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Facts
The assessee company disclosed total income of Rs. 61,57,11,235/-. A query was raised by CPC regarding a one-day delay in depositing employees' provident fund of Rs. 38,80,972/- for May 2021. The delay was attributed to the EPFO website being non-operational.
Held
The Tribunal held that the Additional/Joint CIT(A) erred in dismissing the appeal ex-parte without considering the grounds raised by the assessee and without providing a proper opportunity of hearing. The Tribunal also noted the EPFO's directive not to levy penalties for such delays.
Key Issues
Whether the disallowance of employee's contribution to provident fund due to a one-day delay, caused by technical issues with the EPFO portal, is justified, especially when no penalty was imposed by the PF authorities.
Sections Cited
143(1), 36(1)(va), 14 B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
This appeal filed by the assessee is directed against the order dated 30.12.2024 passed by Ld. Addl/JCIT(A), Faridabad for the assessment year 2022-23.
The assessee has raised the following grounds of appeal :-
“1. The learned Additional/Joint Commissioner of Income Tax (Appeals) erred in confirming the additions of Rs 38,73,775/- on account of delay in depositing the employees' contribution to the provident fund.
2. The learned Additional / Joint Commissioner of Income Tax (Appeals) erred in not affording reasonable opportunity to the appellant to explain its case thereby violating the principle of natural justice.
3. The learned Additional / Joint Commissioner of Income Tax (Appeals) erred in applying the Apex Court Judgment without appreciating the peculiar facts and circumstances of the appellant's case.
The learned Additional / Joint Commissioner of Income Tax (Appeals) failed to appreciate that delay in deposit of employees contribution occurred due to the circumstances beyond the control of the appellant.
The Learned Additional / Joint Commissioner of Income Tax (Appeals) failed to consider the circular issued by the Employees Provident Fund Organisation by virtue of which the relief has been provided from the levy of penal damages for delay in deposit of dues for the month of May 2021 caused on account of non-linking of employee's Universal Account Number (UAN) with Aadhar- a prerequisite for payment of dues which was subsequently relaxed.
The appellant craves leave to add, alter or amend any of the grounds of appeal, at any time before or at the time of hearing.”
Facts of the case in brief, are that "The assesse is a Private Limited company & has furnished its return of Income on 29th November 2022 disclosing total income of Rs. 61,57,11,235/-. While processing the return u/s 143(1), a query was raised by CPC about the one day delayed payment of Provident Fund of Rs. 38,80,972. It was explained in the reply that Employees Provident Fund organisation under its letter No. C-I/MISC./Pandemic Relief/2021/Vol-I/ dated 31st August 2021 has stated that delay in filing of ECRs ( electronic challan cum return) for wage month of May, 2021 statutorily due on or before 15.6.2021 should not be presumed as employer’s default. In view of this, the Appellant submitted that this amount need not be disallowed under Income tax act in view of the above situation. But while issuing intimation u/s 143(1) this amount was disallowed. Aggrieved by this addition the appellant preferred appeal before the learned CIT appeal/ ADDL/JCIT(A) Faridabad. 3.1. Since the assessee remained absent and did not furnish any reply on 2 opportunities provided by Ld. Addl/JCIT(A) the appeal was dismissed by Ld. Addl/JCIT(A) after following the judgement of Checkmate services (P) LTD vs CIT ( 2022) 143 taxmann.com 178 SC, by observing as under 4.5 Respectfully following the above view endorsed by the Hon'ble Supreme Court in which the Hon'ble Court has dealt with various rulings and finally concluded the matter in favor of Revenue; the disallowance of Rs.38,80,972/-made under Section 36(1)(va) of the Act, on account of delayed payment of Employees Contribution to PF/ESI u/s 143(1) is confirmed. The grounds of appeal are dismissed.
3.2. It is this order against which the assessee is in appeal before the Tribunal.
4. Learned AR appearing from the side of the assessee submitted before us that the ex-parte order passed by Ld. Addl/JCIT(A) is unjustified. Learned AR submitted before us that admittedly Ld. Addl/JCIT(A) has issued two notices for appeal hearing and the assessee sought adjournment with regard to 2nd notice of hearing. However it was neither considered nor referred by Ld. Addl/JCIT(A) & the appeal was decided ex-parte. 4.1. Learned AR submitted that the employee’s contribution to provident fund to the extent of ₹ 38,73,775/- for wage month of May 2021 was required to be deposited by 15 June 2021. However due to non working of EPFO site the electronic challan cum return could not be paid on 15-06-2021. The payment could be made by the appellant on the next day that is on 16-06-2021, resulting in a delay of one day. Learned AR further submitted that by recognizing the practical difficulties faced by the employers, the EPFO issued letter dated 31 August 2021 directing not to impose any penalty under section 14 B of the said act by PF authorities for the above said delay. And accordingly no penalty under the respective PF act was levied on the assesse for the delay of 1 day. However the delay of one-day was duly reported by the auditor in the audit report of the assessee and the CPC accordingly disallowed the employees contribution to PF of ₹ 38,80,972/- under section 36(1)(va) of the IT act on account of the delay of one-day. 4.2. Learned AR submitted before us that when no penalty was imposed in the PF act for the above said delay of one-day, observing the same, no penalty should also be imposed under the income tax act . In support of its contentions learned AR relied on various decisions passed by coordinate benches of this Tribunal, as under wherein applying the doctrine of impossibility of performance, no disallowance was made. FIL India Business & Research Services(P.) Ltd(154taxmann.com 251)(Del) Mahesh Nemichandra Ganeshwade (32 CCH 0281) (Pune) National Aviation Co. of India (29 CCH 0807) (Mum) Jagdish Malpani (23 CCH 0574) (Indore) Anant Chetan Agarwal (54 CCH 0181) (Lucknow) Ashiana Amar Developers (46 CCH 0246) (Kol) Mahendra Rajnikant Zaveri (51 CCH 0028) (Jaipur) Sheema Mathur (51 CCH 0511) (Jaipur)
4.3. Apart from above LD AR also relied on the decision, Diamour Jewels (P ) LTD 165 Taxmann.com 112 Mumbai, wherein under similar circumstances and identical facts the Tribunal has deleted the addition made by the CPC under section 36(1)(va) of the IT Act. Accordingly learned AR requested before the bench to delete the addition so made by CPC and confirmed by Ld. Addl/JCIT(A) without considering the specific grounds raised before him. Alternatively LD AR requested to set-aside the ex- parte order passed by Ld. Addl/JCIT(A) & remand the matter back to him to decide the appeal a fresh after providing reasonable opportunity of being heard.
5. Learned DR appearing from the side of the revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
6. We have heard the learned counsels from both the sides and perused the material available on record including the case laws decisions relied on by the Counsel of the assesse. In this regard we find that the assessee company is required to deduct and deposit employees contribution to provident fund of ₹ 3,873,775 for the month of May 2021 before the stipulated date that is 15 June 2021, however due to non-working of EPFO site the electronic challan, cum return ie ECR could not be deposited on 15th June but was deposited on 16 June 2021 that is with delay of one-day . The above delay of one-day was reported in the audit report and accordingly the CPC made disallowance under section 36 (1)(va) of the IT act of ₹ 38,80,972/- and added the same amount to the income of the assessee. Ld. Addl/JCIT(A) decided the appeal ex- parte, since the assessee could not appear on the dates of hearing provided by Ld. Addl/JCIT(A). However the assessee claimed that he sought adjournment on 2nd hearing but the same was not considered by Ld. Addl/JCIT(A). It is the claim of the learned counsel of the assessee that Ld. Addl/JCIT(A) erred in dismissing the appeal solely by relying on the judgement passed by Hon’ble Supreme Court in the case of checkmate services private limited versus CIT (supra) and not considering the grounds raised by the assessee that the EPFO himself has directed its officials not to levy any penalty under section 14. B of the PF act for the delayed payment if any on account of non-seeding of adhaar with UAN ie Unified account numbers of the employees. In this regard learned AR of the assessee referred letter dated 31st August 2021 which was issued by Addl. CPFC(HQRS)( Compliance, Legal & Recovery) EPFO & produced the same before the bench, wherein it was directed that the delay due to non-seeding of Adhaar not to presume as employer’s default. LD AR of the assessee also produced the copy of email dated 16-06-2021 sent to the EPFO deptt wherein it was informed to them that the website was not working on 15-06-2021 which resulted in one days delay. Apart from above learned AR of the assessee placed reliance on various decisions passed by coordinate benches of the Tribunal wherein applying the doctrine of impossibility of performance no disallowance was made.
Considering the totality of the facts of the case we are of the considered opinion that the order passed by Ld. Addl/JCIT(A) is not correct wherein he dismissed the appeal filed by the assessee merely by following the judgment of Hon’ble Supreme Court passed in the case of checkmate services private limited versus CIT (supra) and failed to consider the specific grounds raised
by the assessee with regard to the (1) Impossibility of performance due to non working of EPFO website on the particular day (2) Peculiar fact that the EPFO has himself waived of the levy of any penal charges for the delayed payment for the wage month of May 2021. 7.1. Apart from above we also find that Ld. Addl/JCIT(A) has not provided proper opportunity of hearing to the assessee since only two notices of hearing were issued that too in a short span of 4 days time.
8. In the light of above discussion & in the interest of justice, we deem it appropriate to set-aside the ex-parte order passed by Ld. Addl/JCIT(A) and remand the matter back to him with a direction to decide the appeal afresh as per fact and law after providing reasonable opportunity of hearing to the assessee. The assessee is hereby also directed to respond to the notices issued by Ld. Addl/JCIT(A) in this regard and produce requisite documents/evidences in support of grounds of appeal without taking any adjournment under any pretext, otherwise Ld. Addl/JCIT(A) shall be at liberty to pass appropriate order as per law. Thus, the grounds of appeal raised by the assessee in this appeal are partly allowed for statistical purposes.
9. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on this 22nd day of July, 2025.