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Facts
The assessee, an individual providing manpower services, challenged the disallowance of employee and employer contributions to PF and ESI for assessment years 2018-19 to 2020-21. The CPC initially made disallowance u/s 143(1) for late deposits, which was confirmed by the CIT(A) following the Supreme Court's decision in Checkmate Services, but the assessee contended that substantial payments were made before statutory due dates.
Held
The Tribunal restored the issue for all assessment years to the Assessing Officer for verification, directing the AO to distinguish between delayed payments and those made within statutory due dates. The AO is to pass an appropriate order after verifying the details, ensuring that contributions made before the statutory due date are allowed.
Key Issues
Whether disallowance for delayed payment of employee's contribution to PF/ESI should apply to contributions paid before the statutory due date, in light of the Checkmate Services (P) Ltd. Supreme Court ruling.
Sections Cited
143(1), 154, 36, 36(1)(va)
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
The above three appeals filed by the assessee are directed against the separate orders dated 10.06.2024 of the Ld. CIT(A) / NFAC for assessment years 2018-19 to 2020-21 respectively. Since identical grounds have been raised by the assessee in all these appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order.
In all these appeals the assessee challenged the order of the Ld. CIT(A) / NFAC in confirming the disallowance made by the Assessing Officer on account of delayed payments of employees’ contribution to PF and ESI.
2018-19 as the lead case. Facts of the case, in brief, are that the assessee is an individual engaged in providing manpower / labour services under the name and style of M/s. Rutika Services. She filed her return of income for the impugned assessment year on 30.11.2019. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 13.12.2019 at a total income of Rs.2,15,71,910/- wherein the CPC made addition of Rs.1,54,02,025/- on account of disallowance for late deposit of employees’ contribution towards PF and ESI. The assessee filed a rectification application before the Assessing Officer which was disposed of vide order u/s 154 of the Act dated 28.09.2022 wherein the Assessing Officer rejected the rectification application thereby confirming the disallowance of Rs.1,54,02,025/-.
4. In appeal, the Ld. CIT(A) / NFAC dismissed the appeal filed by the assessee.
Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 1. On the basis of facts and circumstances of the case and as per law, The Commissioner of Income Tax (Appeals) is not justified in confirming the disallowance of Rs.91,10,395/- made by CPC, Bengaluru by invoking provisions of section 36 of the Act for the reason of delay in payment of employer's contribution to Provident Fund and Employee State Insurance (ESI) Contribution when the provisions of section 36(1)(va) are not applicable to Employer's contribution to PF as well as ESIC.
2. On the basis of facts and circumstances of the case and as per law, The Commissioner of Income Tax (Appeals) is not justified in confirming the disallowance of Rs.1,54,02,025/- made on account of delay in payment of Employees and Employers Contribution to Provident Fund and ESI Contribution by invoking provisions of section 143(1) of the Act.
3. On the basis of facts and circumstances of the case and as per law, The Commissioner of Income Tax (Appeals) is not justified in confirming the disallowance to the extent of Rs. 62,91,630/- made on account of disallowance of delay in payment of Employees Contribution to Provident Fund and ESI Contribution, when the said contribution is paid on or before the due date under the PF/ESIC law.
The appellant craves for the addition to, deletion, alteration, modification of the above grounds of appeal.
6. Identical grounds have been raised by the assessee for the other two years also.
The Ld. Counsel for the assessee at the outset filed the following chart and submitted that in view of the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd vs. CIT (2022) 143 taxmann.com 178 (SC), the employees’ contribution to PF and ESI which has been paid before the statutory due date has to be allowed:
Referring to the above chart, he submitted that since the assessee has paid employer’s and employees’ contribution towards PF and ESI before the statutory due date, therefore, disallowance is to be restricted only to the extent of delayed payment. Referring to the chart, he submitted that the total disallowance as per the decision of the Hon'ble Supreme Court comes to only Rs.13,53,045/-. He accordingly submitted that he has no objection if the matter is restored to the Assessing Officer with a direction to verify the details and pass appropriate order.
Ld. DR on the other hand heavily relied on the orders of Assessing Officer/CPC and 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. We find the CPC in the instant case made disallowance of Rs.1,54,02,025/- on account of late deposit of employees’ contribution towards PF and ESI. The rectification application filed by the assessee was rejected by the Assessing Officer against which the assessee preferred an appeal before the Ld. CIT(A) / NFAC who following the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd vs. CIT (supra) upheld the action of the Assessing Officer. It is the submission of the Ld. Counsel for the assessee that substantial payments on account of employees’ contribution to PF and ESI have been made before the statutory due dates and the total disallowable amount comes to Rs.13,53,045/- in light of the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd vs. CIT (supra). It is also his submission that since the details were never verified by the CPC / Ld. CIT(A) / NFAC, therefore, he has no objection if the matter is restored to the file of the Assessing Officer for necessary verification and grant appropriate relief. Since the Ld. Counsel for the assessee filed a chart before us substantiating the deposit of employees’ contribution to PF and ESI before the specified due date prescribed under the PF and ESI Acts, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to verify the details and pass appropriate order as per fact and law. Needless to say the Assessing Officer shall grant due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
Identical grounds have been raised by the assessee in and 1648/PUN/2024 for assessment years 2019-20 and 2020- 21 respectively. Following the same reasonings, we restore the issue to the file of the Assessing Officer for verification of the details and pass appropriate order as per fact and law. We hold and direct accordingly. The grounds raised by the assessee in these two appeals are also allowed for statistical purposes.
In the result, all the three appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 20th March, 2025.