CHECKMATE FACILITY AND ELECTRONIC SOLUTIONS PRIVATE LIMITED,VADODARA vs. THE DY.CIT, CIRCLE-1(1)(1), VADODARA

The main issue in the appeal before Ld. CIT(Appeals) was the disallowance of Rs. 36,72,752/- made by the CPC under Section 36(1)(va) of the Act for delayed payments of employee contributions towards PF and ESIC. Upon reviewing the facts, Ld. CIT(Appeals) noted that the disallowance was based on discrepancies between the Tax Audit Report and the Income Tax Return, particularly regarding the due dates for contributions under Section 36(1)(va) of the Act. Ld. CIT(Appeals) noted that the assessee failed to deposit employee contributions to the PF/ESI within the due date, as per the provisions of the Act. The Tax Audit Report highlighted that there was a variance between the prescribed due dates and the actual payment dates, leading to the disallowance under Section 36(1)(va) of the Act. Ld. CIT(Appeals) referred to the judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax (2022), which held that the non-payment of employee contributions within the due date would lead to disallowance, irrespective of whether the employer had paid the amount before the return filing date. The amendments made by the Finance Act, 2021, to Section 36 and Section 43B of the Act further clarified the issue, supporting that the provisions related to employee contributions were not subject to the same leeway as employer contributions. Accordingly, Ld. CIT(Appeals) held that the disallowance made by the AO was in accordance with the provisions of the Act and did not merit interference. The appeal was thus dismissed, and the addition made by the ITA Nos. 473&706/Ahd/2024 Asst. Years –2019-20 & 2021-22 - 3–

The assessee is in appeal before us against the order passed by Ld. CIT(Appeals). The assessee has taken the following Grounds of Appeal: “1. On the facts and circumstances of the case as well as law on the subject, the learened CIT(A) has erred in confirming addition of Rs. 36,72,752/- on account of debatable and contentious issue as prima-facie adjustment u/s 143(1)(a) of the Act.

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 36,72,752/- on account of delay in payment of employees’ PF and ESIC contribution even when at the relevant time different High Courts have given contradictory judgments.

Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 1,00,35,800/- on account of debatable and contentious issue as prima-facie adjustment 143(1)(a) of the Act.

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 1,00,35,800/- on account of delay in payment of employees’ PF and ESIC contribution even when at the relevant time different High Courts have given contradictory judgments.

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 1,00,35,800/- on account of delay in payment of employees’ PF and ESIC contribution without considering the fact that payment is not made to the employees and hence, there is no question of deduction of the sum and in-turn payment under relevant acts.

Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

Further, the assessee has also taken the following Additional Ground of Appeal:

Before us, the Counsel for the assessee initially argued that while considering the delay in payment of ESI/ PF, the period of 15 days has to be reckoned from the actual date of payment of salary to the employee and not the close of the month. Viewed from this perspective, there is no delay in contribution of ESI/ PF and no disallowance is called for u/s 36(1)(va) of the Act. However, the Bench confronted the Counsel for the assessee with the decision of the Gujarat High Court in the case of Principal Commissioner of Income-tax vs. Suzlon Energy Ltd. [2020] 115 taxmann.com 340 (Gujarat)/[2020] 423 ITR 608 (Gujarat) vide order dated 11-02-2020, in which Gujarat High Court held that where assessee had not deposited employees' contributions towards PF and ESI within prescribed period in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified. Further, in the said decision, the Gujarat High Court held that section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 makes it obligatory for the employer before paying him his wages to deduct the employee's contribution along with the employer's own contribution as fixed by Government. The employer is further obliged to pay the same within fifteen days of the close of every month pay i.e. such contribution and administrative charges. The reference to fifteen days of the close of the month must be in relation to month during which the payment of wages is to be made and corresponding liability to deduct employee's

Thereafter, the Counsel for the assessee submitted that in light of the above decision of Gujarat High Court referred to above, he wishes to withdraw the present appeals and does not wish to argue the matter further.

Therefore, in light of the juri ictional High Court decision in the case of Suzlon supra and the request of the Counsel for the assessee, the appeal of the assessee is dismissed.

Since common facts and issues for consideration are involved for both the years under consideration, both the appeals filed by the assessee are hereby dismissed as withdrawn.

In the result, both the appeals filed by the assessee are dismissed. This Order is pronounced in the Open Court on 25/03/2025 (ANNAPURNA GUPTA) JUDICIAL MEMBER Ahmedabad; Dated 25/03/2025