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Facts
The assessee's assessment for AY 2017-18 was completed under Section 143(3), and the AO disallowed Rs. 7,75,777/- as provident fund contribution, arguing it exceeded 27% of the salary. The assessee contended that the amount was for staff deployed in a sister concern and no deduction was claimed for it. However, the CIT(A) dismissed the appeal.
Held
The Tribunal found that the assessee had not claimed any deduction for the impugned provident fund contribution of Rs. 8,21,162/-. Consequently, the question of disallowance on grounds of excess or unreasonableness did not arise, and the CIT(A) had erred by confirming the addition without addressing this crucial submission. The Tribunal directed the AO to delete the addition.
Key Issues
Whether the disallowance of provident fund contribution was justified when the assessee asserted that no deduction was claimed for the disallowed portion, and the amount pertained to staff deployed in a sister concern.
Sections Cited
143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 19.11.2024 for Assessment Year (AY) 2017-18.
Brief facts of the case are that the appellant is a partnership firm engaged in the business of manufacturing and selling of plywood. The return of income for AY 2017-18 was filed on 18.10.2017 declaring total income of Rs. 30,490/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1, Kannur (hereinafter called "the AO") vide order dated 20,10.2019 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) at total income of Rs. 4,89,530/-. While Vasulal Textiles doing so, the AO disallowed Rs. 7,75,777/- being contribution made to PF by holding that the said amount cannot exceed 27% of the salary debited to the Profit & Loss A/c.
Being aggrieved, an appeal was filed before the CIT(A) contending that the appellant has idle staff, who were deployed in sister concern and received reimbursement of their salaries and the reimbursement was duly credited in their salary account. The said amount was not claimed as deduction. The CIT(A), however, dismissed the appeal.
Being aggrieved, the appellant is in appeal before the Tribunal in the present appeal.
When the appeal was called on, nobody appeared on behalf of the assessee despite due service of notice of hearing. Therefore, I proceeded to dispose of the appeal after hearing the learned Sr. DR.
On a perusal of the assessment order, it would show that the AO made addition on contribution to PF which is in excess of 27% of the salary debited to the Profit & Loss A/c. The material on record clearly indicates that the appellant had not made claim for deduction on entire contribution to PF of Rs. 8,21,162/-. It is the contention of the appellant that the appellant had deployed the idle staff with sister concern and received reimbursement of the salary as well as contribution made to PFA, which is credited to the respective expense head. When the appellant had not made any claim for deduction, the question of disallowance on the ground of excess and unreasonableness of amount Vasulal Textiles does not arise. Therefore, the CIT(A), without addressing this submission, made by the appellant had merely confirmed the addition, which is unreasonable and arbitrary. Therefore, I direct the AO to delete the addition
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 24th February, 2025. 8.