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Facts
The assessee filed appeals challenging the disallowance of EPF contributions, representing the employee's share, which were not deposited within the statutory due date. This disallowance was made as an adjustment under Section 143(1)(a) of the Income Tax Act.
Held
The Tribunal, relying on the Supreme Court's judgment in 'Checkmate Services P. Ltd.', held that late deposit of employee's contributions is not allowable and Section 43B is not applicable to such contributions. It also affirmed that such disallowances can be made as prima facie adjustments under Section 143(1)(a), considering it an 'incorrect claim' rather than a 'debatable issue' in light of the settled legal position.
Key Issues
Whether the disallowance of employee's EPF contributions, deposited after the statutory due date, can be made as an adjustment under Section 143(1)(a) of the Income Tax Act, and whether Section 43B is applicable to such disallowances.
Sections Cited
143(1), 143(1)(a), 143(3), 43B, 36(1)(va), 37
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI G.S. PANNU, VICE- & SHRI ANUBHAV SHARMA
PER ANUBHAV SHARMA: JUDICIAL MEMBER: Both the appeals have been preferred by the same assessee against the order dated 10.03.2019 of learned Commissioner of Income-Tax(Appeals)/Addl/JCIT(A)-2, Jaipur (hereinafter referred as
2 ITA Nos.3836 & 3837/Del/2024 Ld. CIT(Appeals) passed under Section 143(1) of Income-Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ITO, Ward 1(2), Meerut (hereinafter referred as the Ld. AO). 2. Heard and perused the record. 3. The issue in both the appeals arises out of the addition made during assessment under Section 143(1)(a) of the Act on the basis that EPF amount arising out of employees contribution was not deposited within the due date. 4. On hearing learned authorized representative, it comes up that reliance is still placed on judgment of Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. (2009) 319 ITR 306. Even in the grounds, it is mentioned that the disallowance is against the provisions of section 43B and the aforesaid referred decision of Hon'ble Supreme Court. Learned authorized representative has submitted that disallowance in any way could not have been made under Section 143(1) of the Act as it was a debatable issue. 5. We are of the considered opinion that the grounds as raised and the submissions of learned Representative have no substance in the light of the judgment of Hon'ble Supreme Court of India in the
3 ITA Nos.3836 & 3837/Del/2024 case of Commissioner of Income Tax-I v Checkmate Services P. Ltd., Tax Appeal No. 680 of 2014, dated 14.10.2014 wherein the said judgment of CIT vs. Alom Extrusions Ltd. (supra) is considered and it is held that the deposit of employees share has to be as per the due date under the relevant statue only and section 43B of the Act is not applicable. 6. In regard to legitimacy of disallowance made under Section 143(1) of the Act by the Centralized Processing Centre (CPC). The issue has been dealt and decided against the taxpayer, by this very bench in the case of Akriti Jewelcraftz (P) Ltd., Delhi vs Acit, Circle- 1(1), New Delhi decided on 14 December, 2023, vide ITA No.190/Del/2023, by following findings; “4.1 The ld. AR has submitted that the ld.CIT(A) has fallen in error in following the judgment of the Hon'ble Supreme Court in the case of 'Checkmate Services Case' while the facts of the assessee's case were different because in the case of 'Checkmate Services Case' the addition was sustained in an assessment order framed u/s 143(3) of the Act while in the case of the assessee the addition is in intimation u/s 143(1)(a) of the Act. He relied on the order of the Mumbai Bench in M/s P.R. Packaging Service vs. ACIT, taking into consideration the judgement of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. (supra) observed that disallowance cannot be made in the processing intimation u/s 143(1)(a) of the Act. He also relied on the order of Cuttack Bench in the case of Nirakar Security & Consultancy Services (P) Ltd. in ITA No.98/CTK/2022 to submit that the matter was remanded to the file of the
4 ITA Nos.3836 & 3837/Del/2024 AO to adjudicate the grounds of the assessee relating to claim of the said employee's contribution as business expenditure u/s 37 of the Act.
4.2 The ld. DR, however, relied on the findings of the ld. tax authorities below.
After giving thoughtful consideration to the matter on record and the admitted facts of late deposit of the contributions, the Bench is of the considered view that there is no force in the contention of the ld. AR as that the judgement of the Hon'ble Supreme Court in the case of 'Checkmate Services Case' has settled the issue against the tax payers by holding that the payments towards employee's contribution to Provident Fund after the due date prescribed under the relevant statute is not allowable as deduction u/s 36(1)(va) of the Act. The Mumbai Bench order in the case of M/s P.R. Packaging Service (supra) has been considered in another order in the case Deutsche India Pvt. Ltd. vs. ACIT in ITA No.2842/Mum/2022, order dated 22.02.2023 and relying another order in the case of Nissan Enterprises Ltd. vs. DCIT, ITA No.3270/Mum/2022, order dated 17.02.2023 the Co-0rdinate bench has held as under:- "9. We find that, recently, in Nissan Enterprise Ltd. vs DCIT-CPC, in ITA No.3270/Mum/2022, the Tribunal vide order dated 17/02/2023, after considering the aforesaid decision in P.R. Packaging Service (supra) held that pursuant to the decision of the Hon'ble Supreme Court in Checkmate Services (P.) Ltd. (supra), the claim of deduction towards employee's contribution to PF & ESI made by the taxpayer becomes an incorrect claim warranting prima facie adjustment under section 143(1) of the Act. The relevant findings in the aforesaid decision are as under:- "3.1. The ld. AR vehemently relied on the decision of the Co- ordinate Bench of this Tribunal in the case of P.R. Packaging Services in ITA No.2376/Mum/2022 dated 07/12/22 (authored by the undersigned) wherein this issue has been decided in favour of the assessee. We find that the said decision was rendered by applying the provisions of Section 143(1)(iv) of the Act. Pursuant to the aforesaid decision of the Hon'ble Supreme Court, the claim of deduction towards employee's contribution to PF & ESI made by the assessee becomes an incorrect claim warranting prima facie
5 ITA Nos.3836 & 3837/Del/2024 adjustment u/s.143(1) of the Act. Hence, the decision relied by the ld. AR would not advance the case of the assessee.
3.2. In view of the aforesaid observations and respectfully following the decision of the Hon'ble Supreme Court referred to supra, the grounds raised by the assessee are hereby dismissed"
Further, the coordinate Benches of ITAT Delhi in Aroma Aromatics and Flavours vs. CIT(A) in ITA No.1646/Del/2021, order dated 30.11.2022 and in Savleen Kaur & Ors., ITA No.2249/Del/2022, order dated 09.01.2023, have held that the Hon'ble Supreme Court judgement in the case of 'Checkmate Services Case' is applicable also to the cases of adjustment done by the CPC u/s 143(1) of the Act. Thus, this Bench is not inclined to entertain the plea as raised by the ld. AR and there was no error in the findings of the ld.CIT(A) in following the judgement of the Hon'ble Supreme Court in the case of 'Checkmate Services Case'. The grounds have no substance.”
In the light of aforesaid, there is no substance in the grounds raised. Both the appeals are dismissed. Order pronounced in the open court on 13/06/2024. Sd/- Sd/- (G.S. PANNU) ( ANUBHAV SHARMA) VICE-PRESIDENT JUDICIAL MEMBER Dated: 13th June, 2024. Mohan Lal
6 ITA Nos.3836 & 3837/Del/2024