NARESH KUMAR,PANIPAT HARYANA vs. ASSESSING OFFICER, PANIPAT, HARYANA
Income Tax Appellate Tribunal, DELHI BENCH ‘E’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI S.RIFAUR RAHMANNaresh Kumar, vs.
PER S. RIFAUR RAHMAN, AM:
This appeal is filed by the assessee against the order of Ld. Addl. / JCIT(A)-1, Pune, dated 16.10.2023 for the Assessment Year 2020-21. 2. Brief facts of the case are that assessee had filed the income tax return declaring net income of Rs.85,76,090/- on 04.11.2022. Thereafter, the Assessing Officer completed the assessment u/s. 143(1) of the Income-tax Act, 1961 (for short ‘the Act’) at a total income of Rs.1,80,97,300/- after making adjustments to total income. The intimation u/s. 143(1) of the Act
2
was passed on 16.03.2023, by making the addition of Rs.95,21,210/- on account of delayed deposit of Employee contribution of PF & ESI.
3. Against the aforesaid action of the AO, assessee preferred the appeal before the Ld. CIT(A), who vide his impugned order dated 16.10.2023
has affirmed the action of the AO and dismissed the appeal of the assessee.
4. Aggrieved with the order of the Ld. CIT(A), assessee is in appeal before us on the following grounds:-
1)
That the Authorities below erred in confirming /
sustaining the addition made towards belated payment of employees’ contribution to PF & ESI of Rs. 1,11,94,917/- is wholly unsustainable both on facts and in law. Break up of provident fund and ESI are given below :
Particulars Amounts Provident Fund Rs. 96,43,823/- and Fund set up under the provisions of ESI Act, of RS.
1,94,85,48,552/- Total Rs. 1,11,94,917/-.
2)
Since no additions u/s. 36(1)(va) could be done, as per the mandate of u/s. 143(1)(a) thus there was no adherence of relevant section and therefore, it is clear cut case of mistake of law and thus it is mistake apparent from record u/s. 54. 3)
That the authorities below failed to appreciate the fact that no addition by way of adjustment while processing /
intimation the return of income u/s. 143(1)(a) towards the delayed deposit of the employees’ contribution towards ESI and PF [though deposited within the due date of filing of return u/s. 139(1) can be made. It would not fall clause (iv) of section 143(1) and that the juri iction of HC & SC was in favour of assessee at the 3
time of processing under that section. Thus, it was debatable issue at the time of processing of return.
4)
That the authorities below erred both in law and facts by disallowing the employee’s contribution of EPF/ESI.
Hence, same is allowable deduction u/s. 37(1) as laid down by Hon’ble Supreme Court in the case of Travancore titamium product ltd. 1966 AIR 1250. 5)
That there is no misuse of funds by the assessee. So, there was no breach of law as envisaged in memorandum explanation of the bill in which this option was incorporated in the Act.
6)
That the authorities below erred in confirming /
sustaining the addition made of Rs. 10,02,542/- (EPF) on account of delayed deposition of Employer’s /Employee contribution of PF and ESI after the date specified u/s.
43B of the Act. It is wrongly disallowed by CPC u/s.
143(1)(a), because it doesn’t fall under the juri iction of section 143(1). It is wholly unsustainable both on facts and in law.
7)
That the authorities below erred in confirming /
sustaining the addition made of Rs. 2,46,398/- instead of Rs. 15,281/- on account of disallowance of TDS claimed.
The assessee claimed the total TDS amount of Rs.
32,99,626/-, the AO had only allowed TDS claimed of Rs.
30,53,228/-, inadvertently the AO had wrongly disallowed Rs. 2,46,398/- instead of Rs. 15,281/- of TDS amount claimed by the assessee in return filing. It is wholly unsustainable both on facts and in law.
8)
That the authorities below erred in both law and facts by chargeability of interest under section 234A and 234B of the Act are bad in law. The authority below is directed to alter, modify or delete the same in accordance with law.
9)
That the order passed by authorities below is also erroneous, illegal and against the principle of natural justice and equity and the well settled laws of the land.
4
Thus, the department has not demonstrated that there was misuse of funds in disallowed the same.
10)
That the authorities below failed to consider / appreciate the submission of assessee made at various dates in response to their notice u/s. 250 of the Act and proceeded with confirming the impugned addition without considering the documentary evidence submitted and explanation given in support of assessee’s claim.
11)
That the order passed by the authorities below is also erroneous, illegal and against the principles of natural justice and equity and the well settled laws of the land.
12)
That the appellant craves leave of ITAT to add, alter, modify, substitute, delete any grounds of appeal at any stage of the proceedings before the ITAT.
The primary issue involved in this appeal is that the ld. Addl./JCIT(A) has erred in upholding the disallowances of expenditure of Rs.95,21,210/- made by the Assessing Officer representing delay in remittance of Employee’s Contribution towards ESIC and Provident Fund invoking provisions of section 36(1)(va) of the Income-tax Act, 1961. 6. At the time of hearing, ld. counsel for the assessee submitted that the issue involved is relating to confirmation of adjustment of Rs.95,21,210/- u/s.36(1)(va) r.w.s 2(24)(x) on account of delayed deposit of employees contribution to PF and ESI made in the intimation u/s.143(1), without appreciating the fact that employees contribution to PF and ESI are 5 2710/Del/2022 for assessment year 2019-20. The Ld. Counsel for the assessee submitted that in view of the aforesaid decision, the matter may be restored to the file of AO to ascertain the due date for remittance of the PF/ESI contributions of employees in the present case. 7. On the other hand, ld. DR for the Revenue objected to the submissions made by the ld. AR for the assessee and submitted that the issue is squarely covered by the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT 143 taxmann.com 178. 8. Considered the rival submissions and material placed on record. We observed that the first plea of the assessee that the issue under consideration is beyond the scope of section 143(1)(a) of the Income-tax Act, 1961 (for short ‘the Act’). In our considered view, this issue is 6 already settled in favour of the Department. Accordingly, this plea of the assessee is rejected. 9. Coming to alternative plea of the assessee. Considered the rival submissions and this plea was considered by the coordinate Bench in the case of Benson Movers Pvt. Ltd. (supra) and the relevant decision of the coordinate Bench is as under :- “5. In so far as employees contributions towards PF & ESI it is noticed that the issue as to whether the due date under PF/ESI Acts should be as per the calendar month for which the salary is payable or from the month in which the salary is paid to the employee by the employer came up for adjudication in the case of Sentinel Consultants Pvt. Ltd. Vs. ACIT (supra) and the Tribunal restored the issue to the file of the AO with the following observations:-
“9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees’ contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy.
1 We notice at the outset that an opportunity was given via electronic platform of the deptt. For the proposed adjustments and in the absence of e- response, the adjustments were carried out the CPC- Bangluru and intimation was issued enhancing the assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees’ contribution to PF/ESIC in the light of the judgment rendered by the Hon’ble Supreme Court in Checkmate The contention of the Assessee that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co-
7
ordinate bench in the case of Weather Comfort
Engineers Private Limited vs. ACIT-CPC ITA No.
959/Del/2021 order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e- response.
2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1)(va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of the assessee. Thus, in view of such mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon’ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. Such view also draws support from the observations made in recent judgment of the Hon’ble Supreme Court in the case of Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit.
3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts
8
per se. as observed by the co-ordinate bench in Kanoi
(Cal). This aspect has not been found to be examined by the Assessing Officer or CIT (A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.”
We find similar view has been taken by the co- ordinate benches in the cases of B. L. Kashyap & Sons Ltd. (supra) and VVDN Technologies Pvt. Ltd. (supra). The ld. Counsel submits that in view of these decisions the matter may be restored to the Assessing Officer to ascertain the due date for remittance of the PF/ESI contributions of employees. Considering the decisions of the coordinate benches referred to above we restore this issue to the file of the Assessing Officer to decide in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee and the assessee is at liberty to provide all the necessary information in support of its contention.”
Since the above issue is squarely covered by the above decision, we are inclined to remit the issue back to the file of AO to consider the alternative plea of the assessee as per law after giving proper opportunity of being heard to the assessee. 11. As regards secondary issue relating to confirmation of addition of Rs.2,46,398/- instead of Rs. 15,281/- on account of disallowance of TDS
9
claimed is concerned. At the time of hearing, ld. AR has submitted that the authorities below erred in confirming/ sustaining the addition made of Rs.2,46,398/- instead of Rs. 15,281/- on account of disallowance of TDS claimed. He further submitted that assessee claimed the total TDS amount of Rs.32,99,626/-, the AO had only allowed TDS claimed of Rs.30,53,228/- and inadvertently the AO had wrongly disallowed
Rs.2,46,398/- instead of Rs. 15,281/- of TDS amount claimed by the assessee in the return of income.
12. After hearing both the sides, in the interest of justice, we remit back this issue to the file of the AO with the directions to verify the claim of the assessee, in view of his aforesaid contentions and if the said claim is found in order, the same may be allowed, in accordance with law.
13. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on this 30th day of January, 2025
after the conclusion of the hearing. (SATBEER SINGH GODARA)
ACCOUNTANT MEMBER
Dated: 30.01.2025
TS
ITA No. 3702/Del/2023