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Facts
The assessee filed its return declaring NIL income after setting off brought forward losses. The CPC disallowed the set off and determined business income. The assessee's rectification application was rejected, and the CIT(A) partly accepted the appeal, rejecting the deduction for employer's contribution to PF/ESI due to a one-day delay in deposit.
Held
The Tribunal held that in cases where there is a one-day delay in depositing PF/ESI due to technical glitches in the online portal, and the assessee cannot be penalized. However, in this specific case, since no documentary evidence was produced to substantiate the technical glitch, the issue was restored to the AO for limited purpose.
Key Issues
Whether the assessee is eligible for deduction for employer's contribution to PF/ESI when there is a one-day delay in deposit due to alleged technical glitches, and whether documentary evidence is required to prove such glitches.
Sections Cited
143(1), 36(1)(va)
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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, DELHI
(A.Y.2022-23) Indo Rama Synthetics (India) Ltd., 53-54, Delhi Press Building, PH-IV, Udyog Vihar, Haryana 122015 ...... अपीलाथ�/Appellant PAN: AAACI-1530-L बनाम Vs. Deputy Commissioner of Income Tax, ..... �ितवादी/Respondent Circle 10(1), C R Building, Delhi 110001 अपीलाथ� �ारा/ Appellant by : Shri Rohit Jain, Advocate, Ms. Somya Jain & Shri Shivam Gupta, Chartered Accountants �ितवादी �ारा/Respondent by : Shri Sanjay Kumar, Sr. DR सुनवाई क� ितिथ/ Date of hearing : 16/01/2025 घोषणा क� ितिथ/ Date of pronouncement : : 15/04/2025 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)/Additional/Joint Commissioner of Income Tax(Appeals)-2, Guwahati (hereinafter referred to as 'the CIT(A)') dated 26.02.2024, for assessment year 2022-23.
Shri Rohit Jain, appearing on behalf of the assessee submits that the assessee had filed its return for AY 2022-23 on 23.10.2022. During the period relevant to assessment year under appeal, the assessee had income of Rs.195.67 lakhs, (AY 2022-23) however, the same was set off with brought forwarded losses, hence, the assessee filed its return of income declaring NIL income. The return of the assessee was processed by the Centralized Processing Centre (CPC) vide intimation dated 29.07.2023 u/s. 143(1) of the Act. The CPC disallowed set off of brought forwarded losses and determined the business income of assessee at Rs. 1,95,67,15,034/-. Against intimation u/s. 143(1) of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’), the assessee filed rectification application before the AO on 26.12.2022. However, the same was rejected vide order dated 29.07.2023 without assigning any specific reason. Against the said order the assessee filed appeal before the CIT(A). The CIT(A) vide impugned order partly accepted appeal of the assessee. The CIT(A) rejected assessee’s claim of deduction with regard to employer’s contribution towards Provident Fund/ESI. The ld. counsel submits that there was one day delay in deposit of employer’s share of PF as the portal was not working. The assessee was required to deposit PF by 15.06.2021, whereas, the assessee made contribution on 16.06.2021. The Tribunal in the case of Kangra Cooperative Bank Ltd. vs. DCIT in for AY 2019-20 vide order dated 29.11.2024 in similar circumstances granted relief to the assessee, where the contribution towards PF was late by one day. The ld. Counsel further submitted that, in the Audit Report for relevant period, the date has been wrongly mentioned as January 2021 instead of January 2022. The CPC held it to be deemed delay, whereas Audit Report for FY 2021-22 could not, by any stretch of imagination, indicate January 2021—it must refer to January 2022. He submitted that there was no delay in submission of the Audit Report.
Per contra, Shri Sanjay Kumar representing the department submitted that in so far as delay in contribution towards PF/ESI the issue is now settled by the (AY 2022-23) decision of Hon’ble Supreme Court of India in the case Checkmate Services P. Ltd. vs. CIT 143 taxmann.com 178 (SC). Once there is delay in contribution of PF/ESI the same has to be disallowed.
Both sides heard, orders of the authorities below examined. The assessee in grounds no. 2 and 3 of appeal has assailed denial of deduction of Rs.39,59,510/- claimed in respect of contribution towards provident fund and other welfare fund. The ld. Counsel submitted that there was one day delay in deposit of provident fund as the portal was not working. Hence, delay in deposit of contribution cannot be attributed to the assessee. To substantiate his contention that there was technical glitch in the portal, no documentary evidence was furnished by the assessee.
I find in the case of Kangra Co-operative Bank Ltd. vs. DCIT (supra), the Division Bench of the Tribunal held that where there was one day delay in deposit of PF/ESI due to technical glitch in the EPF portal. The benefit of deduction was allowed to the assessee. For the sake of completeness the relevant extract of the Tribunal order is reproduced herein below:- “10. From examination of record in light of aforesaid contention, it is crystal clear that Learned CIT(A) confirmed addition of Rs.8,37,196/- made by Learned AO on account of disallowance of expenses for EPF, late deposit. It is material fact that employee’s provident fund of Rs.8,37,196/- for the month of May, 2021 could not be deposited in due time on 15/06/2021 and was deposited on the very next day i.e 16/06/2021 by the assesse due to technical glitches in EPF portal. As per ratio of Judgment in FIL India Business & Research Services (P.) Ltd. v. Deputy Commissioner of Income-tax, it is well settled that when the assessee had deposited the employees dues before the prescribed due dates but due to the glitches at the end of the respective (AY 2022-23) authorities, the amounts were reversed by the bank, then the assessee cannot be penalized with the addition on account of delayed deposits. Therefore, impugned orders is set aside.”
I find that in the case of Magic Software Pvt. Ltd. vs. DCIT in for AY 2022-23 the Tribunal vide order dated 29.07.2024, Tribunal allowed benefit of deduction to the assessee there was one day delay towards deposit of PF where the assessee was prevented to make online payment owing to technical glitch in the provident fund online payment platform. The Division Bench while granted relief to the assessee held asunder:- “7. In the light of the material available on record, we have no iota of doubt that the attempt to make timely payment of contribution towards PF contribution by assessee stands vindicated. Thus, where the assessee was prevented to make online payment owing to technical glitches in the Provident Fund online payment platform, we see no reason to penalize the assessee for the unresponsive platform of the Provident Fund Department. It is trite that an assessee cannot be asked to do what is impossible for him to do. The provisions of Section 36(1)(va) thus requires to be read down appropriately in tune with doctrine of impossibility.”
The Division Bench of Tribunal in the case of Protiviti India Member P. Ltd. vs. ACIT in & 2959/Del/2022 for AY 2017-18 & 2018-19 vide order dated 14.02.2024 in similar circumstances held that where there is delay in deposit of PF and ESI within prescribed due date on account of failure of website portal of PF/ESI, the benefit of deduction under Income Tax cannot be denied to the assessee.
Thus, in all the above citied case, the respective appellants/assessee were able to substantiate that there was glitch in websites/portal of PF/ESI which prevented them to deposit the amount of contribution within time. However, in (AY 2022-23) the present case except from bald assertion no documentary evidence is filed by the assessee. Therefore, I deem it appropriate to restore this issue back to AO for limited purpose for assessee to show that due to technical glitch, the assessee could not deposit employee’s contribution within time. If the assessee is able to discharge its onus, the AO shall allow assessee’s claim of deduction.