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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”: HYDERABAD
Before: SHRI LAXMI PRASAD SAHU & SHRI DUVVURU RL REDDY
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER
ITA Nos. 493 & 494/Hyd/2021 Assessment Years: 2017-18 & 2018-19 United Rail Road Vs. Dy. Commissioner of Consultants Pvt. Ltd., Income-tax, Secunderabad. Central Circle – 1(3), Hyderabad. PAN – AAACU 2794A (Appellant) (Respondent) Assessee by: Shri P. Murali Mohan Rao Revenue by: Shri Rohit Mujumdar Date of hearing: 18/01/2022 Date of pronouncement: 19/01/2022 O R D E R PER BENCH.: Both these appeals filed by the assessee are directed against CIT(A) – 11, Hyderabad’s orders dated 11/10/2021 for AYs 2017-18 & 2018-19 involving proceedings u/s 143(1) of the Income Tax Act, 1961.
The only issue involved in both these appeals is that the addition towards employees and employers contribution to PF and ESI on the ground of late payment of the same.
:- 2 -: ITA Nos. 493 & 494/Hyd/2021 M/s United Rail Road Consultants Pvt. Ltd., Sec’bad.
Briefly the facts as taken from AY 2017-18 are that the appellant company has filed the return of income for A Y 2017-18 on 24.10.2017 declaring total income of Rs. 4,71,33,550/-. Subsequently, the CPC passed an order u/s 143(1) of the Act dated 28.12.2018 by disallowing an amount of Rs.2,78,01,152/- comprising employees share of Rs.1,28,92,477/- and employers share of Rs.1,49,08,675/- towards contribution to PF /ESI not credited before the due date and thereby determined the total income of the appellant at Rs.7 ,49,34,702/-.
Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A) with a delay of 446 days for AY 2017-18 and 95 days delay for AY 2018-19. The assessee has filed a petition for condonation of delay, which was extracted by the CIT(A) in his order at page No. 3, which is reproduced as under: “ I. Imtiaz Farooqi, Director of M/s UNITED RAIL ROAD CONSULT ANTS PRIVATE Limited, do hereby solemnly affirm and state as under. The communication of proposed adjustment u/ s 143(1)(a) of the Act dt. 02.11.2018 in respect of the Assessment Year 2017-18 was passed by the CPC. In relation to the same, our accountant had advise d that there is no need to file an appeal and accordingly a response to 143(1)(a) was filed disagreeing with the proposed addition on 20.02.2019. Subsequently, when we received a notice of demand from the A 0 on 18.02.2020. we approached our Chartered Accountant, who advised us to file an appeal before the Hon'ble CIT(A) and that is the reason why
:- 3 -: ITA Nos. 493 & 494/Hyd/2021 M/s United Rail Road Consultants Pvt. Ltd., Sec’bad. appeal could be filed on 21.02.2020 with the delay of 446 days as the appeal was due for filing on 02.12.2018 and instead of that the same is being filed on 21.02.2020. The delay in filing of the appeal may please be condoned and as the delay in filing the appeal is for sufficient and genuine reasons. In view of the above reasons, the delay may please be condoned and the appeal may please be considered as due to circumstances which were beyond the control of the Assessee. " The revised condonation petition which was filed subsequently during appeal proceedings vide 07. 10.2021 is as under: "I, Imitiaz Farooqi, hereby state that, I am acquainted with the facts of the case in respect of appeal which has been filed with the CIT (appeals), for Assessment Year 2017-18, and I state that: The return of Income was filed on 24.10.2017. The communication of the proposed adjustment was passed on 02.11.2018 and as it was only a show cause we disagreed with the same and respond to it. To our surprise we received demand 'notice on 18.02.2020. When we verified, we came to know that an intimation order dated 28.12.2018 was passed which was never received to us. Thus, we filed appeal with a condonation of delay of 466 days. The delay in filing is entirely due to non-receipt of order and we couldn't verify as our accountant was 11;ot sick. Thus, the delay in filing of appeal may please be condoned and as the delay in filing the appeal is for sufficient and reasonable cause of reason. In view of the above reasons, the delay may please be condoned and the appeal may please be considered as due to circumstances which were beyond the control of the Assessee."
:- 4 -: ITA Nos. 493 & 494/Hyd/2021 M/s United Rail Road Consultants Pvt. Ltd., Sec’bad.
After considering the submissions of the assessee for condonation of delay, the CIT(A) dismissed the appeals in- limine without condoning the delay by referring various decisions of the Hon’ble Supreme Court and Hon’ble High Courts.
5.1 However, the CIT(A) further observed in his order as under: “However, it is also to be noted that the appellant had filed a rectification petition uls 154 with the AO for allowing employer's contribution to PF & ESI and employees' contribution of PF & ESI paid before the date of filing of return. In this regard, it is to be noted that with regard to the employees' contribution of PF & ESI, the Honble Apex Court has dismissed the SLP of the Department against the order of the Honble Rajasthan High Court in the case of Rajasthan State Beverages Corporation. Ltd in ITA No. 150 of 2016 dated 08.06.2016 which granted relief in the favour of assessee and had held that the employees' contribution of PF & ESI paid before the date of filing of return is an allowable expenditure. Since the issue under appeal is a settled issue, the AO may consider the issue u/s 154 after considering necessary supporting evidences filed by the appellant and allow the same as per law.”
We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. From the order of CIT(A), we observe that though the CIT(A) dismissed the appeals in-
:- 5 -: ITA Nos. 493 & 494/Hyd/2021 M/s United Rail Road Consultants Pvt. Ltd., Sec’bad. limine without condoning the delay, observed that “since the issue under appeal is a settled issue, the AO may consider the issue u/s 154 after considering the necessary supporting evidences filed by the appellant allow the same as per law.” We have also gone through the Tax Audit Report i.e. Form No. 3CD for both the years at Sl.No. 20(b) and found that the assessee has paid the entire PF/ESI due before filing of the return of income u/s 139(1) of the Act. In view of these observations, we are of the view that the issue in dispute 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 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
:- 6 -: ITA Nos. 493 & 494/Hyd/2021 M/s United Rail Road Consultants Pvt. Ltd., Sec’bad. 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 Respectfully, following the above decision of the co- ordinate bench of Tribunal, we direct the AO to delete the addition in respect of employer’s & employees contribution of PF&ESI in both the years under consideration following the said order of the ITAT and in accordance with law after providing reasonable opportunity of hearing to the assessee in the matter.
In the result, both the appeals of the assessee are allowed in above terms. A copy of this common order be placed in the respective case files.
Pronounced in the open court on 19th January, 2022.
Sd/- Sd/- (DUVVURU RL REDDY) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 19th January, 2021.
:- 7 -: ITA Nos. 493 & 494/Hyd/2021 M/s United Rail Road Consultants Pvt. Ltd., Sec’bad. Copy to : 1 M/s United Rail Road Consultants Pvt. Ltd., C/o P. Murali & Co., CAs, 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad – 82 2 DCIT, Central Circle – 1(3), Hyderabad. 3 CIT(A), Hyderabad 4 Pr. CIT (Central), Hyd. ITAT, DR, Hyderabad. 5 6 Guard File.