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Facts
The assessee, a private limited company providing security personnel services, filed its return of income. The Assessing Officer made additions for delayed deposit of employee contributions to PF/ESI and for a mismatch between revenue in books and Form 26AS. The CIT(A) confirmed these additions.
Held
The Tribunal held that the disallowance for delayed deposit of employee contributions to PF/ESI was correctly confirmed based on High Court and Apex Court judgments. However, the addition for revenue mismatch was set aside and restored to the AO for fresh examination due to lack of detailed reconciliation.
Key Issues
Whether disallowance for delayed deposit of employee PF/ESI contributions is justified, and whether addition for revenue mismatch between books and Form 26AS requires further examination by the AO.
Sections Cited
250, 36(1)(va), 2(24)(x), 139(1), 26AS, 143(3)
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Income Tax Appellate Tribunal, THE INCOME TAX APPELLATE
O R D E R O R D E R O R D E R O R D E R
PER PER DR. B.R.R. KUMAR, VICE PER PER DR. B.R.R. KUMAR, VICE DR. B.R.R. KUMAR, VICE-PRESIDENT DR. B.R.R. KUMAR, VICE PRESIDENT PRESIDENT:- PRESIDENT
This appeal has been filed by the Assessee against the order dated 02.07.2025 passed by the Ld. Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (‘Ld. CIT(A)’ in short), under Section 250 of the Income-tax Act, 1961 (‘the Act’ in short), relating to the Assessment Year 2016-17.
The effective grounds raised by the assessee are as follows:-
“1. The CIT(A) has erred both in Law and in Fact in confirming the disallowance of Rs. 10,09,59,768/- alleged it to be delayed Payment to Employees Contribution to PPF/ESI. 2. Your Appellant submit that in view of facts and circumstances of the case and as per provisions of Law as then existed the payment is made before filing Return of Income and therefore disallowance is not called for. The AO has failed to give any Show Cause Order and the amount that he had around for Addition.
3. The CIT(A) has also erred in confirming applicability of Sec.26AS and confirming addition of Rs.2,78,40,685/- as alleged difference in revenue receipt between books of accounts and as per 26AS.
Your Appellant a Private Ltd. Co. has been regularly maintaining Books of Accounts duly audited and also subject to Tax Audit and same method of accounting is followed from year to year by the Company and accepted by Income Tax Department regarding tax at source and payment of tax to the revenue and it is a case of "mismatch".”
The brief facts of the case are that the assessee is engaged in the business of providing security personnel services and operates as a private limited company. It filed its return of income on 29.09.2015 declaring a total income of Rs.14,94,15,640/-. The case was subsequently selected for scrutiny under CASS and the assessment was completed under Section 143(3) of the Act on 27.12.2017, making total additions of Rs.12,88,00,453/- . The assessee challenged the order before the Ld. CIT(A), who confirmed the disallowances, leading to the present appeal.
Ground No.1 & 2 – Disallowance of Employees’ Contribution to PF/ESI Ground No.1 & 2 Disallowance of Employees’ Contribution to PF/ESI Ground No.1 & 2 Ground No.1 & 2 Disallowance of Employees’ Contribution to PF/ESI Disallowance of Employees’ Contribution to PF/ESI
The Assessing Officer made a disallowance under Section 36(1)(va) r.w.s. 2(24)(x) of the Act for delay in deposit of employees’ contribution to PF/ESI beyond the due date as prescribed under the statute. We find that the issue stands squarely covered against the assessee by the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation in Tax Appeal No. 637 of 2013 and the judgement of the Hon’ble Apex Court in assessee’s own case, i.e. Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178, wherein it was held that employees’ contribution to PF/ESI is allowable as deduction only if deposited within the due dates as prescribed under the respective Acts and not merely by the date of filing return under Section 139(1) of the Act.
4.1 In view of the binding precedent of the Hon’ble Supreme Court and Hon’ble High Court, we find no infirmity in the order of the Ld. CIT(A). Accordingly, this ground of appeal is dismissed.
Ground No. Ground No.3–Addition on Account of Revenue Mismatch with Form 26AS Ground No. Ground No. Addition on Account of Revenue Mismatch with Form 26AS Addition on Account of Revenue Mismatch with Form 26AS Addition on Account of Revenue Mismatch with Form 26AS 5 This ground pertains to the addition made by the Assessing Officer and confirmed by the CIT(A) on account of alleged difference between the revenue as per books of accounts and Form 26AS. The Assessing Officer observed discrepancies to the extent of Rs.2,78,40,685/- in revenue reported in Form 26AS and as per the assessee’s audited books. The assessee submitted that the mismatch was due to various practical issues such as (i) different accounting methods adopted by customers, (ii) deduction of TDS on gross amount, (iii) TDS on reimbursement of expenses, (iv) timing differences due to financial year mismatches, (v) incorrect PAN quoted by deductors etc… The Ld. CIT(A) observed that the assessee has given general type of reasons for the said difference in revenue receipts as per books and Form 26AS, but failed to reconcile or justify the mismatch with supporting documents.
5.1 We have carefully considered the submissions and the documents available on record. While the assessee has offered some reasonable explanations for the discrepancies, no detailed party-wise reconciliation has been submitted either before the Assessing Officer or the CIT(A) to substantiate these claims. Given the nature of the assessee’s business, such mismatches may not be indicative of income concealment. Therefore, in the interest of justice, we consider it appropriate to restore this matter to the file of the Assessing Officer for a fresh examination. The Assessing Officer shall re-examine the reconciliation to be provided by the assessee, after affording the assessee a reasonable opportunity of being heard. The assessee is directed to submit a complete party-wise reconciliation along with all necessary supporting documents.
This ground is accordingly allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed for statistical purposes.
The order is The order is pronounced i pronounced in n the the open open Court Court on on 29 29.09.202 .2025. The order The order isis pronounced i pronounced i n n the the open open Court Court on on 29 29 .202 .202