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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”: HYDERABAD
Before: SHRI LAXMI PRASAD SAHU & SHRI K. NARASIMHA CHARY
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA Nos. 21 & 22/HYD/2022 Assessment Years: 2018-2019 & 2019-2020 Simhapuri Bhavitha, Vs. Asst. Commissioner of Nellore. Income-tax, Circle – 1, Hyderabad. PAN – AAXAS 7764B (Appellant) (Respondent) Assessee by: Shri I. Kamareddy Revenue by: Shri Rohit Mujumdar Date of hearing: 03/03/2022 Date of pronouncement: 07/03/2022
O R D E R PER BENCH: These two appeals filed by the assessee are directed against CIT(A), National Faceless Appeal Centre (NFAC), Delhi’s separate orders, both dated 03/12/2021 for AYs 2018-19 & 2019-20 involving proceedings u/s 143(1) of the Income Tax Act, 1961 ; in short “the Act”. As the facts and grounds are identical in these appeals, the same were clubbed and heard together and, therefore a common order is passed for the sake of convenience.
:- 2 -: ITA Nos. 21 & 22/Hyd/2022 Simhapuri Bhavitha, Nellore.
The first issue raised in ground Nos. 1 to 4 involved in these appeals are that the addition towards employees’ contribution to PF & ESI made on the ground that the same was not paid before the due date as provided u/s 36(1)(va) of the I.T. Act.
Briefly, the facts of the case as taken from AY 2018-19 being ITA No. 21/Hyd/2022 are that the assessee had filed return of income on 30/10/2018, which was processed u/s 143(1) of the Act on 20/12/2019. While doing so, the ADIT, CPC had disallowed an amount of Rs. 52,27,033/- u/s 36(1)(va) on the ground that the same were paid beyond the due date as prescribed under the respective Act.
When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the disallowance made by the AO.
5 Aggrieved, the assessee is in appeal before the ITAT.
Before us, the ld. AR of the assessee submitted that the assessee had filed its return income on 31/10/2019, which was an extended date for filing of return of income. He submitted that the entire employees contributions towards PF and ESI were paid before filing of the return u/s 139 of the Income Tax Act. The ld. AR filed a paper book containing 22 pages, the contents of which are as under:
:- 3 -: ITA Nos. 21 & 22/Hyd/2022 Simhapuri Bhavitha, Nellore.
The ld. DR, on the other hand relied on the orders of revenue authorities and submitted that since the assessee failed to remit the employees contributions towards PF & ESI, within the due date as prescribed under the respective Act and, therefore, the revenue authorities disallowed the same u/s 36(1)(va) of the Act.
We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The assessee submitted before the lower authorities that the employees’ contributions to PF & ESI paid after the due date, but, before the due date of filing the return of income. Therefore, the issue has been settled that if the assessee has paid the PF and ESI payments before the due date of filing of return income u/s 139(1) of the Act, no disallowance is warranted as held by the coordinate bench
:- 4 -: ITA Nos. 21 & 22/Hyd/2022 Simhapuri Bhavitha, Nellore.
of the ITAT Hyderabad in case of ITA No. 2197/Hyd/2017 for Assessment Year: 2013-14, in case of Value Momentum Software Services Private Limited, Vs Deputy Commissioner of Income Tax, in which, it was held as under:
“5. Next comes the latter issue of Section 43B disallowance of Rs.8,11,648/- pertaining to employees provident fund. It is not in dispute that learned lower authorities held that the same had to be deposited before the due date prescribed in the corresponding statute than the due date for filing Section 139(1) return. The Revenue’s case in tune thereof relies on Section 36(va) read with explanation thereto that it is not Section 43B but the former provision which is applicable in such an instance. We find no merit in the Revenue’s foregoing stand. We take note of the explanatory memorandum to the Finance Act, 2021 proposing amendment in both Section 36(va) as well as Section 43B by inserting corresponding Explanations that although the impugned employees provident fund comes under the former provision only, the same is applicable from 01-04-2021 onwards. Meaning thereby that the legislature itself has condoned the impugned default before 01-04-2021. We thus delete the impugned employees provident fund disallowance of Rs.8,11,648/- for this precise reason alone. Necessary computation to follow as per law.”
5.1 We find that the assessee himself has disallowed an amount of Rs. 30,140/- as per paper book page N. 18, but, during the course of arguments, the ld. AR of the assessee failed to explain the nature of disallowance. The CPC while processing the return of income disallowed an amount of Rs. 52,27,033/-. Therefore, for arriving the correct claim of
:- 5 -: ITA Nos. 21 & 22/Hyd/2022 Simhapuri Bhavitha, Nellore.
deduction of employees contribution of PF & ESI u/s 36(1)(va) r.w.s. 43B, we remit the issue to the file of the AO with a direction to follow the above decision of the coordinate bench cited supra and decide the issue in accordance with law. Thus, grounds No. 1 to 4 raised by the assessee on this issue are allowed for statistical purposes.
As regards ground No. 5 that the CPC, Bengaluru is not justified in taxing the income of the assessee at the maximum marginal rate of 30% instead of the slab rates of tax applicable to registered society as is in the case of an individual, the ld. AR of the assessee contended that the assessee is an AOP where tax rate is applicable as per the slab rates of tax applicable to registered society as is in the case of an individual. In this connection, he placed reliance on the CBDT Circular No. 14 (XL-35) dated 11/04/1955, a copy of which is filed on record. The contents in the Circular are reproduced as under: CBDT Circular No. 14 (XL-35) dated 11/04/1955- Department must not take advantage of ignorance of assessee administrator March 1, 2016 Income Tax 1 Comment CBDT Circular No. 14 (XL-35) dated 11/04/1955- Department must not take advantage of ignorance of assessee to collect more tax than what is legitimately due Central Board of Direct Taxes
:- 6 -: ITA Nos. 21 & 22/Hyd/2022 Simhapuri Bhavitha, Nellore.
Circular No. 14 (XL-35) Miscellaneous—Refund and reliefs due to assessees— Departmental attitude towards Dated: 11/04/1955 ASSESSMENT SECTIONS 143, The Board have issued instructions from time to time in regard to the attitude which the Officers of the Department should adopt in dealing with assessees in matters affecting their interest and convenience. It appears that these instructions are not being uniformly followed. 2. Complaints are still being received that while ITO’s are prompt in making assessments likely to result into demands and in effecting their recovery, they are lethargic and indifferent in granting refunds and giving reliefs due to assessees under the Act. Dilatoriness or indifference in dealing with refund claims (either under s. 48 or due to appellate, revisional, etc., orders) must be completely avoided so that the public may feel that the Government are actually prompt and careful in the matter of collecting taxes and granting refunds and giving reliefs. 3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should :— (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.
:- 7 -: ITA Nos. 21 & 22/Hyd/2022 Simhapuri Bhavitha, Nellore.
Public Relations Officers have been appointed at important centres, but by the very nature of their duties, their field of activity is bound to be limited. The following examples (which are by no means exhaustive) indicate the attitude which officers should adopt :— (a) Sec. 17(1) : While dealing with the assessment of a non- resident assessee the officer should bring to his notice that he may exercise the option to pay tax on his Indian income with reference to his total world income if it is to his advantage. (b) Sec. 18(3), (3A), (3B) and (3D) : The officer should in every appropriate case bring to the assessee’s notice the possibility of obtaining a certificate authorising deduction of income-tax at a rate less than the maximum or deduction of super tax at a rate lower than the flat rate, as the case may be. (c) Secs. 25(3) and 25(4) : The mandatory relief about exemption from tax must be granted whether claimed or not; the other relief about substitution, if not time barred, must be brought to the notice of a taxpayer. (d) Sec. 26A : The benefit to be obtained by registration should be explained in appropriate cases. Where an application for registration presented by a firm is found defective, the officer should point out the defect to it and give it an opportunity to present a proper application. (e) Sec. 33A : Cases in which the ITO or the Asstt. Commissioner thinks that an assessment should be revised, must be brought to the notice of the CIT. (f) Sec. 35 : Mistakes should be rectified as soon as they are discovered without waiting for an assessee to point them out. (g) Sec. 60(2) : Cases where relief can properly be given under this sub-section should be reported to the Board. 5. While officers should, when requested, freely advise assessees the way in which entries should be made in various forms, they should not themselves make any in them on their behalf. Where such advice is given, it should be clearly explained to them that they are responsible for the entries made in any form and that they cannot be allowed to plead that they were made under official instructions. This equally applies to the Public Relation Officers. 6. The intention of this circular is not that tax due should not be charged or that any favour should be shown to anybody in
:- 8 -: ITA Nos. 21 & 22/Hyd/2022 Simhapuri Bhavitha, Nellore.
the matter of assessment, or that where investigations are called for, they should not be made. Whatever the legitimate tax it must be assessed and must be collected. The purpose of this circular is merely to emphasise that we should not take advantage of an assessee’s ignorance to collect more tax out of him than is legitimately due from him
The ld. DR, on the other hand, besides relying on the orders of revenue authorities submitted that this issue was not raised before the CIT(A) and, therefore, the same should be rejected.
After considering the submissions of both the parties and perusing the material on record as well as the orders of revenue authorities, it is observed that as contended by the assessee, the ADIT, CPC has charged the tax @ 30% which is a maximum marginal rate. Since the assessee is an AOP, the slab rate of taxes applicable as in individual cases, but, it is not clear from the record about the nature of business and its source of income of the assessee. The AR of the assessee failed to explain the nature of business and its source of income, we are unable to decide the issue as to whether the assessee’s income comes under Maximum marginal rate or slab rate of taxes. Therefore, we remit the issue to the file of the AO with a direction to decide the issue whether the assessee’s income comes under Maximum marginal rate or slab rate of taxes based on the nature of business and its source of income. Thus, this ground is allowed for statistical purposes.
:- 9 -: ITA Nos. 21 & 22/Hyd/2022 Simhapuri Bhavitha, Nellore.
In ITA No. 22/Hyd/2022 for AY 2019-20, with regard to ground Nos. 1 to 4 regarding disallowance u/s PF & ESI, it is observed that on perusal of record, we find that the assessee has himself disallowed an amount of Rs. 24,93,200/- as per paper book page No. 20. Therefore following the decision in AY 2018-10 vide para 5.1 supra, we remit this issue to the file of the AO to decide the same as directed in para No. 5.1. Accordingly, ground Nos. 1 to 4 are allowed for statistical purposes.
Ground No. 5 with regard to applicability of rate of tax on the income of the assessee is identical to that of AY 2018-19, following the decision therein, we remit this issue to the file of the AO to decide the same with identical directions as given vide para No. 8 (supra). Thus, this ground is allowed for statistical purposes.
In the result, both the appeals of the assessee are partly allowed for statistical purposes in above terms.
Pronounced in the open court on 7th March, 2022.
Sd/- Sd/- (K. NARASIMHA CHARY) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 7th March, 2022.
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kv Copy to : 1 Simhapuri Bhavitha, C/o SETNEL Office, Industrial Estate, Near AK Nagar Post office, AK Nagar, Nellore 2 ACIT, Circle – 1, Nellore 3 CIT(A), NFAC, Delhi. ITAT, DR, Hyderabad. 4 5 Guard File.