SHRIRAM FORTUNE SOLUTIONS LTD.,CHENNAI vs. DCIT, CC-3(1), CHENNAI

Brief facts of the case are that the appellant had filed its return of income for A.Y. 2019-20 on 31.10.2019 declaring total income at Rs.53,02,850/-. The same CPC, Bengalore on 29.07.2020 u/s 143(1) of the Act determining the total income of the appellant at Rs.2,46,59,630/- after making addition of Rs. 1,93,56,775/- u/s 36(1) (va) of the Act on account of disallowance of delayed payments of employees' contribution towards provident fund and ESI. Against the aforesaid addition, the assessee challenged the order dated 29.07.2020 while processing u/s 143(1) of the Act before the ld.CIT(A). Beofre the ld.CIT(A), the appellant submitted that the chartered account in his auditor’s certificate has certified the payment of PF & ESI of Rs. 1,93,56,775/- and requested to delete the said addition. However, the ld.CIT(A) observed that in clause 20(b) of tax audit report was duly certified by the auditor that employees' contribution towards provident fund and ESI of Rs. 1,93,56,775/- are not paid by the appellant. He also notes that in appellant's case, no such revised Tax Audit Report has been validly e- filed till date. Hence, he further holds that submission of additional details/documents in support of such claim cannot be admitted since it is outside the scope of section 143(1). Therefore, the addition of Rs.1,93,56,775/- u/s 36(1)(va) in the order u/s 143(1) on account of disallowance of delayed payments of employees' contribution towards provident fund and ESI and consequently not allowing set off of current year loss of Rs.56,82,084/- against income from other sources in the order u/s 143(1) of the Act on the basis of the validly e-filed Tax Audit Report is found to be consistent with facts on record and in accordance with law and hence the ld. CIT(A) confirmed the action of the ld. Assessing Officer. Aggrieved, assessee preferred an appeal before us.

We heard both sides and perused the orders of lower authorities. We have also gone through the paper book filed by the assessee. Further, having gone through the entire materials on record specifically Form 3CD at Sr.No.20b we find that sum received from employees, due date for payment and the actual date of payment to the concerned authorities are find mentioned therein. We also find that before ‘the actual date of payment to the concerned authorities’, the actual amounts paid are shown as ‘0’ in respective column. We find and consider this reporting as inadvertent error for the reason that after this column payments dates are find mentioned in the next column as actual date of payment to the concerned authorities. When actual dates of payment are very much reported in Form 3CD, it could be treated as inadvertent error. Apart from the above reasoning other clinching evidence filed are auditor’s certificate certifying inadvertent error crept in the report, PF chart, ESI chart, challans showing payment made. Even 3CD report has been rectified in respect of payment of PF and ESI contributions. The Hon'ble Supreme Court in the case of Price Water Coopers (P) Ltd. vs CIT 348 ITR 306 (SC) wherein it has been held that no penalty is leviable in case of an inadvertent error committed in the computation of income. The Hon'ble Supreme Court considering the totality of the fact of that case held that even the assessee could make "silly" mistakes. The Hon'ble Supreme Court observed that the contents of the tax audit report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It was noted that all that has happened in the present case is that through a bonafide and inadvertent error the assessee while submitting its return failed to add the provision for gratuity to its total income. This can only be described as a human error which are prone to make. The Hon'ble Supreme Court held further that the caliber and expertise of the assessee has little or nothing to do with the inadvertent error. It was observed that the assessee should have been careful cannot be doubted but the absence of due care in cases such as the present does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Similarly, in the case of Baroque Pharmaceuticals (P.) Ltd. [2022] 137 taxmann. com 94 (Gujarat) it is held by the Hon’ble Court that reopening notice merely relying on a technical mistake committed by an auditor was unjustified.

Therefore, in the light of above conspectus of matter and taking guidance from the judgments referred supra, we treat such reporting at Sr.No.20b as ‘0’ in Form 3CD as inadvertent error / human error. To err is human nature. No one is infallible. Further, to perpetuate an error is no heroism when apparent error is shown. We are also of the considered opinion that assessee has made the actual payment of PF and ESI contribution as received from the employees well within time. On merits there is no quarrel except technical or venial breach has occurred while filling up column. Therefore, we direct the ld.AO to delete addition on this count and re-compute the income considering other relief prayed such as set off of current year loss as per law.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 28th day of August, 2024 at Chennai.