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Facts
The assessee, a co-operative society, filed its return declaring a total income. The case was selected for scrutiny, and the Assessing Officer made additions, including Rs. 81,26,202/- on account of unpaid creditor balances and Rs. 1,09,39,451/- for delayed deposit of employee's EPF contribution. The CIT(A) partly allowed the appeal.
Held
The Tribunal noted that for the addition of Rs. 81,26,202/-, the assessee failed to provide details and the genuineness of credits was questionable. For the EPF contribution, there was a dispute regarding the correct figure of disallowance. Therefore, both issues were remanded.
Key Issues
Whether the addition on account of unpaid creditors is justified, and the correctness of the disallowance for belated EPF contribution.
Sections Cited
41(1), 143(2), 36(1)(va)
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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW
Before: SHRI ANADEE NATH MISSHRA & SHRI SUBHASH MALGURIA
2014-15 against impugned appellate order dated 14/06/2023 (DIN & Order No.ITBA/NFAC/S/250/2023- 24/1053700611(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. In this appeal the assessee has raised the following grounds:
“1. BECAUSE the ld. "CIT(A)" has erred in law and on facts in sustaining the addition of Rs.81,26,202/- made by the Assessing Officer under section 41(1) of the "Act", on account of credit balance in the account of certain creditors lying unpaid for several years.
2. BECAUSE while making/sustaining the addition of Rs.81,26,202/- the authorities below failed to appreciate that in respect of the said credits no allowance or deduction had been made in the assessment for any assessment year on account of loss, expenditure or trading liability and no benefit in respect of trading liability by way of remission or cessation had accrued to the "Appellant" in the assessment year under appeal.
3. BECAUSE on a due consideration of material and information placed on record of the authorities below, it could not have said or held that the liability shown at Rs.81,26,202/- had ceased to exist and as such, the ld. "CIT(A)" ought to have deleted the addition of Rs.81,26,202/- erroneously made by the Assessing Officer.
4. BECAUSE the case laws relied upon by the ld. "CIT(A)" in sustaining the addition of Rs.81,26,202/- are distinguishable on facts and hence not applicable in the case of the "Appellant".
BECAUSE the ld. "CIT(A)" was not correct in sustaining the addition of Rs.1,09,39,451/- made by the Assessing Officer u/s 36(1)(va) of the "Act" on account of alleged late deposit of employees' contribution to provident fund.
BECAUSE the allowability of employees' contribution to EPF amounting to Rs.1,09,39,451/- u/s 36(1)(va) of the "Act" at the relevant point of time was duly covered in favour of the "Appellant" by the judgment of the Hon'ble Jurisdictional High Court in the case of Sagun Foundry Private Limited Vs. CIT reported in [2017] 78 taxmann.com 47 (Alld) and reliance by the ld. "CIT(A)" on the decision of Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT is wholly misplaced.
BECAUSE the order appealed against is contrary to facts, law and principles of natural justice.”
The assessee has also raised additional ground, which reads as under:
“Ground No. 9: BECAUSE, without prejudice to the grounds hereinfore, the authorities below have grossly erred in computing/confirming the quantum of disallowance u/s 36(1)(va) of the Act at Rs.1,09,39,451/-, whereas, on a correct computation, the amount of disallowance could not have exceeded Rs.10,24,784/- and consequently the disallowance deserves to be restricted to Rs.10,24,784/-.”
The facts of the case, in brief, are that the assessee is a co-operative society duly registered under the U.P. Co-operative Societies Act, 1965, vide certificate dated 25/11/1974. The assessee filed its return of income on 30/09/2014, declaring a total income of Rs.33,89,16,300/-. Thereafter, the case was selected for scrutiny and a statutory notice u/s 143(2) of the Income Tax Act, 1961 (“the Act”, for short) was issued. In response to the statutory notice, the Learned Authorized Representatives for the assessee attended the assessment proceedings. The Assessing Officer completed the assessment and passed assessment order determining the total income of the assessee at Rs.39,94,42,601/- and made various additions. Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who after considering the material available on record and submissions of the assessee, partly allowed the appeal of the assessee. Aggrieved with the order of learned CIT(A) against the sustenance of additions, the assessee has preferred appeal before the Income Tax Appellate Tribunal.
Grounds No. 1 to 4 are in respect of addition of Rs.81,26,202/- made by the Assessing Officer under section 41(1) of the Act on account of credit balance in the account of certain creditors lying unpaid for several years. Grounds No. 5 & 6 are in respect of addition of Rs.1,09,39,451/- made by the Assessing Officer u/s 36(1)(va) of the Act on account of late deposit of employees’ contribution to provident fund.
5. During the course of hearing before us, learned Authorized Representative for the assessee reiterated the submissions as made before the Ld. CIT(A) and submitted that the authorities below failed to appreciate that in respect of the said credits, no allowance or deduction had been made in the assessment for any assessment year on account of loss, expenditure or trading liability and no benefit in respect of trading liability by way of remission or cessation had accrued to the assessee in the assessment year under consideration. He also submitted that learned CIT(A) was not justified in holding that the liability shown at Rs.81,26,202/- had ceased to exist and as such the learned CIT(A) ought to have deleted the addition made by the Assessing Officer. On the other hand learned Department Representative for Revenue opposed the submissions made by learned Counsel for the assessee and supported the orders of the authorities below. We have heard the rival parties and have gone through the material placed on record. The learned CIT(A) has observed in the impugned order that the assessee failed to provide the details or nature of transaction; and that except the name and outstanding balances, the assessee failed to provide the address or proof of identity of the persons and therefore, the Assessing Officer was not able to enquire into the genuineness of these credits. Under these facts, this issue is remanded back to the file of learned CIT(A) with the direction to provide further opportunity to the assessee and to pass order afresh on this issue in accordance with law after providing reasonable opportunity of being heard to the assessee and to the Assessing Officer.
6. Grounds no. 5 & 6 are related to disallowance of belated EPF contribution. The learned Counsel for the assessee submitted that the lower authorities have failed to verify the correct figure and made disallowance without considering it in right perspective. He drew our attention to the EPF contributions deposit details which is part of the paper books. As per this, the total delayed amount is stated to be Rs.10,24,784/- only. On the other hand, the Ld. Departmental Representative has no objection, if, the matter is restored to the file of the Assessing Officer with regard to the verifying the correct figure and decide the issue accordingly. We have heard the rival parties and have gone through the material placed on record. In view of the submissions made by the Ld. Authorized Representative for the parties, we deem it fit and proper and in the interest of justice to restore this issue to the file of the Assessing Officer to verify the correct figure of disallowance after ascertaining the delay in payment correctly. The Assessing Officer is directed to pass de novo order in accordance with law on this limited issue.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
(Order pronounced in the open court on 12/06/2025)