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Facts
The assessee, engaged in a security agency, filed their return for AY 2021-22. The CPC processed it under Section 143(1), making an addition for employee contributions to ESI and EPF due to late deposit, despite the assessee arguing they were paid before the return filing due date.
Held
The Tribunal held that the issue of late payment of PF and ESI has been settled by the Supreme Court in the case of M/s Checkmate Services Pvt. Ltd. vs. CIT. Therefore, there is no scope for further interpretation, and the appeal is dismissed.
Key Issues
Whether the disallowance of employee contributions to PF/ESI paid late but before the due date of filing the return is justified, considering the Supreme Court's decision.
Sections Cited
143(1), 2(24)(x), 36(1)(va), 43B
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Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘SMC’, CHANDIGARH
Before: SHRI LALIET KUMAR & SHRI KRINWANT SAHAY
Order Per Krinwant Sahay, AM : Appeal in this case has been filed by the assessee against the order dated 14-06-2024 of ld. Addl /JCIT (Appeals), Mudurai folder for A.Y. 2021-22.
Grounds of appeal are as under: -
1. The Learned CIT(A) erred significantly, both actually and legally, in upholding the intimation under section 851-Chd-2024 Ranbir Singh, Panchkula 2 143(1) issued by the CPC, which processed the appellant's return of income for the assessment year 2020-21 at Rs. 28,15,010/-.
2. The Ld. CIT(A) made a substantial error, both factually and legally, by misinterpreting provisions of Section 36(1) (va) read with Section 2(24)(x) and Section 43B, along with various legal precedents relevant to the assessment year 2020-21, thereby upholding the disallowance of Rs. 10,03,117/-due to the late payment of employee contributions to ESIC/EPC.
The Learned CIT(A) erred significantly, both factually and legally, in making an adjustment of Rs. 10,03,117/- under section 143(1) of the Income Tax Act, which exceeds the permissible scope of this provision. Section 143(1) allows for prima facie adjustments based on clear errors or discrepancies in the return, such as arithmetical mistakes, incorrect claims apparent from the return information, or inconsistencies in audit reports.
The Learned CIT(A) erred significantly, both factually and legally, by failing to recognize that the Tax Auditor's report merely noted the due dates and actual payment dates of employees' contributions towards Provident Fund without recommending any disallowance. The CPC relied on this report to make additions under section 143(1)(a)(iv), which is unjustifiable since the auditor did not indicate any disallowance. Hence, the addition based on this report exceeds the permissible scope of adjustments under section I43(1)(a).
5. Considering the facts and circumstances of the case and the law; the National Faceless Appeal Centre / CIT(A) erred in upholding the action of the Ld. AO(CPC) in disallowing the employee contribution of 851-Chd-2024 Ranbir Singh, Panchkula 3 Rs. 10,03,117/-under Section 36(1) (va) with respect to PF/ESI, when the same was deposited by the assessee before the due date of filing the return of income. The action of the Ld. CIT(A) is illegal, unjustified, arbitrary, and contrary to the facts of the case. Relief should be granted by deleting the entire addition made by ld. AO (CPC) and confirmed by ld. CIT(A).
6. The addition by way of adjustment and intimation under section 143(1) of the Income Tax Act, based on a retrospective amendment to the Income Tax Act, is beyond the scope of 143(1).
7. The Ld. CIT(A) erred significantly, both factually and legally, by failing to recognize that according to Clause 38 of the Employee Provident Fund Scheme 1952, the employer is required to deposit the PF/ESI contribution of the assessee within 15 days of the close of every month. The term 'every month' refers to the month in which the salary/remuneration is paid to the employee, not the month for which the salary or wages were due. Therefore, if the term 'month' is interpreted as the month of payment of the wages/salary to the employee, all the payments of the employee's contribution were made within the due date. Consequently, the addition made by the Ld. AO and upheld by the Ld. CIT(A) is incorrect and arbitrary.
The appellant reserves the right to add, amend, or delete any ground of appeal on or before e date of hearing.
3. Brief facts of the case as per the written submissions filed by the Counsel of the Assessee before us are as under: - 851-Chd-2024 Ranbir Singh, Panchkula 4 The appellant, an individual engaged in operating a security agency filed a return of income for the assessment year 2021-2022 on 24.12.2021, with acknowledgment number 386472150241221, declaring an income of Rs. 18,11,900/-. The Central Processing Centre (CPC) processed this return under Section 143(1) of the Income Tax Act, 1961, and issued an electronic order on 21.11.2022, assessing the income at Rs. 28,15,010/-. The CPC made an addition of Rs. 10,03,117/- based on the provisions of Section 2(24)(x) read with Section 36(l)(va) of the Act, citing the late deposit of employee contributions towards ESI and EPF. The appellant filed an appeal before the Commissioner of Income Tax (Appeals) - National Faceless Centre [Ld. ClT(A)], arguing that the disallowance was unjust as the contributions were paid before the due date for filing the return. The appellant contends that Ld. CIT(A) ignored the provisions of law and judicial precedents on the subject and mechanically disallowed the employee contributions paid late but before the due date of filing the return of income. Aggrieved by the impugned order, the appellant has preferred the present appeal.
851-Chd-2024 Ranbir Singh, Panchkula 5 4. During proceedings before us, ld. Counsel for the Assessee submitted that during processing of the return, CPC Bangaluru rejected all the claims made for deduction for the payment of employees’ contribution towards PF and in the appellate proceedings, the Ld. CIT(A) made an error by misinterpreting provisions of section 36(1) (va) r.w.s 224(x) and Section 43B along with various legal precedents relevant to A.Y. 2020-21. In fact, the central issue of this appeal is the payment of employees’ contribution to ESI /EPF. The Ld. Additional Commissioner of Income Tax (Appeal) has relied on the order of the Hon'ble Supreme Court in the case of M/s Checkmate Services Pvt. Ltd. Vs. CIT, Civil Appeal No. 2383 of 2016 and according confirmed the addition / disallowance made u/s 36(1)(va) of the Act r.w.s 224(x) of the I.T. Act for late deposit in the government account. During the proceedings before us, the Ld. Counsel emphasized on the order of the Kolkata Bench of the ITAT in the case of Kanoi Papers and Industries Ltd vs ACIT reported in 75 TTJ 448. In this order the Tribunal has held that “….15 days from the end of the month in which salary actually disbursed, the Tribunal has held that 'Clause 38 of the Employees' Provident Fund 851-Chd-2024 Ranbir Singh, Panchkula 6 Scheme, 1952, fixes the time-limit for making payment in respect of contribution to the provident fund to be 15 days from the close of the month concerned. However, the issue here is whether the "month" should be considered to be the month which the wages relates or the month in which the actual disbursement of the wages is made, we are of the considered opinion that the expression "month" should mean here the month during which the wages/salary is actually disbursed irrespective of month to which the same relates”.
The ld. DR relied on the order of the Addl. CIT(A) and the proceedings of return u/s 143(1) of the I.T. Act by CPC Bangaluru.
We have considered the findings given by the CIT(A) in the appellate order and the written submissions filed by the ld. Counsel for the Assessee. We have also considered the arguments made by him during the proceedings before us and we have also taken on record the arguments made by the ld. DR on this issue. We are of this view that after the order of the Hon'ble Supreme Court in the case of M/s Checkmate Services Pvt. Ltd. Vs. CIT, Civil Appeal No. 2383 of 2016, issue of late payment of PF and ESI has got finality and there is 851-Chd-2024 Ranbir Singh, Panchkula 7 hardly any scope of any other interpretation than the one brought on record by the Hon'ble Apex Court. Therefore, respectfully following the ratio decided by the Hon'ble Supreme Court in the case of M/s Checkmate Services Pvt. Ltd. Vs. CIT (supra), we do not find any reason to interfere in the findings given by the Addl. CIT(A) in this case. Accordingly, Assessee’s appeal on different grounds and issues raised before us is dismissed.
In the result, Assessee’s penalty is dismissed.
Order pronounced on 26.05.2025.