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Income Tax Appellate Tribunal, “A”
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER PER BENCH: This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals), (NFAC), dated 19.08.2021 emanating out of proceedings under section 143(1) of the Income-tax Act, 1961 (hereinafter also called as „the Act‟) for the Assessment Year 2018-19. The assessee has raised the following grounds of appeal:
The order of National Faceless Appeal Centre at Delhi in DIN & Order No.ITBA/NFAC/S/250/2021-22/1034981424(1) dated 19.08.2021 for the above assessment year is contrary to law, facts, and in the circumstances of the case.
A.Y. 2018-19 Shri Muraleedharan Kalathil vs.DCIT
2. The NFAC erred in sustaining the disallowance of employees' contribution to PF & ESI by invoking the amended provisions of section 36(1)(va) read with section 43B of the Act without assigning proper reasons and justification.
3. The NFAC failed to appreciate that the amended provisions applicable from the assessment year 2021-22 was erroneously applied and ought to have appreciated that the said amended provisions could not have retrospective application, thereby vitiating the decision rendered in the impugned order. 4. The NFAC failed to appreciate that the consistent judicial trend by virtue Of the decisions of the Madras High Court and Jurisdictional Benches of the Income Tax Appellate Tribunal under the pre-amended scenario was completely overlooked and brushed aside and ought to have appreciated that the binding decisions were completely ignored, thereby vitiating the decision on merits. 5. The NFAC failed to appreciate that the employees' contribution of PF & ESI were admittedly remitted before the due date for filing of the return of income as per section 139 of the Act for the assessment year under consideration and hence ought to have appreciated that such factual matrix would be eligible for making the claim for deduction of such sum in the computation of taxable total income. 6. The NFAC failed to appreciate that the tax audit report should not be relied upon solely to make the disallowance of such remittances being the employees' contribution of PF & ESI and ought to have appreciated that the scope of the provisions in making the initial order even though narrow, the correctness of making the said claim for deduction independent of tax audit report should be considered in the context of the consistent judicial trend in making the law on the issue by the Jurisdictional Benches of the Appellate Tribunal and Madras High Court. 7. The NFAC failed to appreciate that the mechanical addition made without examination of the facts as well as without granting reasonable opportunity should be reckoned as bad in law and further ought to have appreciated that the restricted power of the scope of the proceedings u/s 143(1) of the Act was admittedly exceeded and stretched beyond its scope, thereby vitiating the impugned order. 8. The NFAC failed to appreciate that the judicial trend on this issue was completely ignored and further ought to have appreciated that the contribution of the employees remitted before the due date A.Y. 2018-19 Shri Muraleedharan Kalathil vs.DCIT for filing of the return of income u/s 139 of the Act should be considered for deduction within the scope of section 36(1)(va) read with section 43 B of the Act, thereby vitiating the addition made mechanically without recording reasons in relation thereto.
The NFAC failed to appreciate that the modus operandi of the appellant's business would establish the impossibility / difficulty in remitting the employee's contribution of PF/ESI within due date specified under the relevant Acts and hence ought to have appreciated that the remittance of such within the time prescribed u/s 139(1) of the Act should be reckoned as proper compliance for granting such deduction in the computation of taxable total income.
The NFAC failed to appreciate that in any event the entire re- computation of taxable total income was wrong, erroneous, unjustified, incorrect, invalid and not sustainable both on facts and in law.
The NFAC failed to appreciate that the impugned adjustment made is beyond the scope of the proceedings u/s 143(1) of the Act thus vitiating the addition made therein.
The NFAC failed to appreciate that there was no proper / reasonable opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.
In the present appeal, the question involved is allowability of employees‟ contribution of ESIC and PF, which was deposited beyond time mentioned in the respective Statutes but before filing income tax return u/s 139(1) of the Act.
We have heard both the parties, perused the records. In this case, the DCIT (CPC), Bengaluru vide an order u/s 143(1) of the Act dated 17.05.2019 disallowed an amount of Rs.16,40,621/-.
A.Y. 2018-19 Shri Muraleedharan Kalathil vs.DCIT
From the plain reading of the order u/s 143(1), it is not clear whether any opportunity was provided before making the disallowance by the DCIT (CPC), Bengaluru. Aggrieved by the same, an appeal was filed before the CIT(A). The CIT(A) dismissed the appeal of assessee.
Hon‟ble Rajasthan High Court in the case of Rajasthan State Beverages Corpn. Ltd vide order dated 4/8/216 has held as under: Quote “This court in the aforesaid case has also allowed the claim of the assessee, in so far as payment of PF & ESI etc. is concerned, on the finding of fact that the amounts in question were deposited on or before the due date of furnishing of the return of income and taking in consideration judgment of this Court in CIT v. State Bank of Bikaner & Jaipur [2014] 363 ITR 70/43 taxmann.com” Unquote
The SLP filed against the said decision has been dismissed by Hon‟ble SC.
Hon‟ble Jurisdictional High Court held in the case of CIT vs Ghatge Patil Transports Ltd, IT APPEAL NOS. 1002 & 1034 OF 2012 vide order dated 14/10/2014 as under : Quote , “ In this manner, the amendment provided by Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee A.Y. 2018-19 Shri Muraleedharan Kalathil vs.DCIT on the one hand with contributions to various Employees' Welfare Funds on the other. All this came up for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra). The Tribunal in the case at hand relied upon the said judgment. There is no reason to fault the order passed by the Tribunal. We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd. (supra) applies to employees' contribution as well as employers' contribution. Question Nos.2, 3 & 4 are accordingly answered in favour of the assessee and against the revenue. ” Unquote. Thus respectfully following the Hon‟ble High Courts it is held that the payment of employee‟s contribution beyond the due date mentioned in the relevant statute but before the due date of filling the return of income u/s 139(1) is allowable expenditure.
In the result, the assessee‟s appeal is allowed.