RAMZANALI ASGAR KHAN ,BENGALURU vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(3)(1), BENGALURU

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal by assessee is directed against order of NFAC for the assessment year 2018-19 dated 15.3.2024. Since the issue in both the appeals is common except figures, these are clubbed together, heard together and disposed of by this common order for the sake of convenience. The assessee has raised following grounds of appeal: 1. “GROUND 1: The addition made u/s 36(1)(va), is beyond the jurisdiction u/s 143(1)

1.1 The A.O., C.P.C., Bengaluru has no jurisdiction to make the addition on account of Section 36(1)(va) as the same cannot be given effect by way of intimation u/s 143(1). Reliance is placed on following decisions, (all of which, except last one, have been rendered, post the decision in Checkmate Services) wherein it has been held that the addition u/s 36(1)(a), cannot be given effect by way of intimation u/s 143(1).

ITA Nos.806 & 807/Bang/2024 Ramzanali Asgar Khan, Bangalore Page 2 of 10 a) Paris Elysees India Private Limited vs Deputy Commissioner of Income Tax, [TS5214-1TA (2023) (Jaipur-O]; (2023) 106 ITR 294 b) Gurmeet Singh Hora vs ACIT, ITA No. 45/RPR/2023, dt 03.08.23, ITAT Raipur. c) Romy David vs DCIT, ITA No. 358/RPR/2023, dated 05.01.2024, ITAT Raipur. d) Satpal Singh Sandhu vs DCIT [TS-7675-itat-2023 (Raipur)-O] e) Kalpesh Synthetics Pvt Ltd vs DCIT [TS-5623-ITAT-2022(Mumbai)-O] f) P R Packaging Service vs ACIT [TS-7319-1TAT-2022Mumbai-O]; g) M/S 360 Realtors LLP vs ADIT, CPC [TS-6783-ITAT-2022(Delhi)-O] h) Garg Head Centre & Nursing Home P Ltd vs ACIT, ITA No. 1700/DeV2022 1.2 Invalid invocation of Section 36(1)(va) : The AO, has invoked section 36(1)(va) which is illegal. If at all any addition to income should have been made it should have been u/s 2(24)(x). The Hon'ble Supreme Court in case of Checkmate Services, in para 53 has held that the employees contribution will always retain its character as income'. Also the Amendment to Sec 43B in Finance Act, 2021 are Prospective and cannot be applied for the AY up to 2021-22 2. GROUND 2: There is no Violation of Sec 36(1)(va), as all the remittances are made within 15 days from the end of month in which wages I salaries are paid. 2.1 A combined reading of the provisions of EPF Act, EPF Scheme and the returns required to filed under the EPF Act, implies that the due date for remittance of PF is 15 days form the end of the month in which wages are paid and not the month for which it becomes due. The Appellant, has duly remitted the provident fund contributions within the 15 days from the end of the month is which the wages are paid. Therefore, the addition u/s 36(1)(a) is unsustainable. Reliance is placed on the following decisions: a) KanoAPaper & Industries Ltd,. Calcutta Vs. ACIT, Co. Circle 7(2), Calcutta [TS5188-ITAT-2001(Calcutta)-O] b) Fluid Air (India) Ltd vs DCIT [TS-5037-ITAT-1997 (Bombay)-O] c) M/S MTR Maiya's in ITA No. 95/Bang/2023, dated 02.05.2023 d) Bulk Liquid Solutions Pvt Ltd in ITA No. 01/Bang/2024 e) Shri Trimbak Konher Patil in ITA No. 5 and 6/Bang/2024 f) M/s Benson Movers P Ltd, vs ACIT Circle 4(2) in ITA No. 2710/DeV2022. g) Vigilant Security Placement and Detective Services Pvt Ltd Vs DCIT in ITA No.2740/DeV2022, dated 13.06.2023 h) Dignus Services vs ITO, ITA Nos. 116 & 117/DeV2023, dated 26.09.2023 3. GROUND 3 : The provisions of Sec 2(24)(x) or 36(1 (va) is not applicable on the Appellant, as he is only a Contractor and not a 'principle employer'. For the limited purpose of PF Act, the employees of Contractor are originally the employees of Principle employer who has given contract to the Appellant.

ITA Nos.806 & 807/Bang/2024 Ramzanali Asgar Khan, Bangalore Page 3 of 10 Further the Appellant being contractor has not recovered PF from his majority of employees who are daily wage construction labourers. 4. GROUND 4: Disallowance of Employer's contribution u/s 36(1)(va) owing to error in reporting in Form 3CD is to be set aside. The Tax auditor has grossly erred in reporting all the amounts as employee's contribution, wherein the amounts reported in form 3CD are total of both employee and employer's contribution totaling to Rs. 1,44,63,619/. This includes employer's contribution of Rs. 75,53, 188. The employer's contribution is covered u/s 43B & all contributions are remitted within due date of furnishing the return of income. 5. GROUND 5 : To allow full tds credit. The Appellant has claimed the TDS credit of Rs. 44,36,351 instead of 54,36,351/-, owing to oversight while filing the return of income. The credit of Rs. 54,36,351 is being reflected in Form 26AS. It is requested the Appellate authority to allow the full TDS credit as available in Form 26AS, ignoring the error made by assessee.”

2.1 In the interest of natural justice, we admit the additional evidences for adjudication. After admitting the same, we find that since the issue is already settled by the earlier order of this Tribunal in the case of Manikandan Vazhukkapara Kumaran in ITA No.577/Bang/2023 dated 29.11.2023 for the assessment year 2018- 19, there is no necessity of going through these documents at this stage.

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ITA Nos.806 & 807/Bang/2024 Ramzanali Asgar Khan, Bangalore Page 5 of 10 filed by the assessee in response to such communication and has made such disallowances which is against the principles of natural justice.

“The scope of an intimation u/s 143(1)(a) of the Act extends to the making of adjustments based upon errors apparent from the return of income and patent from the record. Thus, to say that the scope of incorrect claim should be circumscribed and restricted by the explanation, which implies the term “entered” would in my view not be correct and the provision must be given full and unfettered play. The explanation cannot curtail or restrict the main thrust or scope of the provision and due weightage as well as meaning has to be attributed to the purpose of section 143(1)(a) of the Act.” 6.1 Even otherwise, the above issue has been decided by this Tribunal in the case of Manikandan Vazhukkapara Kumaran cited

ITA Nos.806 & 807/Bang/2024 Ramzanali Asgar Khan, Bangalore Page 6 of 10 (supra). Being so, this is a settled issue that CPC is justified in making the above adjustments u/s 143(1) of the Act. This ground of assessee is dismissed. 7. Ground Nos.1.2, 2, 3 & 4 are inter-related with regard to deposit of contribution of PF is to be determined from the end of the month in which the salary is disbursed to employees and according to the assessee’s counsel, it has bee deposited within 15 days from the end of the month within which the wages are disbursed or paid. Therefore, provisions of section 36(1)(va) of the Act was not violated. 8. We have heard the rival submissions and perused the materials available on record. It is to be noted that the additional evidences filed by the assessee in similar case has been examined by the Tribunal in the case of Manikandan Vazhukkapara Kumaran cited (supra) and after examining the same in that case, wherein it was held as under: “10. We have perused the submissions advanced by both sides in the light of various decisions relied by both sides. 10.1 In the present facts of the case, the assessees are proprietary concern, engaged in the business of manpower supply for the years under consideration. Admittedly in the audit report filed along with return of income, the assessee had mentioned the details in respect of the contributions failed to be deposited with the statutory funds within the due date. The CPC after issuing communication to the assessee, made disallowance of such contributions in the hand of the assessee for the years under consideration in an intimation issued u/s 143(1)(a) of the Act. It is the contention of the ld. A.R. that at the time when disallowance was made, this issue was covered by the jurisdictional High Court in the favour of assessee by the decision in case of Essae Teraoka (P) Ltd. v. DCIT reported in (2014) 43 taxmann.com 33, according to which, since the deposit to the respective funds was made before the due date of filing the respective fund was made before the due date of filing of the original return of income, any delay that happened stood condoned.

10.2 Subsequently, by virtue of the decision of Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. cited (supra), the ratio has been laid down that any delay in depositing the employees contribution to the respective funds by an employer would amount to disallowance u/s 36(1)(va) of the Act of such contribution. Further, it is a trite law that any ratio expressed by Hon’ble Supreme Court would relate back to the time from which the provision has been enacted and therefore, such law declared by Hon’ble Supreme Court was retrospectively applicable, and the decisions rendered by various Hon’ble High Courts favouring assessee would be of no benefit at that stage.

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10.3 The ld. A.R. though did not dispute this position submitted that, what would be the due date for deposit of the employees’ contribution to the PF would have to be computed from the date when the employer pays salary to such employees. He has referred to section 38 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 in his argument in support.

10.4 He thus submitted that in terms of section 38 of the Act, Employees provident fund and Miscellaneous Provisions Act, 1952 refers to the time limit for depositing the contribution within 15 days of the close of the month must be to the month in which the salary payment is made. He submitted that the entire additional evidence filed before this Tribunal establishes that there is a delay in paying salary to the employees and therefore, if that is taken into consideration, there cannot be any delay that would be attributable towards the deposit of employees’ contribution to the relevant fund. He also submitted only a minor amount would fall within the purview of disallowance u/s 36(1)(va) of the Act. The ld. A.R. thus prayed that the additional evidence filed by assessee may be admitted and the issue may be remanded to the ld. AO for necessary verification based on such additional evidences. 10.5 At the request of the ld. A.R., we had directed the ld. D.R. to carry out necessary verifications and sufficient time was granted to the ld. D.R. in order to respond to the additional evidence filed by assessee.

10.6 The ld. D.R. after going through the entire additional evidences submitted that, apparently the dates have been shifted and therefore, there is delay only in respect of few contributions. However, the ld. D.R. submitted that had this to be the case, why would the auditor in the audit report give different dates. He raised the concern in respect of the same by submitting that merely because there were decisions of jurisdictional High Court which was in favour of the assessee during the relevant period would not support the auditor to tinker with the actual date of payment of salary and actual deposit of employees’ contribution with the relevant fund. He submitted that all these evidences now tendered by the assessee are mere after thought and therefore, cannot be entertained. He also submitted that these arguments or submissions are raised by the assessee for the first time before this Tribunal. 10.7 After considering the above submissions by both sides, we are compelled to analyze the provisions of Provident Fund Act relied by the ld. A.R. which is filed at the paper book pages 58 to 198 filed on 11.10.2023. Section 38 of the Employees Provident Fund Act reads as under:

“Section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, becomes relevant. Sub-section (1) thereof reads as under: The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible

ITA Nos.806 & 807/Bang/2024 Ramzanali Asgar Khan, Bangalore Page 8 of 10 thereon) for the time being payable to the employees other than an excluded employee, as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the fund "electronic through internet banking of the State Bank of India or any other Nationalized Bank authorized for collection" on account of contributions and administrative charge]: "Provided that the Central Provident Fund Commissioner may for reasons to be recorded in writing, allow any employer or class of employer to deposit the contributions by any other mode other than internet banking" 10.8 The above provision requires an employer to deduct the employees’ contribution before paying the employee his wages and further requires to deposit such contribution withheld by the employer along with employer’s own contribution to the relevant fund held by the Government. It is further requires that the employer shall within 15 days of the close of every month pay the same to such fund along with administrative charges. It is thus, clear that after deducting the employees’ contribution towards the fund the same has to be deposited with the Government within 15 days of the close of every month. In our opinion, reference to 15 days of the close of every month has to be in relation to the month during which the payment of wages is to be made and the corresponding liability to deduct employees’ contribution to such fund immediately arises. Further, the expression “within 15 days of the close of every month”, therefore, must be interpreted as having reference to the close of the month for which the wages are required to be paid with corresponding date to deduct employees’ contribution and to deposit the same with the relevant fund.

10.9 On perusal of section 38 of the Employees Provident Fund & Miscellaneous Provisions Act, 1952, the phrase used in respect of the wages that an employer is supposed to pay to an employee for any period or part of period, are represented as, contributions that are “payable”. This means, the legislature is very clear in its intent that the employer is supposed to deduct the contributions in respect of the funds at the end of the month when the employee is eligible to receive his or her wages and the employer is cast upon with the duty to pay the necessary dues. The section 38 therefore, envisages that, at the end of every month when the employer is due to make the payment to such employees, the necessary contributions have to be deducted and deposit within 15 days of such deductions. With such an understanding, the argument advanced by the ld. A.R. cannot be appreciated that, in a case the salary or wages are paid in a subsequent month, the liability to deposit the employees’ contribution to the fund gets deferred by another month.

10.10 The dictum laid down by Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. Cited (supra) is that section 38 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 makes it obligatory for the employer before paying and employee the wages or salary to deduct the employees’ contribution. Thus, to analyze in the form of an example assuming a circumstance that the employer does not make payment of salary/wages to the employees for 2 to 3 consecutive months. This does not mean that the employer gets the benefit of depositing the employees’ contribution of such months for which the salary was not

ITA Nos.806 & 807/Bang/2024 Ramzanali Asgar Khan, Bangalore Page 9 of 10 paid on time to such employees will get shifted. That would render the entire provision otios and is not the intention of the legislature also. 10.11 We have carefully gone through the additional evidences for all the years under consideration and note that such shifting of depositing the contribution on behalf of the employees by the assessee is not in consonance with the provisions of section 38 as observed herein above and argued by the ld. D.R.

10.12 In additional ground No.3, the argument of ld. A.R. is that audit report originally filed by the assessee is wrong as the auditor mentioned single date of remittance though there were multiple dates of remittances in each month. 10.13 The ld. A.R. pleaded before us that audit report is wrongly prepared by the tax auditor for which there is no evidence brought on record regarding any confirmation from the tax auditor. In our opinion, such arguments to tarnish a professional is not appreciated. Based on the above discussion, we do not find any merit to consider the same.

10.14 We, therefore, do not find any merit in the new argument raised by the assessee in additional ground No.2 requesting to remand the issue back to the Ld. AO to verify the claim of disallowance in the light of the additional evidences filed by assessee. We, therefore, dismiss additional ground No.2 raised the assessee, as such argument is not in consonance with the provisions of Section 38 under Employees Provident Fund and Miscellaneous Provisions Act, 1952.

Accordingly, the additional ground nos. 2-3 raised by assessees stands dismissed in all the appeals.”

8.1 Accordingly, these grounds are dismissed in both the appeals on similar lines. 9. Next ground No.5 is with regard to non-giving of TDS credit for these two assessment years properly. The assessee relied on the order of Tribunal in the case of M/s. Arvind Ltd. in ITA No.588/Ahd/2014 dated 23.2.2017. 10. After hearing both the parties and perusing the additional evidences filed by the assessee in sl.nos.8 & 9 of the chart above in para 2 of this order, we are of the opinion that it is appropriate to remit this issue to the file of ld. AO to go through the Form 26AS filed in relevant assessment years and given credit to the corresponding TDS if the assessee has offered the corresponding income in the relevant assessment year. Alternatively, TDS credit to be given in

ITA Nos.806 & 807/Bang/2024 Ramzanali Asgar Khan, Bangalore Page 10 of 10 appropriate assessment year when the assessee has offered the income for taxation. Ordered accordingly. 11. In the result, both the appeals of the assessee are partly allowed for statistical purposes.

Order pronounced in the open court on 7th June, 2024

Sd/- Sd/- (Keshav Dubey) (Chandra Poojari) Judicial Member Accountant Member

Bangalore, Dated 7th June, 2024. VG/SPS

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Asst. Registrar, ITAT, Bangalore.