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Facts
The assessee, a labour contractor, filed his return of income for AY 2020-21. The CPC processed the return, making an addition of Rs. 53,11,870/- for delayed deposit of employee's contribution towards PF/ESI after the due dates. The assessee contended that the deposits were made before the due date of filing the return and relied on various court decisions.
Held
The Tribunal held that the disallowance made by the AO is justified, as the law laid down by the Hon'ble Apex Court in the case of Checkmate Services P. Ltd. is clear. The case-laws relied upon by the appellant are no longer applicable. The addition made by the AO is confirmed.
Key Issues
Whether the disallowance of employee's contribution towards PF/ESI deposited after the due date, but before the due date of filing the return, is justified in light of the Hon'ble Supreme Court's decision in Checkmate Services P. Ltd.
Sections Cited
143(1), 154, 36(1)(va), 139(1), 43B, 2(24)(x)
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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI MANISH BORAD & MS. ASTHA CHANDRA
आयकर अपील सं. / Assessment Year : 2020-21 Pradeep Ramkrishna Rote, ITO, Ward-1(3), Jalgaon S. No. 141, Plot No. 20, Near JMC Garden, Ayodhya Vs. Nagar, Jalgaon-425001 PAN : AGUPR3300A अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : None Department by : Shri Arvind Desai, Addl.CIT Shri Manish Mehta, Addl.CIT Date of hearing : 12-02-2025 & 14-05-2025 Date of 06-06-2025 Pronouncement : आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 08.07.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2020-21.
2. The appeal was scheduled for hearing on 28.10.2025, 25.11.2025, 02.01.2025, 12.02.2025, 07.05.2025 and finally on 14.05.2025. None appeared for and on behalf of the assessee when the matter was called for hearing on the aforesaid dates. The Ld. DR, however, has been present on all the dates of hearing and therefore we proceed to decide the appeal after hearing the Ld. DR.
Facts of the case in brief, are that the assessee is an individual who is a labour contractor. He filed his return of income for AY 2020-21 on 03.11.2020 declaring total income at Rs.10,46,460/- and claimed refund of Rs.10,79,290/-. The return was processed by the Central Processing Center/Assessing Officer (“CPC/AO”) on 30.11.2021 under section 143(1) of the Income Tax Act, 1961 (the “Act”) determining the total income at Rs.63,58,330/- by making an addition of Rs.53,11,870/- on account of late deposit of employee’s contribution towards PF/ESI after the due dates. The rectification application filed by the assessee was disposed off by the Ld. AO/CPC vide order dated 08.03.22 passed under section 154 of the Act without making any changes in the aforesaid intimation order earlier passed under section 143(1) of the Act.
Aggrieved, the assessee filed appeal before the Ld. CIT(A)/NFAC. During the appellate proceedings, the assessee submitted before the Ld. CIT(A)/NFAC that the dues were paid marginally after due dates under the respective PF/ESIC Act(s) on account of technical difficulties but before filing the ITR under section 139(1) of the Act and the assessee being a labour contractor received the payments late and hence deposits were also delayed. The decision of the Hon’ble Rajasthan High Court in the case of CIT Vs. M/s. Udaipur Dugdh Utpadak Sahakari Sangh Limited, Udaipur and NFAC order passed under section 250 of the Act in assessee’s own case for AY 2019-20 was relied upon wherein under the similar set of facts, it has been held that no disallowance under section 36(1)(va) can be made.
4.1 The above submission of the assessee was not found to be acceptable by the Ld. CIT(A)/NFAC. Relying on the decision of the Hon’ble Supreme Court in the case of Checkmate Service P. Ltd. Vs. CIT in Civil Appeal No. 2833 of 2016 dated 12.10.2022, he dismissed the appeal of the assessee by observing as under : “6. I have considered the facts of the case, rectification order u/s. 154 of the Act and appellant's written submissions. The CPC while processing the assessee's return of income filed for the AY 2021-22, made disallowance of Rs. 53,11,870/- as the assessee deposited the employees' contribution towards PF and ESI after the due dates. The assessee also failed to get relief in the rectification order u/s. 154 of the Act dated 08-03-2022. The appellant has submitted that he claimed deduction of contribution made to Employees Provident fund and Employees State Insurance Corporation as dues were paid marginally after due dates of respective relevant act, technical difficulties cited but before filing the Income Tax Return u/s 139(1)and the assessee being labor contractor received payments late and hence payments of PF. ESIC naturally becomes late. The appellant has relied on decision of the Hon'ble Rajasthan High Court in the case of CIT vs. M/S Udaipur Dugdh Utpadak Sahakari Sangh Limited, Udaipur to support his claim that though payments of PF, ESIC were made late as per respective Acts but before the due date of filing of return u/s. 139(1) of the Act, therefore, no disallowance u/s. 36(1)(va) can be made. The appellant has also referred to decision of the NFAC passed u/s 250 bearing order no. ITBA/NFAC/ S/250/2021- 22/1035848660(1) for the AY 2019-20. Considering the facts of the case and appellant's submissions, I am not inclined to agree with the appellant's claim. The appellant has claimed that since he already deposited the employees contribution towards PF/ESI before the due date of filing of return therefore, no disallowance can be made in its case. This claim of the appellant is not acceptable in view of the decision of the Hon'ble Supreme Court in the case of Checkmate Service P. Ltd. vs. CIT in Civil Appeal no.
2833 of 2016 dated 12-10-2022. For the sake of clarity, the relevant paras of the Hon'ble Supreme Court's order are reproduced as under:- "1. Leave granted. Berger Paints India Ltd. v Commissioner of Income Tax, Kolkata-IV & Anr.1 was the lead matter while hearing this batch of appeals. However, the parties agreed to treat Checkmate Services Pvt. Ltd. v Commissioner of Income Tax-12 as the lead appeal, for convenience. In all these appeals, the common question involved is with respect to the interpretation of Section 36(1) (va) and Section 43B of the Income Tax Act, 1961 (hereinafter, "IT Act"), and whether the appellant assessees are entitled to deduction of amounts deposited by them towards contribution in terms of The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter, "EPF Act"), The Employees' Provident Funds Scheme, 1952 (hereinafter, "EPF Scheme"), The Employees' State Insurance Act, 1948 (hereinafter, "ESI Act"), The Employees' State Insurance (Central) Regulations, 1950 (hereinafter, "ESI Regulations") or any other provident or superannuation fund.
In the years under consideration, the Assessing Officers (hereinafter, "AO") had ruled that the appellants had belatedly deposited their employees' contribution towards the EPF and ESI, considering the due dates under the relevant acts and regulations. Consequently, the AO ruled that by virtue of Section 36(1)(va) read with Section 2(24)(x) of the IT Act, such sums received by the appellants constituted "income". Those amounts could not have been allowed as deductions under Section 36(1)(va) of the IT Act when the payment was made beyond the relevant due date under the respective acts. In other words, as per the AO, as such sums were paid beyond the due dates as prescribed under the respective acts, the right to claim such sums as allowable deduction while computing the income was lost forever. The assessees' pleas were unsuccessful before the Income Tax Appellate Tribunal (hereafter, "ITAT"). Ultimately, in the case of the impugned judgment, the Gujarat High Court too rejected its pleas.3 3. Noticing a division of opinion on the issue, with the High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi favouring the interpretation beneficial to the assesses on the one hand, and the High Courts of Kerala and Gujarat preferring the interpretation in favour of the Revenue on the other, this court granted special leave to appeal in all these cases. ……………………………………………………………………………………… 54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction.
In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed." Considering the fact that delayed payments of PF/ESI are clearly established in the case of the present appellant and the law as laid down by the Hon’ble Apex Court, it is held that the disallowance made by the AO is justified. The case-laws referred to by the appellant are not longer applicable after the decision of the Hon’ble Apex Court. Accordingly, the addition made at Rs.53,11,870/- is confirmed. The ground Nos. 1 to5 raised by the appellant regarding this issue are dismissed.”
Dissatisfied with such order of the Ld. CIT(A)/NFAC, the assessee is in appeal before the Tribunal raising the following solitary ground of appeal:
1) Under the facts and circumstances of the case and in law the learned CIT(A), NFAC has erred in confirming the disallowance of Rs.53,11,870/- made by CPC, Bengaluru u/s 36(1)(va) while processing the ITR for AY 2020-21 u/s 143(1)(a) of the Act. 2) The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.
We have heard the Ld. DR and perused the material available on record. The only dispute in the present appeal is regarding the allowability of deduction u/s 36(1)(va) of the Act on account of delay in deposit of employees’ contribution to PF/ESIC under the respective PF/ESIC Act(s) but before filing the ITR under section 139(1) of the Act. Admittedly, there was a delay on the part of the assessee in depositing employee’s contribution towards PF/ ESIC under the respective relevant PF/ ESIC Act(s) on account of which the Ld. AO/CPC disallowed the claim of the assessee. The Ld. CIT(A)/NFAC has upheld such action of the Ld. AO/CPC observing that the assessee’s claim is no longer supported by the decision(s) (supra) relied upon by him in the light of the decision of the Hon’ble Supreme Court in the case of Checkmate Services P. Ltd. pronounced on 12.10.2022 (supra), the relevant paras/ observation of the Apex Court reproduced in the preceding paragraph.
Respectfully following the decision of the Hon’ble Supreme Court in Checkmate Services P. Ltd.’s case (supra), we do not find any infirmity in the order of the Ld. CIT(A)/NFAC. The addition of Rs.53,11,870/- made by the Ld. AO/CPC and confirmed by the Ld. CIT(A)/NFAC is hereby sustained. The solitary ground raised by the assessee is accordingly dismissed.
In the result, the appeal of the assessee is dismissed.