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Facts
The assessee, engaged in manpower supply and recruitment, filed their ITRs for AY 2018-19, 2019-20 and 2020-21. The Assessing Officer made additions under Section 36(1)(va) for delayed deposit of employee contributions to EPF/ESI, which were deposited before the due date of filing the ITR but after the statutory due dates for such deposits.
Held
The Tribunal noted that the issue of delayed payment of contributions has been settled by the Supreme Court in the Checkmate Services case, ruling against the assessee. However, considering the facts and the element of natural justice, the Tribunal remitted the matters back to the Assessing Officer for verification in light of the Supreme Court judgment and to provide the assessee an adequate opportunity to present their case.
Key Issues
Whether delayed deposit of employee's contribution to EPF/ESI, even if paid before the due date of filing the return, is disallowable under Section 36(1)(va) in light of the Supreme Court's decision in Checkmate Services.
Sections Cited
36(1)(va), 43B, 139, 143(1), 143(3), 2(24)(x), 250
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI LALIET KUMAR & SHRI KRINWANT SAHAY
Since the issues involved in all the three appeals mentioned above are the same, therefore, they are being taken together for passing the appellate order. Accordingly, for assessment year 2019-20 is being taken as a lead case.
2. Appeal in this case has been filed against the order dated 31.07.2021 passed by the ld. CIT(A) NFAC Delhi for assessment year 2019-20.
3. Grounds of appeal in all the three above are as under:
“1. This appeal is being filed by the assessee against the order of CIT(A) NFAC, Delhi (hereinafter called as Ld. CIT(A)) on 31.07.2021 vide order/ DIN: ITBA/NFAC/S/250/2021-22/1034557817(1) for A.Y. 2019-20: a. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in disallowing the appeal of the assessee by taking the plea of latest amendment made by way of insertion of explanation w.e.f.
& Ors. A.Ys. 2018-19 & Ors. 3 01.04.2021 to Section 36(1)(va) and Section 43B of the Act w.e.f. 01.04.2021.
2. On the facts and in the circumstances of the case and in law, learned Commissioner of Income Tax erred to upheld the assessment order/intimation dated 07-07-2020 passed by the Ld. Assessing Officer, CPC Bangalore u/s 143(3) of the Act with regard to disallowance of Rs. 20,01,278/- u/s 36(1)(va) r.w.s. 2(24)(x), on account of delayed payment/remittances of the employee's contribution to EPF/ESI.
3. The Appellant craves leave to add, amend, alter vary and /or withdraw any or all the above grounds of Appeal.”
4. The registry had highlighted the delay in filing of this appeal and the counsel of the assessee has filed an affidavit for condonation of delay which is as under:
“1. That appellant is a company having PAN No. AACCT5653K.
2. That the permanent address of the appellant is E-193, Industrial Area, Phase 8B, Mohali.
3. That against order of Worthy CIT(A)passed u/s 250 dtd. 31.07.2021, the appeal was filed before the Hon'ble ITAT on 31.08.2021 which is within prescribed time limit of 60 days.
That the Registry had pointed out the defect that there was short fall of Rs. 9,000 towards the appeal fees along with some other clerical mistake in the appeal & Ors. A.Ys. 2018-19 & Ors. 4 memo. These defects were removed by depositing the challan towards the deficit in appeal fees of Rs. 9,000/- on 05.07.2023 and the appellant also filed revised Form 36by rectifying the clerical mistakes.
That the appeal was f iled by the previous counsel of the appellant before the Hon'ble ITAT by filing the challan towards appeal fees of Rs. 1,000/- instead of Rs. 10,000/- as he was unaware about the f ees to be deposited for filing the appeal before the Hon'ble ITAT, though the said appeal was filed within a time period of 60 days from receipt of appellate order. When the above mistake came to our knowledge, we immediately rectified the mistake on the same day of our appointment. The above mistake was totally unintentional and bona-fide on the part of the appellant. Therefore, the appeal filed by the appellant deserves to be treated to have been filed in time.
That it is further submitted that if the appeal is considered to have been filed on the date of deposit of fresh challan, then there has occurred delay of 644 days in filing of the appeal. But this is only due to the challan having been deposited of the short amount even though appeal memo in Form 36 was filed in time.
7. That in view of above facts and circumstances there was reasonable and bonafide cause for the delay in filing of the appeal and it deserves to be condoned. Further I undertake to f ully co-operate f or the early disposal of the subject appeal.”
& Ors. A.Ys. 2018-19 & Ors. 5 5. We have considered the issue of delay in filing of the appeal and we have also considered the reasons brought on record in the form of an affidavit by the assessee.
6. Considering the facts mentioned therein the delay is hereby condoned.
Brief facts of the case are as under:
“1. The appellant is into the business of manpower supply and recruitment since 2007. Appellant had e f iled the ITR on 31.10.2018 and the due date was also u/s 139 was 31.10.2018 declaring income of Rs. 13971318/-.
2. ITR was processed by the CPC and accordingly order issued u/s 143(1) of the income tax Act, 1961, assessing the Income at Rs 27730885/- thereby making a total addition of Rs. 13759567/-.
That Out of the above said total addition Rs. 13759567/- was made u/s 36(1)(va) on account of any sum received from employees as contribution to any provident fund or any fund set up under ESI Act or any other fund for the welfare of employees to the extent not credited to the employees on or before the due date under relevant act.
4. In the instant case the amount of Rs. 13759567/- related to employees contribution to the provident fund and ESI which was paid by the assessee subsequent & Ors. A.Ys. 2018-19 & Ors. 6 to the due date prescribed under the relevant PF and ESI Act.”
The counsel of the assessee has filed written submissions during proceedings before us which is reproduced as under:
“The appellant is into the business of manpower supply and recruitment since 2006. Appellant had e filed the ITR on 31.10.2019 and the due date of which was 31.10.2019 u/s 139, declaring income of Rs. 2,72,27,495/-. During the year the employees share of EPF/ESI contribution was deposited delayed but was deposited much before the due date of ITR. In fact the contribution was deposited within the financial year 2018-2019., but was not deposited within the due date as prescribed under the EPF/ESI statute.
The Ld. AO, CPC has passed the impugned order and has made addition of Rs. 20,01,278/- u/s 36(1) (va) being employees contribution to PEF/ESI deposited delayed by the assessee (beyond the due date prescribed in the EPF/ESI Statute) but was deposited well before the due date of ITR.
The section 36(1) (va) abruptly disallow the delay deposit in contradiction of section 438. The disallowance is not even allowed in the next assessment year also if deposited beyond the date of filing ITR, as allowed by Section 43 B. The Ld. AO fails to appreciate that appellant has not earned any income actually, which is being taxed in his hand. It is not even a notional income as the appellant had already & Ors. A.Ys. 2018-19 & Ors. 7 deposited the sum deducted from the employees against the statutory dues, with govt. exchequer much before the due date of filing ITR. The employee's share of deduction and its deposit before the due date of filing of ITR must be treated at par with the requirements for the deduction of the statutory dues u/s 43B and accordingly deduction should be allowed to the appellant.
The jurisdictional high court also allowed the deduction as expenses if the sum is paid on or before the due date of ITR. Their other judicial pronouncement also which are in our favor: a. Hon'ble Supreme Court (2017) in the case of Principal Commissioner of Income-Tax, Jaipur versus m/s Rajasthan State Beverages Corpn. Ltd. b. Hon'ble Supreme Court in the case of CIT vs. Vinay Cement Ltd. (2007) 213 CTR (SC) 268 c. Hon'ble Punjab and Haryana High Court (2015) in the case of CIT Faridabad Vs Lakhani Rubber Udyog Pvt Ltd. d. Hon'ble Punjab and Haryana High Court Commissioner Of Income Tax vs M/S Hemla Embroidery Mills (P) Ltd an 27 November, 2012 (ITA No. 16 of 2009), e. Hon'ble Himachal Pradesh High Court in the case of CIT VS M/s Nipso Polyf abriks Ltd., (ITA 73 of 2018), f. Hon'ble Karnataka High Court in the case of M/s Spectrum Consultants India (P) Ltd. WIP 8834/11 & Ors. A.Ys. 2018-19 & Ors. 8 g. Hon'ble Rajasthan High Court in the case of C.I.T. Udaipur vs M/S Udaipur Dugdh Utpadak (ITA 48/2012) h. Hon'ble Himachal High Court in the case of Sagun Foundry Private Limited Vs CIT. i. Hon'ble Allahabad High Court in the case of Sagun Foundry (P.) Ltd. vs. CIT (2017) 78 Taxmann.com 47 (Alld), j. Hon'ble Delhi High Court in the case of CIT VS AIMIL, k. Hon'ble Delhi High Court in the case of CIT vs. Dharmendra Sharma (2007) 213 CTR (Del) 609: (2008) 297 ITR 320 (Del), l. Hon'ble ITAT Delhi in the case of DCIT VS Dewan Sugar Ltd, m. Hon'ble ITAT Lucknow in the case of Tirubala International Pvt. Ltd vs Dy. Commissioner Of Income Tax, In view of the above facts it is requested to allow the appeal.”
The counsel of the assessee also argued during proceedings before us that:
There is some payment which was delayed by one day because the server of the Govt. was down and the counsel argued that even for that reason the delay has & Ors. A.Ys. 2018-19 & Ors. 9 been counted for one days and it has been disallowed u/s 36(1)(va).
The second argument that the counsel of the assessee brought before us is that there are some challans of payment on which date has been mentioned that requires verification. In fact, the counsel argued that some challans have been wrongly stamped.
3. The counsel also argued that there were delay which were beyond the control of the assessee.
We have considered the arguments of the counsel. The ld. DR relied on the order of the ld. CIT(A).
We have considered the findings given by the A.O. (CPC) and the ld. CIT(A) in his appellate order, the ld. CIT(A) has given his findings as under:
"The facts of the case suggest that there is a delay in deposit of employee PF and ESIC, beyond the respective statutory due dates. There is no controversy on this finding and the appellant also accepts the delay.
Hon. Supreme Court in their landmark decision in CIVIL APPEAL NO, 2833 OF 2016 CHECKMATE SERVICES P.LTD, & ORS. vs. COMMISSIONER OF INCOME TAX & ORS. dated & Ors. A.Ys. 2018-19 & Ors. 10 12.10.2022has laid this controversy to rest and ruled that such delayed payment of contribution, beyond respective statutory due dates, is not permissible as a deduction. Following this judgment, in M/s. Electrical India Vs. ADIT, CPC Bengaluru Chennai ITAT has held as follows:
We find that now this issue has been decided by Hon'ble Supreme Court in f avor of revenue in its recent decision in bunch of appeals titled as Checkmate Services P. Ltd. vs. CIT (Civil Appeal No.2833 of 2016 dated 12.10.2022). In this decision, it was noted by Hon'ble Court that there was divergent of opinion amongst various Hon'ble High Courts viz. High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi favoring the interpretation beneficial to the assessee on one hand whereas High Courts of Kerala and Gujarat favoring interpretation in f avour of the Revenue on the other hand. Taking note of legislative history, the matter has finally been put to rest by Hon'ble Court in revenue's favor.
We have considered the findings given by the ld. CIT(A) in his appellate order and we have also considered the arguments made before us by the counsel of the assessee as well as the written submissions and various details filed before us by the assessee. We find that the ld. CIT(A) has dismissed the appeals of the assessee on the basis of the Hon'ble Supreme Court judgment in the case of Checkmate & Ors. A.Ys. 2018-19 & Ors. 11 Services P. Ltd. & Ors. v. Commissioner of Income Tax & Ors. dated 12.10.2022 in Civil Appeal No. 2833 of 2016. During the proceedings, the counsel drew our attention to the facts that there are certain issues involving in this case as mentioned above which require verification by the ld. A.O.
Keeping in view the request of counsel of the assessee, and the element of natural justice, we are inclined to remit all these three cases involving addition of Rs.20,01,278/- u/s 36(1)(va) in for assessment year 2019-20, Rs. 1,37,59,567/- u/s 36(1)(va) in for assessment year 2018-19 and Rs.75,90,670/- u/s 36(1)(va) in ITA No. 556/CHD/2023 for assessment year 2019-20 to the A.O. The A.O. will verify all the claims of the assessee in the light of Hon'ble Supreme Court judgment in the case of Checkmate Services Pvt. Ltd. (supra). The A.O. will give adequate opportunity (as required in law) to the assessee to put his point. The assessee is also directed to co-operate with the A.O. in the proceedings. All the legal issues/factual issues are now open for verification and order de-novo.
& Ors. A.Ys. 2018-19 & Ors. 12 14. In the result, these three appeals filed by the assessee are allowed for statistical purposes.
Order pronounced on 01.04.2025.