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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: S/SHRI T.R. SENTHIL KUMAR & MAKARAND V.MAHADEOKAR
This appeal filed by the assessee is directed against the order dated 24.07.2024 passed by the Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”]), for the Assessment Year 2015-16, arising from the assessment order passed under section 143(3) of the Act by the Assessing Officer, Circle-1(1)(1), Vadodara, dated 27.12.2017.
The assessee is a private limited company engaged in the business of providing security personnel and allied manpower services. The assessee filed its return of income electronically on 30.09.2015 declaring total income of Rs.91,49,270/- under normal provisions of the Act. Book profit under section 115JB was declared at Rs.75,80,496/-. The case was selected for scrutiny and notices under sections 143(2) and 142(1) were issued and served on the assessee. Subsequent notice under section 142(1) read with section 129 was also issued on 10.10.2017 due to change of incumbent. During the course of assessment proceedings, the AO made two additions:
- Rs.12,785/- on account of delayed deposit of employees’ contribution to PF/ESIC, invoking section 36(1)(va) read with section 2(24)(x); and - Rs.1,14,75,362/- on account of mismatch between gross receipts shown in Form 26AS and that disclosed in the books of account.
The AO held that the employees’ contribution was deposited beyond the due date prescribed under the respective welfare legislations and therefore, not allowable as per the provisions of section 36(1)(va). The AO placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Gujarat State Road Transport Corporation (Tax Appeal No. 637 of 2013).
4. With respect to the difference in revenue receipts, the AO observed that income reported in Form 26AS was higher than 3 the income recorded in the books of account, and the assessee failed to reconcile the differences or provide party-wise justifications. Accordingly, the AO added the entire amount of unreconciled difference to the total income of the assessee.
5. The Assessee preferred an appeal before CIT(A). The appeal filed by the assessee was initially instituted before CIT(A), Vadodara and subsequently migrated to the National Faceless Appeal Centre (NFAC). In the appellate proceedings, the CIT(A) confirmed both the additions. Regarding the disallowance of Rs.12,785/-, the CIT(A) reiterated the legal position laid down by the Hon’ble jurisdictional High Court and also referred to the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. [Civil Appeal No. 2833 of 2016] wherein it was held that the extended due date under section 43B is not applicable to employees’ contribution covered under section 36(1)(va). In relation to the addition of Rs. 1,14,75,362/-, the CIT(A) noted that the assessee did not furnish any reconciliation or supporting documents to substantiate its claim. The appellate authority observed that mere filing of return or audited accounts does not discharge the onus of proof, and in the absence of documentary evidence, the explanation offered was unacceptable. The addition was accordingly sustained.
Aggrieved by the order of CIT(A) the assessee in in appeal before us raising following grounds:
1. The CIT(A) has erred both in Law and in Fact in confirming the disallowance of Rs.12,785/- alleged it to be delayed Payment to Employees Contribution to PPF/ESI.
4 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) is also erred in confirming applicability of Sec.26AS and confirming addition of Rs.1,14,75,362/-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.
Difference arises on account method of accounting followed by Appellant and its contribution the consequence and over period of time the difference is reconciled and there is no short fall as alleged. Your Appellant submits that since the time available at the time of Assessment was short and the amount of alleged difference involved being very large reconciliation couldn't take and it is submitted that to arrive at the correct figure of addition if any a chance of Reconstitution be given as it is done in many cases.
In view of above facts and circumstances your Appellant submits that the addition be deleted and relief be granted. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly. Your Appellant reserves right to add, alter, amend, withdraw any or all Ground of Appeal.
7. Before us, the learned Authorised Representative fairly conceded that the disallowance under section 36(1)(va) is now covered against the assessee by the decision of the Hon’ble Supreme Court in assessee’s own case and did not press further on this ground.
8. As regards the second issue, the learned AR submitted that the alleged difference in receipts is not attributable to unaccounted income but due to timing and accounting 5 differences. The AR submitted that the assessee follows mercantile system of accounting, while customers follow either cash or hybrid systems. In some cases, TDS is deducted on gross amounts including taxes or on reimbursed expenditures, and in other instances due to erroneous PAN punching, income is reflected under assessee’s PAN despite it not pertaining to it. The learned AR placed on record a reconciliation statement at pages 95–97 of the paper book and submitted that similar issue was restored back to the AO in assessee’s own case for A.Y. 2009-10 by the CIT(A) for verification. Therefore, in the interest of consistency and justice, it was prayed that the matter be set aside to the AO for de novo adjudication.
The learned DR fairly submitted that the reconciliation requires factual verification and raised no objection if the matter is remanded back to the file of the AO for limited verification.
We have heard both the parties and perused the material available on record. n view of the binding precedent of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra), and the concession given by the learned AR, we uphold the disallowance of Rs.12,785/- made under section 36(1)(va) of the Act, being delayed deposit of employees’ contribution to PF/ESIC beyond the due date prescribed under the respective Acts. This ground is dismissed.
The addition made by the AO is based on the difference between receipts reported in Form 26AS and those disclosed in the books of account. The explanation offered by the assessee 6 refers to timing and accounting mismatches, TDS deducted on gross values including reimbursements, and third-party errors including wrong PAN tagging. We find that the assessee has now furnished a reconciliation statement and has explained the plausible reasons for mismatch. The same was not available before the AO or CIT(A) in the manner and format as presented before us.
Considering the totality of the circumstances and the principle of judicial consistency as noted in A.Y. 2009-10, we are of the considered view that this issue requires factual verification. The Assessing Officer shall examine the reconciliation and supporting documents and decide the matter afresh after affording a reasonable opportunity of being heard to the assessee. Accordingly, we set aside the order of the CIT(A) on this issue and restore the matter to the file of the AO for fresh adjudication.
In the result, the appeal is partly allowed for statistical purposes.
Order pronounced in the Court on 5th May, 2025 at Ahmedabad.