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Facts
The assessee challenged the disallowance of Rs. 2,54,70,677/- under Section 36(1)(va) for employees' provident fund contributions, which were delayed by one day. The assessee claimed the delay was due to a technical glitch or error in the EPFO portal on the due date, 15th June 2021, and had contacted authorities for resolution. The disallowance was initially made by the Centralized Processing Centre and upheld by the CIT(A).
Held
The Tribunal acknowledged the Supreme Court's ruling in Checkmate Services (P) Ltd., which mandates strict compliance for timely deposit of employee contributions. However, it found that the CIT(A) failed to adequately examine or verify the assessee's claim of technical glitches with supporting evidence. The matter is, therefore, remanded to the CIT(A) for a de novo adjudication to verify all submitted evidence and afford the assessee a proper hearing, strictly adhering to the Supreme Court's precedent.
Key Issues
Whether the disallowance of delayed employee provident fund contributions, due to alleged technical glitches in the EPFO portal, is justified without proper verification of the assessee's claims and evidence by the appellate authority, in light of the binding Supreme Court judgment on timely deposits.
Sections Cited
250, 36(1)(va)
AI-generated summary — verify with the full judgment below
Per contra, the Ld. AR had drawn our attention to page 3 of the 6. impugned order wherein it was recorded as under:
"During the year under consideration, there was a delay of 1 day for depositing the Provident Fund amounting to ₹2,54,70,677/- for the month of May, 2021. The due date for deposit of the same was 15th June, 2021 but the appellant deposited the same on 16th June, 2021. The appellant was not at fault for this delay. In fact, the website/portal of PF department (www.unifedportalmem.epfndia.gov.in) was not operational on 15th June, 2021 and even prior to that. The appellant contacted the regional PF office at Bathinda for resolution so that amount could be deposited within the statutory time line but the said office could not help. The appellant, thereafter, also reached out to the EPFO Regional Office, Bathinda by way of email dated 15th June, 2021 stating the facts and requesting for extension of the due date as portal was facing operational issues. The appellant has also requested to the EPFO Regional Office, Bathinda not to treat the non-deposit of the PF contributions as a noncompliance as it was not due to fault at the appellant end but was a technical glitch or error.” We have considered the rival contentions of the parties and reviewed 7.
3 the material available on the record. In the present case, we find that the issue is squarely governed by the decision of the Hon’ble Supreme Court in Checkmate Services (P) Ltd. v. CIT [(2022) 448 ITR 518 (SC)], where it was categorically held that employees’ contribution to PF/ESI is allowable only if paid within the time prescribed under the respective statutes. The delay, however minimal, disentitles the assessee from claiming deduction under section 36(1)(va) of the Act.
We have also gone through the documents and the decision of 8. Coordinate Bench. The first document filed by the assessee was dt. 16/06/2021 which was after the last date of making the payment. The next document is dt. 15/06/2021 generated at 23:39 wherein the assessee has mentioned “ we are continuously trying to make payment but website is not supporting us”. Another email at page 7 of the documents wherein it is mentioned that “ we have updated the challans of our company for payment process but website is not redirecting to bank’s website. It is crashing”. Lastly, at page 9 the assessee had placed the communication dt. 15/06/2021 wherein it is mentioned that the assessee trying to deposit the contribution for the month of May 2021 but website is not working. All the documents filed by the assessee are the email sent by the assessee on 15/06/2021 between 18:52 to 23:39. The assessee has merely placed reliance on an email addressed to the EPFO between 18:52 hours and 23:39 hours on 15.06.2021, requesting that it not be treated as non-compliant and that no interest, penalty, or damages be levied. However, such self-serving correspondence, without any confirmation or acknowledgment from the EPFO or any authoritative evidence showing that the portal was indeed non- operational, is insufficient to substantiate the plea.
We have carefully considered the submissions advanced by the parties 9. and perused the material available on record. It is the case of the Revenue that, in the absence of any verifiable or contemporaneous evidence demonstrating technical glitches at the relevant point in time, the assessee's plea for condonation of delay in deposit of employees’ contribution towards
4 PF/ESI cannot be accepted. The reliance has been placed upon the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. v. CIT [(2022) 143 taxmann.com 178 (SC) / (2022) 448 ITR 518 (SC)], wherein it has been categorically held that the provisions relating to the timely deposit of employees’ contribution are to be interpreted strictly. Any delay beyond the due date prescribed under the respective statutes would render such contribution ineligible for deduction under section 36(1)(va) of the Act.
It is equally true that the Hon’ble Apex Court has not carved out any 10. exception to the strict compliance mandated under the statutory scheme. However, upon perusal of the appellate order, it is seen that the Ld. CIT(A) has not made any specific finding with respect to the veracity or otherwise of the assessee’s explanation regarding the alleged technical glitch or system- related error. No inquiry appears to have been made to ascertain whether any credible documentary evidence, screen logs, complaint acknowledgements, or correspondence with the EPFO/ESIC or the bank portal was submitted by the assessee in support of its claim.
In our considered view, the issue requires proper examination and verification at the end of the Ld. CIT(A). The principle of natural justice demands that when a specific explanation is offered by the assessee, albeit on a point of law settled against the assessee, the same deserves to be considered with reference to facts and documents. In the absence of a clear finding as to whether the assessee did or did not furnish any substantive evidence regarding technical difficulty, we deem it appropriate to remit the matter back to the file of the Ld. CIT(A) for the limited purpose of verifying whether any such explanation was offered and whether the same is supported by any credible contemporaneous evidence.
We make it clear that the Ld. CIT(A) shall examine the claim of the 12. assessee strictly in light of the binding judgment of the Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. (supra) and after affording a reasonable opportunity of hearing to the assessee. If it is found that the delay in deposit is not within the due date as prescribed under the relevant
5 Provident Fund/ESI laws, and no justifiable and documented explanation is available on record, the disallowance shall be confirmed in accordance with law. Further the Ld. CIT(A) is directed to verify after exercising its power from the office of the concerned authorities either by summoning the record or issuing the commission to ascertain whether there was technical glitches which prevented the assessee from timely deposit of the contribution. The assessee shall also be at liberty to furnish any evidence in support of its case and the Ld. CIT(A) shall consider the evidence if any, filed by the assessee in accordance with law.
In view of the above discussion, the impugned order of the Ld. CIT(A) is set aside, and the matter is restored to his file for de novo adjudication after considering the material, if any, placed by the assessee and after affording an opportunity of being heard.