RAYCHEM RPG P.LTD,MUMBAI vs. ASST CIT CIR 7(2), MUMBAI

The assesee has raised the following grounds of appeal:-

On the facts and in the circumstances of the case and in la\v. the C1T{(A) erred in confirming the action of the AO in not considering the claim made by the Appellant towards delayed payment of employee's contribution to provident fund under section 43B/36(1)(va) of the Act. 2.. The Appellant therefore prays that the AO he directed to allow the aforesaid expenses to the extent they were paid before the due date of filing the Return of income. III. GROUND III The appellant craves leave to add to, alter and/or amend the above grounds of appeal.

The brief facts of the case are that the assessee is engaged in the business of manufacturing and trading of telecommunication and power cable accessories etc. The assessee has filed its return of income for AY 2011-12 on 30/11/2011, declaring total income at Rs.1,76,28,267/-. Subsequently, the assessee has filed a revised return on 19/03/2013 and declared total income at Rs.2,10,24,867/- The case was selected for scrutiny and during the course of assessment proceedings, the AO noticed that the assesee has not included excise duty in the valuation of closing stock of raw material and working progress, however it has included the excise duty in valuation of closing stock of finished goods. The Ld. AO referring to the provision of section 145A of the I.T.Act, 1961, observed that the assessee should have included excise duty component of purchase price of raw material, while valuing closing stock of raw material, working progress and finished goods and accordingly, called upon the assessee to explain as to why, the valuation of closing stock shall not be rejected and revalued, as per the provision of section 145A of the I.T.Act 1961. In response, the assesse claimed that non inclusion of excise duty will have no effect in the profit and loss account. The AO, however, did not find merit in the submissions of the assessee and accordingly, by taking note of amount of excise duty paid on purchases, revalued closing stock and made

The assesee carried the matter in appeal before the Ld.CIT(A), but could not succeed. The Ld.CIT(A) for the detailed reasons recorded in his appellate order, held that adjustment made by the Ld. AO for AY 2010-11 has not been challenged by the assessee, because the same resulted into reduction of total income, however when the adjustment made towards valuation of closing stock resulted in increasing taxable income, the assessee has chosen to challenge the same before the appellate authorities, without following consistency in its approach. Accordingly, he rejected the arguments of the assessee and confirmed additions made by the Ld. AO towards revaluation of closing stock. Similarly, the Ld.CIT(A) has rejected additional ground raised by the assesse, seeking reduction from total income towards suo-moto disallowances of employees contribution to PF, on the ground that the facts with regard to additional ground raised by the assessee were not before the Ld. AO during the assessment proceedings and further, it is not a legal claim, which can be entertained at appellate stage and accordingly, rejected additional ground taken by the assesse. He, further stated that although, the Hon’ble Supreme Court has considered the issue of belated payments of employees contribution to PF in light of provision of section 36(1)(va), rws 43B, but the Hon’ble Gujarat High court, in the case of CIT vs Gujarat State Road Transport Corporation 41 taxmann.com 100, after considering the decision of Hon’ble Supreme Court, in the case of CIT vs M/s.Alom Extrusions Ltd 319 ITR 306 held that the decision rendered by the Hon’ble Supreme Court is not applicable to the employees contribution to Raychem RPG Pvt.Ltd. PF. Accordingly, rejected the claim of the assesee. Aggrieved by the Ld.CIT(A) order, the assessee is in appeal before us.

The first issue that came up for our consideration from ground No.1 of assessee appeal is addition u/s 145A of the I.T.Act, 1961 amounting to Rs.65,89,009/- towards revaluation of closing stock, as per provision of section 145A of the I.T.Act, 1961. The Ld. AR for the assesse submitted that this issue is squarely covered in favour of the assesee by the decision of ITAT, Mumabi in assessee own case for AY 2007-08 in where under identical set of facts, the issue has been restored to the file of the Ld. AO to reconsider the issue, in light of decision of Hon’ble Delhi High court in the case of ITO vs Mahavir Alluminium Ltd. ( 2008) 297 ITR 77 (Delhi). He, further submitted that although, the Ld. AO has accepted the fact that the ITAT has decided the issue in favour of the assessee, but he did not accept the findings of the ITAT without assigning any reasons. The Ld. AR, further submitted that in subsequent AY’s, the Ld. AO himself has accepted valuation of closing stock without considering excise duty component and hence, there is no reason to deviate from the settled position for the year under consideration, unless any changes in facts.

We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that the co-ordinate bench of ITAT, Mumabi in assessee own case for AY 2007-08 had considered an identical issue and by following Tribunal order for AY 2005-06 and 2006-07 has set aside the issue to the file of the Ld. AO to reconsider, in light of the decision of Hon’ble Delhi High Court, in the case of ITO vs Mahavir Alluminium Ltd. (supra). The relevant findings of the Tribunal are as under:-

The next issue that came up for our consideration from ground 2 of assessee appeal is disallowances u/s 36(1) (va) of the I.T.Act, 1961 amounting to Rs.5,38,071/-, in respect of delayed payment of employees contribution to PF. The facts with regard to the impugned dispute are that the assessee has made suo-moto disallowances towards late payment of employee’s contribution to PF in the statement of total income. However, it has filed an additional ground before the Ld.CIT(A), in light of certain judicial precedents, including the decision of Hon’ble Supreme Court in the case of CITvs M/s. Alom Extrusions Ltd 319 ITR 306 and argued that belated payment of employees contribution to PF is eligible for deduction u/s 36(1)(va) r.w.s 43B, if such payments have been paid on or before due date of filing return of income. The Ld.CIT(A) did not accept the arguments of the assessee for the simple reason that the claim made by the assessee by way of additional ground requires factual verification and hence, the same cannot be admitted at appellate stage.

The Ld. AR for the assesse submitted that this issue is squarely covered in favour of the assessee by the decision of Hon’ble Bombay High Court, in the case of G.K. Securities Services Pvt.Ltd. vs DCIT (2019) 261 taxmann.co 152(Bom), where it was held that where assessee filed a revision petition raising claim for deduction of employee contribution to PF, which was erroneously

The Ld. DR, on other hand, submitted that the assessee has made a claim for the time before the Ld. Ld.CIT(A), even though it has suo-moto disallowed belated payments towards employees contribution to PF in the statement of total income. The Ld.CIT(A) after considering relevant facts has rightly rejected the claim of the assessee and his order should be upheld.

We have heard both the parties, perused the material available on record and gone through order of the authorities below. It is a settled position of law that no taxes can be collected unless by the authority of law. Further, even if assessee makes wrong claim or not made a claim, but the Ld. AO is duty bound to compute true and correct taxable income of the assessee on the basis of materials available before him. In this case, the assesse has suo-moto disallowed delayed payment of employee contribution to PF, on the ground that the said payments are not allowable as per provision of Raychem RPG Pvt.Ltd. section 36(1) (va)/43B of the I.T.Act, 1961. However, at later point of time, the law has been evolved by the Hon’ble Supreme Court, in the case of CIT vs Alom Extrusions Ltd. (supra), where it has been held that the assessee is entitled for deductions towards delayed payment of employees contribution to PF, if such payments are made on or before the due date of furnishing return of income. Further, on the basis of changes in law by the decision of Hon’ble Supreme Court, the assessee has made a fresh claim before the Ld.CIT(A) for deductions towards employees contribution to PF, but the Ld.CIT(A) had rejected the claim of the assesse. We find that the Hon’ble Bombay High Court, in the case of G.K. Security Services Pvt. Limited Vs DCIT (supra) had considered an identical issue and held that where, the assessee filed a revision petition raising claim for deduction of employees contribution to PF, which was erroneously not claimed in return of income, in view of the fact that all payments towards employees contribution to PF had been made before the due date filing return of income, the commissioner was not justified in refusing to entertain assesee claim on merits. Therefore, we are of the considered view that the Ld.CIT(A) was erred in not entertaining the claim of the assesse.

Coming back to the issue on merits. The assesse has filed proof of payments of employees contribution to PF before the Ld.CIT(A), which is available paper book filed by the assesee. Further, the ld.CIT(A) has extracted, the details of payments made to PF in its appellate order at para 7 on page 12 and 13, and as per the said chart, although the payments have been made after due dates specified under respective Act, but all payments have been made on or before due date of furnishing return of income.

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