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Facts
The assessee, an individual engaged in the business of contract labor supply, filed an income tax return for A.Y. 2018-19. An intimation under section 143(1) was issued, making a disallowance of Rs. 61,04,310/- for employee contributions to PF and ESI not paid on time. The assessee appealed to the CIT(A), who sustained the addition. The assessee is now in appeal before the Tribunal.
Held
The Tribunal noted that the Tax Audit Report did not indicate a disallowance under section 36(1)(va) and that the addition made under section 143(1) was outside the scope of permissible adjustments. The Tribunal also considered that the due date for employee contribution payment might not be the 15th of the month as indicated in the audit report. Relying on the Hon'ble Supreme Court's decision in CHECKMATE SERVICES PVT LTD VS CIT-1, the Tribunal directed the AO to verify payments and restrict disallowance to only delayed payments.
Key Issues
Whether the disallowance of employee contributions to PF and ESI made under section 143(1) was justified when the Tax Audit Report did not show such a disallowance and the payment dates were debatable.
Sections Cited
36(1)(va), 143(1), 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SMT BEENA PILLAI & SHRI LAXMI PRASAD SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SMT BEENA PILLAI, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA No. 199/Bang/2024 Assessment Year : 2018-19 Shri Mysore Sannasetty Ramakrishna, The Deputy # 64, B Block, Commissioner of Opp. Scanray Income Tax, Technologies, Circle – 1[1] & KIADB Housing Layout, TPS, Hebbal II Stage, Vs. Mysuru. Mysuru – 570 017. PAN: AFBPR9660K APPELLANT RESPONDENT
Assessee by : Shri Ravishankar, Advocate
Revenue by : Shri V. Parithivel, JCIT (DR)
Date of Hearing : 01-04-2024 Date of Pronouncement : 09-05-2024
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order dated 19.10.2023 passed by the NFAC, Delhi for A.Y. 2018-19 on following grounds of appeal: “1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of
Page 2 ITA No. 199/Bang/2024 evidence, probabilities, facts and circumstances of the case.. 2. The learned Addl/Joint Commissioner of Income tax [Appeals] - 11, DELHI is not justified in upholding the determination of total income of appellant in the Intimation u/s. 143[1] of the Act, at Rs. 1,50,02,100/- as against the returned income of Rs. 88,87,800/- and thereby making an addition of Rs. 61,04,300/- u/s.36[1][va] of the Act, allegedly based upon the disallowance indicated in the Tax Audit Report of the Chartered Accountant in Form 3CD, under the facts and in the circumstances of the appellant's case. 3. The learned Addl/Joint Commissioner of Income tax [Appeals] - 11, DELHI ought to have appreciated that there was no disallowance u/s 36[1][va] of the Act indicated in the Tax Audit Report as mere details of the payments made were set-out and therefore, the impugned addition made u/s. 143[1] of the Act is outside the scope of the adjustments capable of being made u/s 143[1][a][iv] of the Act and therefore, the same deserves to be deleted. 3. The learned Addl/Joint Commissioner of Income tax [Appeals] – 11, DELHI failed to appreciate that the due date for making payment of the employee's contribution, would fall in the month, following the actual disbursal of the salary and the due date as per the Provident fund act, was not the 15thday, of each calendar month as indicated in the audit report and therefore, the addition made was misconceived, under the facts and in the circumstances of the case. 4. The learned Addl/Joint Commissioner of Income tax [Appeals] - 11, DELHI failed to appreciate that the intimation issued by the learned Assessing Officer under section 143[1] of the Act was bad in law, since the adjustment made was beyond the scope of the act, under the facts and in the circumstances of the case. 5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG the appellant denies himself liable to be charged to interest u/s. 234A, 234B and 234C of the Act, as computed in the intimation u/s.143[1] of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.
Page 3 ITA No. 199/Bang/2024 6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
Brief facts of the case are as under: 2.1 The assessee is an individual and is carrying on the business of supply of contract labourer. The assessee has derived income for the year under consideration under the head Income from Business and Profession and Income from House Property. He filed his filed return of income on 03/10/2018 for A.Y.2018-19. An intimation u/s. 143(1) was made on 08/01/2020, wherein disallowance of Rs.61,04,310/- of employee contribution of PF and ESI no paid on time, was made in the hands of the assessee.
2.2 The assessee preferred appeal against the intimation passed u/s. 143(1) before the Ld.CIT(A) on merits. The Ld.CIT(A) vide order impugned sustained the addition u/s. 36(1)(va) towards ESI/PF.
2.3 Assessee is in appeal against this order of the Ld.CIT(A) before this Tribunal.
We have perused the submissions advanced by both sides in the light of records placed before us.
We note that the Ld.AR has argued that assessee has remitted most of the contributions towards ESI/PF within the due date
Page 4 ITA No. 199/Bang/2024 which is evident from form 3CEB coln. 20(b). It is the submission of the assessee that no disallowance is called for as the payment where there is no delay in depositing funds to ESI and PF account.
The Ld.AR referred to Form 3CEB Colmn.20 to submit that the delay of only a few days have happened in 6 instances which may be considered.
On the contrary, the Ld.DR relied on the orders passed by the authorities below.
We have perused the form 3CEB wherein in coln. 20, the due date for payment and the actual date of payment to the concerned authority has been recorded. A careful perusal of the same reveals that the certain payments have been made belatedly either with a short delay or with a delay of 2 to 3 months. In our considered opinion, the submissions of the assessee deserves consideration. The assessee is directed to file relevant evidences in support of the claim.
In our considered opinion, after the ratio laid down by Hon’ble Supreme Court in case of CHECKMATE SERVICES PVT LTD VS CIT-1 (supra), will be applicable only in case of delayed payments. Accordingly, we direct the Ld.AO to verify the details filed by the assessee and to restrict the disallowance only in respect of such payments which have been deposited by the assessee to the
Page 5 ITA No. 199/Bang/2024 relevant statute beyond the due date of every month as per the ratio laid down by Hon’ble Supreme Court. Accordingly, the grounds raised by the assessee stands partly allowed for statistical purposes. In the result, the appeal filed by the assessee stands partly allowed for statistical purposes. Order pronounced in the open court on 09th May, 2024.
Sd/- Sd/- (LAXMI PRASAD SAHU) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 09th May, 2024. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order
Assistant Registrar, ITAT, Bangalore