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Facts
The assessee, a limited company, challenged disallowances made by the CPC for delayed payment of employees' contribution to Provident Fund and Superannuation Fund. The disallowances were upheld by the CIT(A).
Held
The Tribunal held that due to the peculiar circumstances of the COVID-19 lockdown, the delay in depositing employee contributions was not attributable to the employer's fault, especially as penal damages were waived. The Tribunal also found that contributions to the superannuation fund were deposited before the due date.
Key Issues
Whether the disallowance of employees' contribution to PF/ESI is sustainable when the delay occurred during the COVID-19 lockdown period, and whether contributions to superannuation fund were indeed paid late.
Sections Cited
36(1)(va)
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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
This appeal filed by the assessee is directed against the order dated 28.09.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2021-22.
2. Facts of the case, in brief, are that the assessee is a limited company engaged in the real estate development and generation of wind power apart from investing the surplus funds. It filed its return of income on 12.03.2022 declaring normally computed total income of Rs.5,61,21,130/- with a tax payable thereon at Rs.1,47,88,554/-. The assessee also declared u/s 115JB of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) a total book profit income of Rs.6,74,73,924/- with a tax payable thereon at Rs.1,12,62,748/-. While processing the return, the CPC disallowed an amount of Rs.64,469/- out of Rs.2,28,590/- against the payment of employees’ contribution towards provident fund. Similarly, the CPC disallowed an amount of Rs.1,64,120/- out of Rs.2,28,590/- against the payment of employees contribution towards superannuation fund. A rectification application filed by the assessee was dismissed by the CPC.
3. In appeal, the Ld. CIT(A) / NFAC dismissed the appeal filed by the assessee by observing as under: “4. I have considered the facts and circumstances of the case and the submission of the appellant as well as grounds of appeal
Since there are divergent views in this matter, the whole issue becomes contentious This cannot therefore, be said that there is an apparent mistake that had crept in the Order, It has been held by Hon'ble Supreme Court in Review Petition (Civil) no. 1620 of 2023 in Civil appeal no.1661 of 2020 in the case of Sanjay Kumar Agarwal vs State Tax Officer that an error which is not self-evident and has to be detected by a process of reasoning, cannot be said to be an error apparent on the face of record and that an error on the face of record must be such an error which, mere looking at the record should strike and it should not require any long-drawn process of reasoning on the points where there may conceivably be two opinions. Relevant part of the decision is reproduced below- "5. It is very pertinent to note that recently the Constitution Bench in Beghar Foundation vs. Justice K.S. Puttaswamy (Retired) and Others, held that even the change in law or subsequent decision/ judgment of co-ordinate Bench or larger Bench by itself cannot be regarded as a ground for review.
6. The gist of the afore-stated decisions is that:- (i) A judgment is open to review inter all if there is a mistake or an error apparent on the face of the record. (ii) A judgment pronounced by the Court is final, and departure from that principle is justified only when circumstances of a substantial and compelling character make it necessary to do so. (iii) An error which is not self-evident and has to be detected by a process of reasoning, can hardly be said to be an error apparent on the face of record justifying the court to exercise its power of review. (iv) in exercise of the jurisdiction under Order 47 Rule 1 CPC, it is not permissible for an erroneous decision to be reheard and corrected." (v) A Review Petition has a limited purpose and cannot be allowed to be "an appeal in disguise.” (vi) Under the guise of review, the petitioner cannot be permitted to reagitate and reargue the questions which have already been addressed and decided.
(vii) An error on the face of record must be such an error which, mere looking at the record should strike and should not require any long-drawn process of reasoning on the points where there may conceivably be two opinions. (viii) Even the change in law or subsequent decision / judgment of a co-ordinate or larger Bench by itself cannot be regarded as a ground for review.” The above discussion makes it clear that the issue is a controversial one and is yet to attain finality. Therefore, being a controversial issue, this issue is beyond the ambit of provisions of section 154 of the Act. Various courts of law have time and again held that any controversial issue cannot be entertained u/s 154 of the Act, as the same cannot be stated to be mistake apparent on record". Therefore, there is no scope in interfering with the Order and it is upheld.
In the result, the appeal is hereby dismissed.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds:
1. Disallowance under section 36(1)(va) amounting to Rs.64,469/- against late payment of Employees Contribution towards Provident Fund as per CPC order: (a) On the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeals) legally erred in upholding the disallowance of Rs.64,469/- made by the Asstt. Director of Income Tax, CPC under section 36(1)(va) of the Income Tax Act without appreciating that no such disallowance was warranted on the facts of the case. (b) On the facts and in the circumstances of the case, the ld, CIT(A) erred in not appreciating that there was a small delay in making payment of employees contribution to PF for the month of April, 2020 since the Company's operations were located at Pune, which place was severely hit by corona virus pandemic and hence, the delay caused due to corona pandemic was to be ignored and the disallowance made u/s. 36(1)(va) may kindly be deleted.
2. Disallowance under section 36(1)(va) amounting to Rs.1,64,120/- against payment of Employees Contribution towards Superannuation Fund as per CPC order: (a) On the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeals) legally erred in upholding the disallowance of Rs.1,64,120/- made by the Asstt. Director of Income Tax, CPC under section 36(1)(va) of the Income Tax Act ignoring the submissions made by your Appellant on the subject matter without appreciating the fact that the amount of contribution was paid IN ADVANCE and within due date. Hence, the disallowance confirmed by him be deleted as there is no delay in payment.
3. Your Appellant craves leave to add, alter or amend the Grounds of Appeal on or before the hearing of this appeal.
5. So far as the first issue i.e. disallowance of Rs.64,469/- u/s 36(1)(va) of the Act is concerned, the Ld. Counsel for the assessee drew the attention of the Bench to pages 8 and 9 of the paper book and submitted that the amount of Rs.64,469/- consists of two entries i.e. provident fund of Rs.15,581/- where the due date for payment was 15.05.2020 but actually paid on 28.05.2020. Similarly, the amount of Rs.48,888/- was paid on 06.06.2020 as against the due date of 15.05.2020. He submitted that the above payments were made during the Covid period. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Diamour Jewels Pvt. Ltd. vs. CPC vide for assessment year 2021-22, order dated 25.07.2024, he submitted that in that case also such amount on account of employees’ contribution to Provident Fund and ESI was deposited in the month of June, 2020 as against the due date in the month of May, 2020. The Tribunal, after considering the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC), has held that in view of the peculiar set of facts prevailing at that time i.e. Covid period there cannot be any adverse effect on the assessee of not depositing the employees’ contribution to PF and ESI within the meaning of section 36(1)(va) of the Act when the relevant enactment itself had given a waiver from levy of penal damages for the delay in deposit during the lockdown period.
6. Referring to the decision of the Chandigarh Bench of the Tribunal in the case of Ethos Limited vs. DCIT vide for assessment year 2021-22, order dated 25.04.2025, he submitted that under identical circumstances the Tribunal, following the decision of the Mumbai Bench of the Tribunal in the case of Diamour Jewels Pvt. Ltd. vs. CPC (supra), has deleted the addition. He accordingly submitted that the disallowance made by the CPC and upheld by the Ld. CIT(A) / NFAC being not in accordance with law has to be deleted.
7. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.
8. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that due to delay in depositing the employees’ contribution towards PF amounting to Rs.64,469/-, the CPC disallowed the same. A rectification application filed by the assessee was rejected by the CPC and on appeal, the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the delay in depositing the same has occurred due to the lockdown prevailing at that time and therefore, the addition is not sustainable in view of the decisions of the Mumbai Bench of the Tribunal in the case of Diamour Jewels Pvt. Ltd. vs. CPC (supra) and Chandigarh Bench of the Tribunal in the case of Ethos Limited vs. DCIT (supra).
9. We find an identical issue had come up before the Mumbai Bench of the Tribunal in the case of Diamour Jewels Pvt. Ltd. vs. CPC (supra) wherein the Tribunal after considering the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd. vs. CIT (supra) has deleted the addition by observing as under: “7. We heard both the parties and perused the material on record. The undisputed fact is that the delay pertains only to the two months of April, 2020 and May, 2020 which were the peak period of pandemic of COVID-19 when lockdown was imposed by the government. It is also a fact that when there was relaxation in the lockdown, assessee vigilantly deposited employees‟ contribution for these two months on 15.06.2020 and 16.06.2020 without waiting for any further delay on this account. It is also undisputed that for all other months, assessee had deposited the employees‟ contribution of PF and ESI within the due dates prescribed under the relevant Acts irrespective of extended period of COVID-19 pandemic. 7.1. Before we delve into the issue raised before us, in the aforesaid factual matrix, it is worth taking note of the certain key data points relating to pandemic of COVID-19 and lockdown imposed thereby. We note that to control the spread of the coronavirus COVID-19 pandemic, the Government of India imposed various phases of lockdown starting from the third week of March 2020. The World Health Organization (WHO) declared COVID-19 a pandemic on 11.03.2020. In India, a complete nationwide lockdown was implemented for a total of 68 days through four phases, from 25.03.2020 to 31.05.2020 plus a prelockdown phase. The overall period was divided into five phases, starting from Phase 0 (pre-lockdown), followed by Phases 1–4, as per the lockdown phases implemented by the Government of India. Table below briefly lists the durations and restrictions imposed during each phase of the lockdown in India: S.No. Phase Name Dates Major restriction or relaxations 1. Phase 0 1–24 March No restriction; all activities in business-as- (Pre-lockdown) 2020 usual mode (24days)
Phase1 25 March– All transport, industrial establishment, 14 April 2020 commercial and private establishments, (21days) and hospitality services closed
Phase2 15 April–3 RestrictionssimilartoPhase1 May 2020 Allowed: Farming operation, (19days) some industries, movement of cargo 4. Phase3 4–17 May Cities classified into three zones (Red, 2020 Orange, and Green). Relaxation of rules in (14days) the Green and Orange zones. Allowed: Activities permitted during Phase 2 and construction activities and movement of vehicles for selected activities. Restrictions similar to Phase1 applied in The Red zones 5. Phase4 18–31 May Allowed: Movement of vehicles without 2020 any (14days) Special conditions along with the opening of the industry 7.2. We have perused the afore stated circular issued by EPF Organisation according to which delay in deposit of contributions during the lockdown period is without mens rea of the employer and such delay cannot be attributed to any culpable state of mind of the employer and therefore does not attract penal provisions of section 14B of the EPF Act. It is stated in this circular that for any delay in payment of any contributions or administrative charges due for any period during the lockdown, no proceeding would be initiated for levy of penal damages in such cases. 7.3. In the given peculiar set of facts and circumstances of this present case, the moot point before us to be considered in respect of the aforesaid delay in depositing employees‟ contribution to PF and ESI is the effect of circular issued by EPF Organisation as referred above, whereby levy of penal damages on account of delay under the relevant Act for deposit of contributions during the period of lockdown has been waived off vis-a-vis the decision of Hon‟ble Supreme Court in the case of Checkmate Services (Supra) wherein the sole focus of the Hon‟ble Court while deciding the instant issue was in the context of due dates prescribed under the relevant Act for claiming deduction under section 36(1)(va) of the Act. 7.4. The contention raised before us is that since the penal damages have been waived off by the EPF Organisation itself for the delay in deposit of contributions during the period of lockdown, there cannot be any adverse effect of not depositing the employees‟ contribution of EPF and ESI within the meaning of section 36(1)(va) of the Act.
We delved into the judgment of the Hon‟ble Supreme Court in the case of Checkmate Services (supra) to address the issue raised before us. In para 2 of the said decision, Hon‟ble Court noted that as per the Assessing Officer, employees‟ contributions 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. Hon‟ble Court noted section 38 of the EPF Scheme which specifies timeline for deposit, i.e. “within fifteen days of the close of every month”. Circular issued by CBDT bearing no. 495 dated 22.09.1987 was also referred in para 9 which dealt with the scope and effect of the sections 36(1)(va) and provisos to section 43B inserted in the Act. The caption of the said circular reads as “Measures of penalising employers who misutilise contribution to the provident fund or any fund set up under the provisions of the Employees‟ State Insurance Act, 1948, or any other fund for welfare of employees.” 8.1. Contention of the Revenue before the Hon‟ble Court was that “when the assessee did not deposit the employees‟ contribution in the PF account before the due date provided under the EPF/ESI Act, the assessee was disentitled to deduction under Section 36 in the relevant assessment order, though the assessee might have deposited the employees‟ contribution on or before the due date of filing of the return under Section 139 of the IT Act.” 8.2. Hon‟ble Court in para 35 and 52 took note of the memorandum explaining the provisions in the Finance Bill, 1987 through which section 2(24)(x), section 36(1)(va) and second proviso to section 43B were introduced. It was observed that “these provisions were introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods.” 8.3. According to the Hon‟ble Court, “the essential character of an employees‟ contribution is that it is part of the employees‟ income, held in trust by the employer and needs to be deposited on or before the due date under the relevant Act. These have to be deposited in terms of such welfare enactments. 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.” Thus, the essential condition for claim of deduction towards employees‟ contribution of PF/ESI is that the terms of particular / relevant enactments governs their allowability under the provisions of the Act. 8.4. In the present case before us, in the given peculiar fact pattern and circumstance, when the EPF Organisation itself has waived off the levy of penal damages for delayed payment during the period of lockdown by issuing the aforesaid circular, there is no question of treating the delay which occurred during the period of lockdown detrimental to the assessee under the Act, more specifically under the explanation to section 36(1)(va) of the Act. The delay in deposit of PF and ESI of the employees‟ share is for the month of April 2020 and May 2020. These months fell in the period of lockdown when pandemic of COVID- 19 was at its peak. Due dates to deposit for these two months were 15.05.2020 and 15.06.2020 as per the relevant enactments. Assessee deposited the delayed amount in the month of June 2020 when there was relaxation in the lockdown and banking was permitted. There is no mischief on the part of the assessee in holding the employees‟ contribution for long periods as contemplated in the memorandum explaining the provisions introduced in the Finance Bill, 1987 and CBDT circular (supra) and dealt by the Hon‟ble Supreme Court in Checkmate Services (supra). In fact, assessee demonstrated its vigilance in depositing the impugned amounts at the first opportunity it got when the relaxation was given in the lockdown. Also, for all the subsequent months, the deposits have been on or before the prescribed due dates under the relevant enactments. Thus, in the present case under its peculiar set of facts, there cannot be any adverse effect on the assessee of not depositing the employees‟ contribution of EPF and ESI within the meaning of section 36(1)(va) of the Act when the relevant enactment itself had given a waiver from levy of penal damages for the delay in deposit „during the lockdown period‟. We delete the addition so made. Grounds taken by the assessee in this respect are allowed. 8.5. Before parting, we make it abundantly clear that our above observations and findings are specific to the peculiar set of facts in the present case, elaborately narrated above, which cannot be taken as laying down a precedence on the issue addressed.
In the result, appeal of the assessee is allowed.”
Similar view has been taken by the Chandigarh Bench of the Tribunal in the case of Ethos Limited vs. DCIT (supra). Since the facts of the instant case are identical to the facts before the Mumbai Bench of the Tribunal in the case of Diamour Jewels Pvt. Ltd. vs. CPC (supra), therefore, respectfully following the same, we delete the addition so made on account of delay in deposit of employees’ contribution to PF/ESI. The first issue raised in the grounds of appeal is accordingly allowed.
11. So far as the second issue is concerned, the same relates to the order of Ld. CIT(A) / NFAC in confirming the disallowance of Rs.1,64,120/- u/s 36(1)(va) of the Act on account of payment of employees’ contribution to superannuation fund as per the CPC order.
The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the following five entries as per page 9 of the paper book and submitted that the assessee has in fact paid the amounts prior to the due date and therefore, the CPC was not justified in making the addition and the Ld. CIT(A) / NFAC was not justified in sustaining such addition. “Superannuation Fund ₹32,824 31-Oct-2019 ₹32,824 31-Oct-2019 Superannuation Fund ₹32,824 31-Oct-2019 ₹32,824 31-Oct-2019 Superannuation Fund ₹32,824 31-Oct-2019 ₹32,824 31-Oct-2019 Superannuation Fund ₹32,824 31-Oct-2019 ₹32,824 31-Oct-2019 ₹32,824 31-Oct-2019” Superannuation Fund ₹32,824 31-Oct-2019
He accordingly submitted that the addition made by the CPC and sustained by the Ld. CIT(A) / NFAC should be deleted.
The Ld. DR on the other hand supported the order of the Ld. CIT(A) / NFAC.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that an amount of Rs.1,64,120/- on account of employees’ contribution to superannuation fund has been deposited before the statutory due date. Under these circumstances, the CPC was not justified in making the addition and thereby rejecting the rectification application and the Ld. CIT(A) / NFAC is equally not justified in sustaining such addition. We, therefore, direct the Assessing Officer / CPC to delete the addition of Rs.1,64,120/-. The second issue raised by the assessee in the grounds of appeal is accordingly allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 7th May, 2025.
Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 7th May, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपीलार्थी / The Appellant; 1. 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune
S.No. Details Date Initials Designation 1 Draft dictated on 05.05.2025 Sr. PS/PS 2 Draft placed before author 06.05.2025 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to the Head 9 Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order