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Facts
The assessee was imposed a penalty under Section 271(1)(c) for allegedly furnishing inaccurate particulars of income due to late deposit of employee's contribution towards EPF and ESIC. The addition was confirmed by the CIT(A) and the Tribunal. The assessee contended that the issue was debatable at the time and cited various court decisions.
Held
The Tribunal held that at the relevant time, the issue regarding the deduction of employee's contribution to PF and ESIC when deposited after the due date but before the filing of the return was debatable. Given the contrary decisions from various courts and the absence of a binding jurisdictional High Court decision against the assessee, the penalty under Section 271(1)(c) was not sustainable.
Key Issues
Whether penalty under Section 271(1)(c) is leviable when the issue concerning the deductibility of employee's contribution to PF and ESIC was debatable and there were conflicting judicial pronouncements.
Sections Cited
271(1)(c), 43B, 2(24)(x)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2012-13) M/s. Checkmate Facility & Vs. Deputy Commissioner of Electronic Solution Pvt. Ltd. Income Tax, Anil R. Shah (C.A.), Shreeji House, Circle-1(1)(1), 4th Floor, B/h. M. J. Library, Ellis Vadodara Bridge, Ahmedabad-380006 [PAN No.AACCC5367P] (Appellant) .. (Respondent) Appellant by : Ms. Kinjal Shah, C.A. Respondent by: Shri Veerbadram Vislavath, Sr. DR Date of Hearing 11.02.2025 Date of Pronouncement 27.02.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax(Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 27.09.2023 passed for A.Y. 2012-13.
2. The assessee has raised the following grounds of appeal:
“I. On Legality 1. Comm. of Income-tax, National Faceless (Appeal) Centre (NFAC), Delhi has erred both in Law and in fact in passing order dated 27-9-2023 wholly and fully relying on order of Dy.CIT, Cir 1(1) (1), Baroda dated 30-1-2020 passes u/s. 271(l)(c ) levying Penalty of Rs.28,29,250/- which is bad in and Void.
Your Appellant submits that the Penalty Order referred above dated 30- 1-2020 is in valid and void in Law ab initio since the Dy. Comm. of Income-tax has failed to quote refer to "Documentation Identification Number (DIN) effective from 1-10-2019 as per binding Circular of Central Board of Direct Taxes bearing No.19/2019 dated 14-8-2019 as well as Press Note released by Central Board of Direct Taxes also dated 14-8-2019 directing all officers of Income-tax Department to refer and mention DIN number in all order.
M/s. Checkmate Facility & Electronic Solution Pvt. Ltd. vs. DCIT Asst.Year –2012-13 - 2– 3. The Penalty Order referred above which is dated 30-1-2020 being after circular effect date from 1-10-2019 is bad in Law in valid and inoperative and reference and reliance by CIT(A) makes his Order also bad in Law and void. For this proposition your Appellant refers and relies on Delhi High Court in the judgement in case of CIT (International Taxation)-1 v. Brandix Mauritius Holdings Ltd, 149 taxmann.com 236. II. Om Merits 1. Without prejudice to above referred Legality of the order, your Appellant also submits that the order of CIT(A) is not maintainable and requires to be set aside since the order of Income-tax Officer levying penalty u/s.271(1)(c) is not maintainable since the Show Cause Notice issued by him prior to levy of Penalty was vague capable of two views and not certain as to whether the Appellant has "Concealed his Income" or "Furnished inaccurate particulars of such income". In view of binding judgements of various High Courts in the case of CIT vs. Manu Engineering Works 122 ITR page 306 (Gujarat) the Penalty is not levyable a) Yours Appellant also submits that Penalty u/s.271(1)(c) is not leviable for addition/ disallowance of addition of Employees contribution PF/ESI of Rs.84,68,418/- and difference in Receipt Rs.2,51,731/- Total of Rs.87,20,149/-. b) Your Appellant submits that full disclosure was made by the Appellant and not accepting a claim or disallowing expenditure does not amount to furnishing inaccurate particulars of Income and Penalty u/s. 271(l)(c ) cannot be levied. 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 to withdraw any or all Ground of Appeal
.”
3. The brief facts of the case are that in the assessment order, an addition of ₹84,68,418/- was made on account of late deposit of employee’s contribution towards EPF and ESIC. The same was confirmed by Ld. CIT(Appeals) and Tribunal for the impugned assessment year. Thereafter, penalty u/s 271(1)(c) of the Act was levied on the assessee for furnishing inaccurate particulars of income and the same was also confirmed by Ld. CIT(Appeals). The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) confirming the levy of penalty u/s 271(1)(c) of the Act disallowance on account of late deposit of employee’s PF and ESIC.
M/s. Checkmate Facility & Electronic Solution Pvt. Ltd. vs. DCIT Asst.Year –2012-13 - 3– 4. Before us, the Counsel for the assessee submitted that at the relevant time for the impugned year under consideration, being Financial Year 2011-12, the matter was a debatable issue and various Courts were taking contrary views on the matter. Accordingly, the counsel for the assessee submitted that since at the relevant time, there was no Jurisdictional High Court decision on this issue against the assessee and further, even various Tribunal were taking contrary views on the matter, the same being a debatable issue, no penalty was called for u/s 271(1)(c) of the Act.
In response, the Ld. DR submitted that the matter has got finality by the decision of Hon'ble Supreme Court in the case of Checkmate Services (P.) Ltd. vs. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC)/[2023] 290 Taxman 19 (SC)/[2022] 448 ITR 518 (SC)[12-10-2022] in which it was held that for assessment years prior to 2021-22, non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was held in trust by assessee-employer as per section 2(24)(x), thus, said clause would not absolve assessee- employer from its liability to deposit employee's contribution on or before due date as a condition for deduction.
We have heard the rival contentions and perused the material on record. We are of the considered view that at the relevant time, when the assessee did not make suo-moto disallowance on account of late deposit of PF and ESIC i.e. financial year ending 31 March 2012, there were contrary decisions on the issue with various M/s. Checkmate Facility & Electronic Solution Pvt. Ltd. vs. DCIT Asst.Year –2012-13 - 4– Courts/Tribunals taking contrary views in the matter. At the relevant time, we observe that various Tribunals had decided the issue in favour of the assessee. Further, we observe that though the Gujarat High Court in the case of Commissioner of Income-tax-II vs. Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Gujarat)/[2014] 223 Taxman 398 (Gujarat)/[2014] 366 ITR 170 (Gujarat)/[2014] 265 CTR 64 (Gujarat)[26-12-2013] had decided the issue against the assessee, but this decision was passed at a later date and could not be held to be binding on the assessee for the impugned year under consideration. In the case of Commissioner of Income-tax vs. SPL Industries Ltd. [2011] 9 taxmann.com 195 (Delhi)[07-07-2010], the Delhi High Court held that where assessee had deposited contribution deducted from employees' salary towards provident fund and employees State insurance before due date of filing return, it would be entitled to deduction of said payments under section 43B of the Act. Again, in the case of Commissioner of Income-tax, Faridabad vs. Hemla Embroidery Mills (P.) Ltd. vide order dated 27-09-2012, High Court held that Employee's contribution to PF, etc. deposited prior to due date of filing return, would be deductible. In the case of Principal Commissioner of Income-tax vs. TV Today Network Ltd. [2022] 141 taxmann.com 275 (Delhi)vide order dated 27-07-2022, the Delhi High Court held that Employees' contribution towards provident fund and ESI would qualify for deduction even if paid after due date prescribed under section 43B but before due date of filing of return. Accordingly, since various Courts have taken a position in favour of the assessee on this issue and at the relevant time, there was no jurisdictional High Court decision which was against the assessee, in our considered view, no penalty is liable to be sustained u/s 271(1)(c) of the Act, since the matter was clearly a debatable issue.
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 27/02/2025
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 27/02/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,