M/S ISSL CPG BPO PVT LTD ,BANGALORE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(1)(1), BANGALORE

The brief facts of the case are that the assessee came up in appeal before this Tribunal on earlier occasion wherein the assessee raised additional grounds in respect of deduction towards employees’ contribution to PF & ESI. This appeal was heard ex parte by the Tribunal and restored the issue of admissibility of additional grounds to the file of CIT(Appeals) for fresh decision and if the same is admitted, to decide it on merits after affording opportunity to the assessee. Consequently, the CIT(Appeals) took up the case in the second round and not admitted the additional ground and dismissed the additional ground as unadmitted. Aggrieved, the assessee is in appeal before me.

The ld. AR for the assessee submitted that the additional ground raised by the assessee before the CIT(Appeals) on the earlier occasion is purely legal in nature and goes to the root of the matter and the same should have been admitted by the CIT(Appeals) in view of the decision of the Hon’ble Supreme Court in the case of NTPC Ltd. v. CIT, 229 ITR 283 (SC) wherein it has been held that the if question of law or grounds are legal in nature, it can be raised at any stage of the proceedings. She submitted that there was no necessity of investigation of any fresh facts to decide the case and the CIT(Appeals) totally miscarried the justice by not admitting the additional ground raised before him.

On the other hand, the ld. DR submitted that first the assessee should claim deduction under a proper section and the claim should be supported by sufficient evidence so as to allow the claim of assessee. In the present case, the mere claim of assessee for benefit of deduction without sufficient evidence cannot be allowed. According to the ld. DR, the claim of assessee was denied for non-compliance of the mandatory requirement of law. He relied on the judgment dated 01.03.2011 of the Hon’ble High Court of Karnataka in the case of BAEHAL Software Ltd. in ITA No.136/2011.

I have heard both the parties and perused the record. In the present case, the assessee has raised additional ground on earlier occasion before this Tribunal. The Tribunal remanded the issue to the file of CIT(Appeals) to consider the admissibility of additional ground. In the second round also, the CIT(Appeals) has not admitted the additional ground holding that there is nothing on record to show how the assessee was prevented by sufficient cause from raising such a claim before the AO. In my opinion, as held by the Hon’ble Supreme Court in the case of NTPC Ltd. (supra) and Jute Corporation of India Ltd., 187 ITR 688 (SC), the appellate authority has the power which the original authority may have in deciding the question before it, subject to the restrictions or limitations, if any, prescribed by the statutory provision. So in the absence of any statutory provision, the appellate authorities are vested with all the plenary powers which an original authority may have in the matter.

Further, in the present case, the assessee placed the necessary evidence before the CIT(Appeals) regarding payment of employees’ contribution to PF & ESI before the due date of filing the return and this evidence should be admitted as additional evidence by the CIT(Appeals) so as to render justice. However, he failed to admit the additional ground on technical reasons which is not proper. Accordingly, in the interest of justice, I admit the additional ground raised by the assessee and direct the AO to examine the additional evidence in accordance with law. If PF & ESI are paid before the due date of filing of return of income, the assessee is entitled to the deduction. With this observation, I remand the issue of allowability of employees’ contribution of ESI & PF to the file of Assessing Officer for fresh consideration.

In the result, the appeal by the assessee is allowed for statistical purposes.