ZAHIR KASAM MEMON,MUMBAI vs. ADDL-JCIT (A)-2, , MUMBAI

I. Delay of 12 days to be condoned. A. At the outset, the Ld.AR submitted that the assessee filed the present appeals before this Tribunal with a delay of 12 days in both the appeals. He has filed the affidavit of the assessee stating as under: “Affidavit for Condonation of Delay in Filing The Appeal Against Assessment Order Of Commissioner of Income Tax Ward/Range - ADDL/JCIT (A)-2 CHENNAI 1) I. ZAHIR KASAM MEMON aged about 49 years, holder of Income Tax PAN - AEMPM1407R, an adult inhabitant residing at Memon Brothers, Pinjarwada, Kumbharwada, Zenda Zahir Kasam Memon; A. Y.2019-20 bazar. Vasai West, Mumbai-401 201 do solemnly affirm and state on oath as under: 2) That I received an Intimation for the Assessment Year 2019- 20 under section 143(1) of the Income Tax Act 1962 on Date 20 February 2020. 3) That as per the said intimation I found that CPC has disallowed the amount of Rs. 2,08,26,668/-. The additions made by the CPC were on account of Disallowance of expenditure indicated in the audit report but not considered in computing the total income in the return. 4) That I was advised by my legal consultant that the said intimation is factually incorrect and an application for Appeal before CTT(A) shall be filed. 5) The Hon'ble CIT(A), in his order dated 19th December 2023, confirmed the adjustment of Rs.1.11,01,285/- towards delayed contribution of PF/ESIC under section 36(1)(va). Thus, Rs. 97.25.003/- towards Employer's contribution was fully allowed as it was paid before due date of filing the return of income. 6) Further, I was advised by the legal consultant to file an appeal before the Hon'ble ITAT for relief. The appeal was filed before this Hon'ble ITAT on date 22nd February 2024. 7) It may be noted that as per section 253(3) of Income Tax Act 1961, appeal shall be filed withing Sixty days of the date of Order, whereas we have filed is after Sixty-Five days and that there is a minor delay of 05 days for which an application for condonation of delay has been filed as provided under section 253(5) of the Income Tax Act, 1961. 8) That delay in filing the appeal is bona fide and that there is has been a minor delay, due to the time taken for selecting and appointing an Authorized Representative. 9) That I had no intention to jeopardize the interest of the revenue by delaying the filing of the appeal. VERIFICATION I, ZAHIR KASAM MEMON, the above-named deponent, do hereby verify and solemnly state that the contents of para 1 to 6 are true to the best of my knowledge and the contents of para 7 to 9 are true to the best of my belief. Nothing material has been concealed.”

B. The Ld.AR submitted that in view of the above, the assessee could not file the appeals before this Tribunal well in time and Zahir Kasam Memon; A. Y.2019-20 by the time the appeal papers were prepared for filing, there arose delay of 12 days in filing these present appeals before this Tribunal. The reason for the delay in filing the present appeals were due to reason beyond the control of the assessee. He thus prayed for the delay to be condoned. C. The Ld.DR though objected, however could not controvert the reasoning given by the Ld.AR for the delay that was caused in filing the present appeals. We have perused the submissions advanced by both sides in the light of records placed before us. D. We note that there is a delay of 12 days in filing the present appeal which was due to wrong understanding of the result of the impugned order. We do not find any reason to reject the application for condonation, as justice must not seem to be rendered but it must be rendered. Assessee cannot be denied the opportunity of being heard which is the basic principles of natural justice. E. It is also noted that there is no malafide intention on behalf of assessee in not filing the present appeals within limitation. It is noted that, there is no malafide intention on behalf of assessee in not filing the present appeals within time. In our opinion, sufficient and reasonable cause has been made out by the assessee for condoning the delay as observed by Hon’ble Supreme Court in case of Collector Land Acquisition Zahir Kasam Memon; A. Y.2019-20 Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 in support of his contentions, wherein, Hon’ble Court observed as under:- “The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits ". The expression “sufficient cause” employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that :

1. 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.

2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. ......................................................1.Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.” F. Considering the above observation by Hon’ble Supreme Court, we find it fit to condone the delay caused in filing the present appeals. Respectfully following the above view, the delay of 12 days is condoned in the appeal.”

II. Admission of Additional Grounds:- A. The Ld.AR submitted that the assessee has filed an application for admission of additional grounds that reads as under: 1. “Your honor the assesse filed appeal late as there was confusion whether the appeal can be filed against Intimation u/s 143(1) and for the amount mistakenly written by the auditor.

B. The Ld.AR submitted that the above grounds are related to the main grounds raised in form 36 and that no new records needs to be looked into for disposing off the issue raised herein. The Ld.DR though could not object to the submissions of the assessee did not support the admission of additional ground. We have perused the submissions advanced by both sides in the light of records placed before us. C. We note that the issue raised by assessee in the additional grounds do not require to delve into any new facts. Accordingly, the additional grounds filed by assessee stands admitted. Brief facts of the case are as under:

2. The assesee is an Individual doing his business in the name of Reliable Agencies, by providing manpower supplies to Vasai Virar Municipal Corporation. He filed his return of income for the year Zahir Kasam Memon; A. Y.2019-20 under consideration on 30.09.2019 declaring total income of Rs.1,33,67,203/-. The Central Processing Centre (hereinafter referred to as „CPC‟) while processing the return u/s. 143(1) of the Act calculated total income of assessee at Rs.3,41,93,915/- on account of amount debited to profit & loss Account to the extent disallowable u/s. 137 of the Act. Aggrieved by the disallowance made u/s. 143(1) intimation, the assessee preferred appeal before the Ld. CIT(A).

3. The Ld. CIT(A) vide impugned order sustain the addition u/s. 36(1)(va) of the Act towards ESI/PF. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal.

4.6. The Ld.DR also placed reliance on the decisions of Hon'ble Bangalore Tribunal and decision of Hon'ble Ahmedabad Tribunal in support which were passed for assessment year 2018-19 and 2019- 20 as under:- i) Checkmate Services Pvt. Ltd. Vs. ADIT, CPC, reported in [2024] 164 taxmann.com 498(Ahmedabad- Trib.) ii) Ramakrishnappa Nagaraj vs. Deputy Commissioner of Income Tax, reported in [2023] 147 taxmann.com 400(Bangalore-Trib.) 4.7. He submitted that the above decisions considered the arguments raised by the assessee herein by way of various grounds on first principles of law. We have perused the submissions advanced by both sides in light of records placed before us.

i. The appellant asserts that the disallowance of employees' contributions to PF and ESIC, as undertaken by the CPC under section 143(1)(a)(iv), is void ab initio and based on an erroneous interpretation of the tax audit report, which purportedly contains clerical inaccuracies. The appellant further argues that the contributions were deposited before the due date for filing the return under section 139(1), thus qualifying for deduction. ii. The appellant contends that the CPC and CIT(A) failed to consider that the contributions were made within the extended filing due date under section 139(1) and argues procedural deficiency in the application of section 143(1). iii. The appellant claims that delayed payments from the Vasai Virar Municipal Corporation (VVMC), a state entity, caused a corresponding delay in depositing employees' PF/ESIC contributions. And the revenue in counter argued and submitted as under:- a. Legal Distinction in Contributions: The Revenue highlights that section 36(1)(va) distinctly regulates employees' contributions, which must be deposited within the due dates specified under the Provident Fund Act and ESIC Act. The Supreme Court in Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC) elucidated this principle, underscoring that the non obstante clause under section 43B does not apply to employees' contributions held by an employer in trust. b. CPC's Compliance in Adjustment: The adjustments made by the CPC under section 143(1)(a)(iv) adhered strictly to statutory mandates. The CPC rightly adjusted the claimed deductions based on data within the audit report, a legally justifiable action where delayed contributions are apparent. The ITAT's ruling in Checkmate Services (P.) Ltd. v. ADIT, CPC [2024] 164 taxmann.com 498 (Ahd - Trib.) explicitly upholds CPC's right to make such adjustments, thus affirming the action in this case. c. CIT(A)'s Decision: The CIT(A) upheld this disallowance, highlighting the established legal distinction between employer and employee contributions, reiterating that delayed employee contributions, irrespective of eventual deposit before the return filing date, fail to qualify for deduction under section 36(1)(va). d. Relevant Judicial Doctrine and Compliance: The doctrine of statutory interpretation mandates strict adherence to provisions as Zahir Kasam Memon; A. Y.2019-20 expressly framed by the legislature. In Checkmate Services (P.) Ltd. v. CIT (2022) 143 taxmann.com 178 (SC), the Supreme Court unequivocally held that "employee contributions must be deposited within the statutory due dates of the Provident Fund and ESI Acts, or disallowance would ensue." This interpretation, now binding across all judicial forums, eliminates ambiguity about the applicability of section 43B in cases concerning employee contributions. e. Absence of Procedural Deficiency: The Revenue asserts that the CPC's adjustment, based on clear information within the appellant's tax audit report, complies with the automated intimation procedure, validly within its rights under section 143(1). The ITAT ruling in Checkmate Services (P.) Ltd. v. ADIT, CPC [2024] 164 taxmann.com 498 (Ahd - Trib.) further affirmed that "where an incorrect claim is evident from the return itself, CPC is obligated to correct it without additional procedural requirements". f. Legal Principle of Strict Compliance: Statutory compliance is paramount. Sections 2(24)(x) and 36(1)(va) are specific in their requirements for timely deposit of employee contributions, with Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC) firmly establishing that "business exigencies or external delays do not mitigate statutory obligations" [12]. The appellant's reliance on business contingencies does not alleviate the mandatory nature of section 36(1)(va), as compliance is unaffected by the appellant's contractual dynamics with VVMC.” 5.3. We have also perused the decisions relied by both sides which has been referred to and relied upon herein above. The provisions and section applicable to the issue has also been analysed as applicable to the year under consideration. Firstly we agree with the Ld.DR that prima facie adjustments could be made by the CPS as per section 143(1)(a)(ii) of the act. Admittedly there is no doubt that section 36(1)(va) and section 43(b) operates on different techniques and different parameters to determine the due date. When the provision of section 43B was first introduced into the statute, it was only concerned of the employees contribution having reference to section 34(1)(iv) of the Act. At that point of time, the question of Zahir Kasam Memon; A. Y.2019-20 employees contribution being considered as a part of employees earning was not there. 5.3.1. Subsequently, when the parliament introduced by way of amendment in 1998-99 section 36(1)(va), simultaneously a second proviso to section 43B was inserted to ensure timely payments were made by the employer to the concerned funds and to avoid mischief of employer retaining amounts for long periods. 5.4. Thus the intention of the parliament to retain the character and nature of employers contribution and the employees contribution to the respective funds the evident from the language used there. 5.5. Further section 2(24)(x) is a deeming section, wherein, the amount received from the employees (whether the amount is received from the employee or by way of deduction authorised by statute), assumes the character of income though not earned. Thus, amounts retained by the employer out of employees income by way of deduction or any other mode, were to be treated as income in the hands of the employer. 5.6. Per contra section 43B covers all deduction that are permissible as expenditure or outgoings forming part as assessee‟s eligibility that includes cess dues, taxes dues or any interest as the case may be. Section 43B requires that timely payment of these expenditure or eligibilities alone would entitle the assessee to have claim the deduction from total income.

Zahir Kasam Memon; A. Y.2019-20 5.7. This difference in the two provisions of the statute referred to herein above stands categorically noted by Hon'ble Supreme Court in case of Checkmate Services Pvt. Ltd. Vs. CIT(supra). We refer to the specific observation of Hon'ble Supreme Court which is are as under:- “57. The distinction between an employer's contribution which is its primary liability under law - in terms of section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (section 36(1) (va)) is, thus crucial. The former forms part of the employers' income, and the later retains its character as an income (albeit deemed), by virtue of section 2(24)(x) unless the conditions spelt by Explanation to section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under section 43B.

6. The assessee has raised additional grounds vide application dated 27/08/2024 that reads as under:- Ground No. 5 & 6 5. ASSESSING OFFICER AO (CPC), while processing the return of income of the assessee company, made adjustment on account of disallowance of expenditure indicated in the Audit Report u/s 143(1)(a)(iv).