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Facts
The assessee filed an appeal against an order that disallowed a deduction of Rs. 3,00,937 for delayed deposit of employees' contribution to PF and ESI. The assessee contended that the deposits were made before the due date for filing the return of income, aligning with Section 43B of the Income-tax Act.
Held
The Tribunal noted that the appeal was initially barred by limitation but condoned the delay. Considering the assessee's specific submission regarding timely deposit and the provisions of Section 43B, the Tribunal decided to remit the matter back to the Assessing Officer for verification of the factual correctness of the claim.
Key Issues
Whether the disallowance of employees' contribution to PF and ESI made on account of delayed deposit beyond the due dates prescribed under Section 36(1)(va) is justified when the deposits were made before the due date for filing the return of income under Section 139(1) and in conformity with Section 43B.
Sections Cited
143(1), 36(1)(va), 139(1), 43B, 20(b)
AI-generated summary — verify with the full judgment below
Order PER LALIET KUMAR, J.M This is an appeal filed by the Assessee against the order of the Ld. CIT, Appeal Add/JCIT(A)-1 Vadodara pertaining to Assessment Year 2021-22.
At the outset the Registry has pointed out that the appeal filed by the Assessee is barred by limitation by 305 days.
After considering the condonation application filed by the assessee, the delay is condoned, as sufficient cause has been shown, and the appeal is admitted for adjudication.
The assessee, Shri Kishan Ram, a resident individual, filed his return of income for the Assessment Year (AY) 2021–22 electronically on 10.01.2022, declaring total income of Rs.4,42,210/-. The return was processed by the CPC, Bangalore, under section 143(1) of the Income-tax Act, 1961, and an intimation dated 21.11.2022 was issued, whereby the returned income was enhanced to Rs.7,26,284/-. The enhancement arose from an addition of Rs.3,00,937/- on account of delayed deposit of employees’ contribution to 2 PF and ESI, as reported in the Tax Audit Report under clause 20(b) of Form 3CD. The CPC noted that these contributions had been credited to the respective employees’ accounts after the due dates prescribed under section 36(1)(va) of the Act, and accordingly disallowed the deduction by making an adjustment in the intimation.
Aggrieved by the adjustment, the assessee filed an appeal before the Ld. CIT(A) contending that while there was a delay in depositing the employees’ contribution beyond the due dates specified under section 36(1)(va), the contributions were nevertheless deposited before the due date for filing the return of income under section 139(1). Relying on various judicial precedents, the assessee argued that such payments ought to be allowable as deductions under section 43B of the Act. The assessee also contended that the adjustment was made without granting proper opportunity of being heard and challenged the disallowance as being contrary to the principles of natural justice and beneficial provisions of law. 5.1 The Ld. CIT(A), after considering the assessee’s submissions and verifying the facts, held that the disallowance made under section 36(1)(va) was in accordance with law, particularly in view of the retrospective clarificatory amendments brought in by the Finance Act, 2021, and the binding judgment of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. The appellate authority also noted that CPC had issued prior intimation proposing the adjustment and thus rejected the assessee’s plea on the ground of lack of opportunity. Accordingly, the appeal was dismissed, and the disallowance of Rs.3,00,937 was confirmed.
Feeling aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before this Tribunal for the ground mentioned in the appeal.
During the course of hearing, the Ld. AR submitted that both the Ld. AO and the Ld. CIT(A) had disallowed the employer’s contribution to the PF and ESI, despite the fact that the said contributions were deposited before the due date for filing the return of income, in conformity with the CBDT Circular No. 669 dt 25.10.1993 as well as the provisions of Section 43B of the Income-tax Act, 1961. In support of this contention, the Ld. AR drew our attention to the table annexed to the grounds of appeal which sets out the dates of deposit of the contributions:
7.1 Furthermore, the Ld. AR placed on record copies of the TRRN details (eight in number), evidencing that the deposits were made within the time frame prescribed under the CBDT Circular and Section 43B.
Per contra, the Ld. Departmental Representative (DR) submitted that the matter may be remitted back to the file of the Ld. Assessing Officer for the limited purpose of verification of the factual position, in the light of the judgment of the Hon’ble Supreme Court in Checkmate Services (P) Ltd. v. CIT, Civil Appeal No. 2833 of 2016.