees’ contribution to PF and ESI, u/s 36(1)(va) of the Act. Ld. Counsel for the assessee submits that in so 3 far as employees’ contribution to PF & ESI is concerned the due date for deposit of PF & ESI shall be reckoned from the month in which disbursement of salary was made. In other words, the Ld.
Counsel submits that for computing the period of delay “month” to be considered is the month in which salary/wages are disbursed by the assessee. For this proposition reliance was placed on the decision of the Kolkata Bench of the Tribunal in the case of Kanoi Paper & Industries Ltd. s. ACIT (75 TTJ 448). Reliance was also placed on the following decisions and submitted that on identical facts the Delhi Bench of Tribunal restored the issue to the file of the Ld. Assessing Officer for examining the due date in the light of the above decisions: -
Sentinel Consultants (P) Ltd. vs. ACIT on 12 June, 2023 [2023] 153 taxmann.com 151;
Sai Computers Ltd. vs. ACIT, CPC on 18 October, 2023 IT Appeal Nos. 2862 to 2865 (Delhi) of 2022;
3. Vigilant Security Placement and Detective Services (P) Ltd. Vs. DCIT (ITA No.2740/2022 dated 13/06/2023).
Ld. DR placed reliance on the orders of the authorities below.
Heard rival submissions and perused the decisions relied on.
The contention raised in this appeal is that the due date of deposit of PF & ESI contributions shall be reckoned from the month in which disbursement of salary was made. Reliance was placed on various decisions to support the above contention. We observe that identical issue came up before the coordinate bench in the case of Sentinel Consultants (P) Ltd. vs. ACIT (153 taxamnn.com 151), wherein the Tribunal restored the appeal to the file of the Assessing Officer on identical issue and to examine the contention raised by the assessee and in the light of the observations of the Kolkata Bench of the Tribunal in the case of Kanoi Paper & Industries Ltd. vs. ACIT (supra). Similar view has been taken by the coordinate benches referred to above. Thus, respectfully following the said decisions we restored this issue to the file of the Assessing Officer to decide the issue in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. vs. ACIT (supra). Needless to say the Assessing Officer shall provide adequate opportunity of being heard to the assessee, the assessee is at liberty to provide all the necessary information in support of its contention.
In the result, appeals of the assessee are allowed for statistical purpose.