NEERAJ DADHICH,JAIPUR vs. ADIT, CPC, BANGALORE

Rajendra Sisodia Advocate to file the appeal before the Tribunal. In support, he filed an affidavit stating therein the facts illustrating the reasons for the delay in filing the appeal with a request to condone the delay in filing the appeal. The Ld. DR has no objection to the request of the Appellant in view of the medical exigencies. Accordingly, the delay is hereby condoned and appeal is admitted on merits.

6. At the outset, the ld. counsel for the assessee has challenged the decision of the ld. JCIT(A) in confirming the disallowance made by the AO u/s 143(1) by invoking section 36(1)(va) on account of delayed payment of Neeraj Dadhich v. ADIT, CPC employees contribution to PF & ESI contributions. The ld. AR has contended that the said disallowance has been made by the AO and sustained by the ld. JCIT(A) in arbitrary manner which is not justified. He contended that the prima facie adjustment made by the CPC by way of disallowance on account of late deposit of employee’s contribution of PF and ESI amounting to Rs.22,22,399/- was not permissible within the ambit of 143(1) and such adjustment is illegal and unsustainable. In support he placed reliance on the following judgement:

411 (HC).

Neeraj Dadhich v. ADIT, CPC 8. We have heard the rival contention, perused the material on record impugned order, the written submission and case law cited before us.

Admittedly, the assessee failed to deposit the employees contributions to PF and ESI to the employee’s account for the relevant assessment year before the due date under the PF and ESI. In the present case, the order passed by the AO and the Ld. JCIT(A), disallowing by way of an adjustment under section 143(1) r.w.s. 36(1)(va) of the IT act, in respect of delayed remittance of employees contribution to Provident fund (PF) and Employee’s State Insurance(ESI) for the assessment year 2018 -19. The Ld. JCIT(A) relying upon the decision of the honourable Supreme Court in the case of “Checkmate Services (P.) Ltd. v. Commissioner of Income Tax”, [2022] 448 ITR 518 (SC) held that such delayed deposit, no adjustment or deduction could be claimed. The relevant para of the judgement reads as under:

"54. In the opinion of this court, the reasoning in the impugned judgment that the non- obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the Neeraj Dadhich v. ADIT, CPC statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that sucht amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction.”

Ltd. (supra), dealt with the issue of disallowance of late payment of PF and ESI contributions in processing of Income Tax Return under section 143(1)(a) by the AO/CPC. The relevant para of the judgement are reproduced here under:

Neeraj Dadhich v. ADIT, CPC 7. Though the decision cited was that of the ITAT, we have considered the same. In our judgment, however, the fact that the assessment order in Checkmate Services (P) Ltd. (Supra) was incidentally under section 143(3) and assessment order in the present case is under section 143(1)(a) The IT act, makes no difference to the principle involved in this matter. The ITAT decision does not discuss why this circumstance constitute a distinguishing feature based on which the ratio of Checkmate Services (P) Ltd. (supra) would be departed from

be claimed or adjustments can be made under section 141(1)(a)(iv) read with section 36(1)(va) only when the employer deposits the contributions in the employees accounts on or before the due date prescribed under the employees Provident fund/employees state

Insurance Act. In this case, admittedly, the contributions were deposited in the employee’s accounts beyond the due date. The circumstance that the assessment order was made under section 143(1)(a) of the act can make no difference.”

Neeraj Dadhich v. ADIT, CPC 10. In the present case, admittedly, the PF and ESI contributions were deposited in the employee’s accounts beyond the due date. The Ld. AR failed to rebut the contention of the Ld. DR or furnish contrary judgement to the latest judgment of Apex Court delivered in the case of Checkmate Services (P) Ltd. (supra) and Bombay High Court in case of Roshan Korgaonkar (supra) on the issue. In view of that matter, we find no infirmity or perversity in the order of the ld. JCIT(A) to the facts on record.

According, we find no merit in the contention of the Ld. AR with regards to the grounds and additional grounds of appeal and same would be liable to be rejected.

11. Respectfully, following honourable Apex Court and Bombay High Court (supra), the disallowance of Rs. of Rs.22,22,399/- by way of an adjustment under section 143(1) r.w.s. 36(1)(va) of the IT act, confirmed by the Ld. JCIT(A) is sustained.

Order pronounced in the open court on 10.10.2024