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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI R.S. SYAL, & SHRI JOGINDER SINGH
& 3726 /Del/2015 Hitrac Manpower Services Pvt. Ltd. ORDER PER JOGINDER SINGH, J.M. The Revenue as well as assessee is in cross appeals against the impugned order dated 22/12/2014 of the Ld. First Appellate Authority, Gurgaon for Assessment year 2011-12.
First, we shall take up the appeal of the Revenue, wherein, the only ground raised pertains to deleting the disallowance of Rs.91,24,693/- ignoring the fact that employees contribution to PF & ESI, received by the employer is income in his hands as per section-2(24)(X) and it is deductible only if it is paid within the due date as specified in section 36(1)(va) of the Income Tax Act and further ignoring the provision of section 43B, which is applicable in respect of employees contribution.
During hearing, Shri Arun Kumar Yadav, ld. DR, advanced arguments, which is identical to the ground raised by contending that while deleting the disallowance, made by the Ld. AO, the Ld. FAA, ignored the provision of section 43B of the Act. On the other hand, the ld. Counsel for the assessee Shri Pankaj Manocha, defended the impugned order by inviting our attention to the factual finding recorded by the Ld. CIT(A). & 3726 /Del/2015 Hitrac Manpower Services Pvt. Ltd. 2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the Ld. AO made addition on account of employees contribution to PF & ESI, paid beyond due date, specified in the Act. The Ld. AO was of the view that the total amount of Rs.23,72,846/- was paid beyond the due date specified in the EPF Act, whereas for ESI, the said amount was Rs.72,63,995/-, The Ld. AO made the addition of both these amounts.
2.2. On appeal before the Ld. CIT(A), the provision of section 2(24)(X) along with section 36(1)(va) r.w.s.43B were considered and considering the decision from Hon’ble Apex Court in CIT vs Alom Extrusion Limited (2009) 319 ITR 306(SC), deleted the addition. The Revenue is aggrieved in is appeal before this Tribunal.
2.3. If the observation made in the assessment order, conclusion drawn in the impugned order, facts available on record, we find that the issue has been settled by Hon ‘ble Apex Court in the case of CIT vs Alom Extrusion Limited (2009) 319 ITR 306(SC), CIT vs Vinay Cement Ltd. (2007) 213 CTR 268 and Hon’ble Delhi High Court in CIT vs AIMIL Ltd. (2010) 188 taxman 265 (Del.), wherein, it was held that 3 & 3726 /Del/2015 Hitrac Manpower Services Pvt. Ltd. employees contribution towards PF & ESI would qualify for deduction even it is paid after due date prescribed under provident fund Act and ESI Act but before due date of filing the return of income. The Hon’ble Punjab & Haryana High Court in the case of CIT vs Kamal Family Trust (2013) 38 taxman.com 334(P & H) held that if the employees contribution to ESI/EPF is paid by the due date of filing the return of income, no disallowance is called for, the relevant extract is reproduced hereunder (:-
“Adverting to question (B), Learned counsel for the appellant could not dispute that the issue raised herein finally stands settled by the Apex Court judgment in CIT vs Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416(SC) and decision of this Court in CIT v.Rai Agro Industries Ltd. [2011] 334 itr 122/[2012] 207 Taxman 10 (mag.)/20 taxmann.com 194, wherein it has been held that second proviso to section 43B of the Act omitted by Finance Act, 2003 with effect from 01/04/2004 was clarificatory in nature and was to operate retrospectively. Once that is so, in the present case, the CIT(A) was right to deleting the addition of Rs.2,64,937/- made by the Assessing Officer u/s 36(1)(va) and u/s 43B of the Income-tax Act, 1961 on account of late payment of employee’s as well as employer’s contribution to PF & ESI as the same had been deposited prior to the filing of the return under section 139(1) of the Act. Thus, question (B) stands answered against the revenue and in favour of the assessee.”
& 3726 /Del/2015 Hitrac Manpower Services Pvt. Ltd. 2.4. Identical ratio was laid down by Hon’ble Karnataka High Court in ESSAE-Teraoka Pvt. Ltd. (2014) 43 taxmann.com 33(Karnataka). Thus, respectfully following the aforesaid decisions and considering the factual matrix on record to the effect that the amounts were deposited within due date of filing of the return u/s 139(1) of the Act, therefore, we find no infirmity in the order of the Ld. CIT(A), resultantly, the appeal of the Revenue is dismissed.
Now, we shall take up the appeal of the assessee (ITA No.3726/Del/2015), wherein, the only effective ground raised by the assessee is with respect to estimation of profit @ 4% of the turnover of the assessee instead of profit declared by the assessee @ 1.89%.
3.1. The crux of the argument on behalf of the assessee is that due certain unavoidable circumstances, the assessee could not produce the books of accounts, which was the basis for making the addition, therefore, the assessee may be provided opportunity to produce the same. Our attention was invited to page-2(para-3.2) of the assessment order and also the observation made by the Ld. CIT(A). Plea was also raised that before the Ld. CIT(A), the assessee asked for opportunity, which was denied and merely on the basis of observation 5 & 3726 /Del/2015 Hitrac Manpower Services Pvt. Ltd. made in the assessment order, the issue in hand was decided for which our attention was invited to para-4.3 of the impugned order.
3.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee declared income of Rs.53,58,360/- in its return filed on 28/09/2012. The case for the assessee was selected for scrutiny, therefore notices u/s 143(2) and thereafter 142(1) of the Act were issued to the assessee. The assessee furnished the required details/documents from time to time as is evident from assessment order itself. The Ld. AO vide questionnaire dated 26/12/2012 asked the assessee to produce books of accounts with supporting bills/vouchers and other documents. The assessee was also asked as to why the books of account may not be rejected, as per section 145(3) of the Act and further as to why the net profit be applied at the rate of 4% as applied in earlier years. The assessee relied upon certain case laws, which were not found convincing and ultimately, the Ld. AO adopted the net profit @ 4% as against 1.89% declared by the assessee. On appeal before the Ld. CIT(A), the assessee relied upon certain case laws and in para 4.3 observed that ‘this was done in view of the fact that the 6 & 3726 /Del/2015 Hitrac Manpower Services Pvt. Ltd. appellant did not produce the books of accounts, when a couple of opportunities were provided by the AO to produce the same’. Considering the totality of facts and Article-265 of Constitution of India to the effect that only due taxes has to be levied/collected and further the assessee is in a position to produce the books of accounts, therefore, no person should be condemned unheard. Thus, we direct the assessee to produce the books of accounts before the Ld. AO, so that the factual matrix may be examined by him to his satisfaction. The assessee be given opportunity of being heard, thus, this ground of the assessee is allowed for statistical purposes only.
Finally, the appeal of the Revenue is dismissed and that of the assessee is allowed for statistical purposes.
This order was pronounced in the open court, in the present of Ld. Representatives from both sides at the conclusion of the hearing, in the presence of Ld. DR on 01/08/2018.