NOMURA RESEARCH INSTITUTE FINANCIAL TECHNOLOGIES INDIA PVT. LTD. ,KOLKATA vs. DCIT, CIR. -1(1), , KOLKATA

The present appeal is filed by the assessee against the order dated 10.01.2024 of the Commissioner of Income Tax (Appeals), Aurangabad [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).

The brief facts of the case are that the assessee filed its return of income on 15.03.2022 by declaring total income of Rs.15,22,38,899/-. An intimation was received u/s 143(1) of the Act dated 27.10.2022 issued by CPC, Bengaluru for assessment year 2021-22. This order included disallowance of Rs.14,92,802/- to the income of the assessee, thereby determining the total income at Rs.15,37,31,700/-. The disallowance was made on account of delay in depositing the Provident Fund (PF) contribution, which was considered as a default.

Dissatisfied with the above order, the assessee went in appeal before the ld. CIT(A) submitting that the delay in depositing of PF contribution was due to unavoidable and genuine circumstances specifically of an order of internet shut down by West Bengal District Administration dated 12.05.2020 mandating suspension of internet services from 2.30 PM on 12th May 2020 until 6 PM on 17th May 2020 to manage law and order situation and maintain public safety. This suspension of services coinciding with the outbreak of Covid-19 pandemic rendered the assessee became unable to make the deposit of PF contribution on time. Despite generating the necessary PF challans dated 15.05.2020 i.e. within the due date prescribed under the Act, the assessee could not complete the deposit as the online payment gateway was disrupted because of internet shut down and as soon as internet service resumed on 18.05.2020, the assessee promptly completed the payment.

Before the ld. CIT(A), the assessee furnished the copy of the order of internet shut down by Govt. and copy of the generated PF challan as stated also in the impugned order passed by the ld. CIT(A) and the assessee has also contended that the delay was entirely due to circumstances beyond the control of the assessee. However, the ld. CIT(A) dismissed the assessee’s appeal without appreciating these extraordinary factors.

Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before this Tribunal contesting the disallowance of Rs.14,92,802/- on the ground of delay in depositing of PF contribution on the part of the assessee arguing that the delay was due to unavoidable and genuine circumstances, due to internet shut-down order issued by the Govt., which was beyond the control of the assessee. 5.1 The ld. AR has submitted that the assessee had promptly generated the PF challan within the stipulated period and the delay was 2 Assessment Year: 2021-22 Nomura Research Institute Financial Technologies India Pvt. Ltd. solely due to suspension of the internet services. The contention of the ld. AR before the Bench was that the extraordinary situation prevailing during the Covid-19 lockdown and restrictions, any additions or disallowances are unjust. The ld. AR, in order to substantiate its claim, he furnished the copy of the internet suspension order passed by the District Magistrate, Govt. of W.B which is placed at page no.206 to 208 and the copy of the PF challan generated on 15.05.2020 at page no.205 of the paper-book. The ld. AR further argued that internet suspension order was issued on 12th May 2020 preventing any online transaction being conducted. This order affected the assessee’s ability to deposit PF contribution on time. As soon as the internet service was restored on 18th May 2020, the assessee immediately made the pending deposit of PF contribution. He, therefore, stated that the delay was not attributable to any negligence or fault on the part of the assessee but due to unavoidable circumstances on account of Govt. mandate for discontinuation of internet service. He also stated that due to prevailing Covid-19 pandemic and subsequent restrictions, the assessee’s inability to meet the deadline fixed by the Govt. constituted a genuine hardship to the assessee. The ld. AR in order to substantiate its claim referred a decision of the Coordinate Mumbai Bench of the Tribunal in the case of Diamour Jewels (P) Ltd. vs. CPC reported in [2014] 165 taxmann.com 112 (Mumbai-Trib.), wherein, under similar circumstances, the Tribunal was condoned the delay in deposit of PF and ESI of the employees’ share for the month of April 2020 and May 2020, which fell in the period of lockdown when pandemic of Covid-19 was at its peak considering the reasonable cause and unavoidable circumstances preventing the assessee to deposit employees’ contribution on or before the due date.

On the other hand, the ld. DR opposed the contentions of the ld. AR stating that as per the provisions of section 143(1) of the Act, timely deposit of PF contribution is a statutory requirement and any delay, Assessment Year: 2021-22 Nomura Research Institute Financial Technologies India Pvt. Ltd. irrespective of any cause could not be subject to disallowance under the relevant provisions.

We, after hearing the rival submissions of the parties and examining the records and evidences submitted by the assessee, find that the assessee generated the PF challans on 15th May 2020 within the stipulated timeline which demonstrates the efforts of the assessee to fulfil statutory requirement. The delay in deposit of PF contribution was due to internet shut-down imposed by the West Bengal District administration in an order dated 12th May 2020 mandating internet suspension from 2.30 PM on 12th May 2020 until 6 PM on 17th May 2020. This shut-down order correlates with the assessee’s stated reasons for delay and substantiated that the delay was indeed due to factors beyond the control of the assessee. As emerged from the above facts, the assessee made the deposit on the first possible date after resumption of internet services on 18th May 2020 by prompt Compliance as soon as circumstances allowed. We also note that during the Covid-19 pandemic several regulatory and statutory guidelines were extended to curb the regular operation along with banking operations. The assessee’s delay fell within this period of lockdown services disruption. We also consider judicial notice of the extraordinary challenge and restriction faced by the public at large during the pandemic which created unprecedented operational and logistic barriers. Similarly, we consider the Coordinate Mumbai Bench of the Tribunal in the case of Diamour Jewels (P) Ltd. vs. CPC (supra), where a delay was condoned under the similar circumstances of unavoidable cause. This precedent reinforces that statutory compliances or timeline which accommodated genuine and reasonable hardship, particularly in exceptional causes such as the present one. In the light of the above observation, we find that the delay in deposit of PF contribution was caused due to unavoidable circumstances by Govt. mandate for internet shut-down in connection with the prevailing Covid-19 pandemic condition. This delay does not 4 Assessment Year: 2021-22 Nomura Research Institute Financial Technologies India Pvt. Ltd. reflect any fault or negligence on the part of the assessee. Under this bona fide circumstance, we hold that it would be unjust to penalise the assessee to deposit PF contribution during the lockdown period. Accordingly, we set aside the addition of Rs.14,92,802/- as made u/s 143(1) of the Act and allow the appeal of the assessee.

In terms of the above discussion, the appeal filed by the assessee is allowed. Kolkata, the 30th October, 2024.