RAMESHKUMAR LALAN TIWARI,SURAT vs. INCOME TAX OFFICER, WARD 2(3)(5), SURAT, SURAT

आयकर अपील�य अ�धकरण, सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr ARJUN LAL SAINI, ACCOUNTANT MEMBER आ.अ.सं./ITA No.484/SRT/2023 (AY 2018-19) (Hearing in Physical Court) Rameshkumar Lalan Tiwari Income Tax Officer, Ward- 181, Bapa Sitaram Society, 2(3)(5), Surat, Aayakar Vs Kawas Hazira Road, Surat- Bhavan, Majura Gate, 394270 Surat-395001 PAN : ADRPT 1473 G अपीलाथ�/Appellant ��यथ� /Respondent

�नधा�रती क� ओर से /Assessee by Shri Avinash Poddar, Advocate & Ms. Anchal Poddar, Advocate राज�व क� ओर से /Revenue by Shri Vinod Kumar, Sr-DR अपील पंजीकरण/Appeal instituted on 17.07.2023 सुनवाई की तारीख/Date of hearing 19.12.2023 उ�घोषणा क� तार�ख/Date of 28.12.2023 pronouncement Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [for short to as ‘NFAC/Ld. PCIT’] dated 18.05.2023 for assessment year 2018-19, which in turn arises out of assessment order passed by Asst. Director of Income Tax, CPC, Bengaluru / Assessing Officer passed assessment order under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 23.03.2020. The assessee has raised the following grounds of appeal:- “1. The learned Commissioner of Income tax (Appeals) NFAC has erred in fact and in law in not appreciating the fact that assessee

ITA No.484/SRT/2023 (A.Y 18-19) Rameshkumr Lalan Tiwari

had neither claimed a deduction of Rs.28,60,762 being unpaid service tax nor debited it in profit & loss account so no question of disallowing the deduction which was not even claimed. 2. The learned Commissioner of Income tax (Appeals) NFAC has erred in fact and in law in concluding that the service tax of Rs.28,60,762 was not passing through the profit and loss etc., should be added whereas the provisions of Section 43B applies to, those expenditure, which are claimed, but, which were not paid before filing of the return, can be disallowed. 3. The learned Commissioner of Income tax (Appeals) NFAC has erred in fact and in law that Chowranghee Sales Bureau Pvt. Ltd. vs. CIT (1973) 87 ITR 542 (SC) is not applicable in assessee case. 4. Without prejudice to above, the learned Commissioner of Income Tax (Appeals) NFAC has erred in law and in fact that is addition of unpaid service tax liability is confirmed in A.Y 2018- 19, at least the deduction of same service tax liability should be allowed as deduction, when it is actually paid in immediately succeeding year AY 2019-20 s per provisions of Section 43B. Ground on addition of Rs.79,88,918/- u/s 36(1)(va) 5. The learned Commissioner of Income Tax (Appeals) NFAC grossly erred in law and in fact that impugned provision of 36(1)(va) is completely arbitrary and unreasonable as the right to claim deduction of employees share of provident fund is lost permanently, if there is delay of even one day on part of employer assessee. 6. The learned Commissioner of Income Tax (Appeals) NFAC has failed to appreciate that salary / wages to workers is paid in the next month, for e.g. for month of April 2017, salary became due in May 2017, and thereby due date for deposit of ESIC/PF will be June 2017. 7. The learned Commissioner of Income Tax (Appeals) NFAC has failed to appreciate that there is no separate provision in EPF Act, to deposit Employer share of contribution and employee share of contribution separately. Due to this, whenever there is working capital crisis, the assessee even though willing to discharge his

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liability of employee share of contribution is unable to do so. So this is treated unequally in law, hence violation of Article 14 of COI. 8. The learned Commissioner of Income Tax (Appeals) NFAC grossly erred in law that impugned provision of 36(1)(va) are against the principles of Natural Justice as per Doctrine of Double Jeopardy, as the same assessee is being taxed brutally by Income Tax Act as well as EPF Act. Article 20(2) of the Constitution of India is violated as assessee is prosecuted and punished for same offence more than once. 9. The learned Commissioner of Income Tax (Appeals) NFAC grossly erred in law that impugned provision of 36(1)(va) as Article 19(1)(g) is violated. 10. Without prejudice to above, the learned Commissioner of Income Tax (Appeals) NFAC has erred in law and in fact of the case that 100% disallowance of Rs.97,88,918 being delay in deposit of Employee share of contribution of PF and ESCIC has resulted in UNDUE HARDSHIPS to the assessee, a. who is provider of employment to more than 500 workers, assessee is contributing in the GROWTH of the Nation. b. but got delayed payment or no payment from principal ESSAR Ltd. As per Resolution Palan under Insolvency & Bankruptcy code, assessee got only around 22% of the outstanding. c. assessee deposited all the employee PF/ESIC, though delayed but with entire INTEREST and Penalty as per PF and ESIC act. d. when the PF/ESIC deposits made online mandatory but system were not working on 15th of the month (due date) so the disallowance be restricted to 30% of the amount of Employee share of ESIC/PF which is deducted but not delay in deposit. Without prejudice to above, the learned Commissioner of Income Tax (Appeals) NFAC has erred in law and in fact of

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the case there is Seamless flow of credit of Employee share of PF/ESIC, i.e., no loss occurs to employee due to such delay in payment by employer. So the assessee should not be punished so cruelly when he is sandwiched for no/delayed/slow payments from Service recipient (Contractee Company i.e. ESAR Ltd.) and timely payment to workers. 11. The appellant craves leave to ad/delete/alter/modify grounds which would be necessary for adjudication of the case.” 2. Rival submission of both the Learned Authorized Representative (Ld.AR) and Learned Senior Departmental Representative (Ld. Sr-DR) heard and record perused. The Ld. AR for the assessee submits that ground No.1 relates to addition of Rs.28,60,762/- under section 43B of the Act on account of unpaid service tax liablity. The Ld. AR for the assessee submits that Assessing Officer / Centralized Processing Centre (CPC) Bengaluru while processing the return made adjustment / addition of unpaid service tax. The Ld. AR of the assessee submits that assessee has neither claimed deduction of such amount nor debited it in the profit and loss account so there was no question of making such disallowance of the deduction which were not even claimed. The NFAC/Ld.CIT(A) confirmed the action of Assessing Officer by taking view that service tax was not passing through profit and loss account and NFAC/Ld. CIT(A) also relied upon the decision of Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT in Civil Appeal No.2833 of 2016 dated 12.10.2022, which is not applicable on the facts of the present case. The Ld. AR of the assessee submits that it is settled position

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under Income Tax law that no disallowance of deduction which has not been claimed can be made. The assessee has filed copy of profit and loss account on record showing the facts that no such deduction is claimed by the assessee. 3. Against ground No.2, which relates to disallowance of under section 36(1)(va) of Rs.79,88,918/- on account of delay in depositing of employees contribution of ESI/PF. The Ld. AR of the assessee submits that CPC has no authority / mandate of law in making such adjustment while processing the return of income. On confronting with ratio of decision of Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs CIT dated 12/10/2022 in Civil Appeal (C) No. 2833 of 2016, the Ld. AR of the assessee fairly accepted such facts. The ld AR for the assessee further submits that Hon’ble jurisdictional High Court has admitted a petition in the case of M/s A S Construction Vs. Union of India in order dated 11.01.2022 in challenging the virus in Section 36(1)(va). The ld AR for the assessee filed copy of the order of jurisdictional High Court has admitted a petition in the case of M/s A S Construction Vs. Union of India in order dated 11.01.2022. The ld AR for the assessee submits that in case the petitioner in M/s A S Construction Vs. Union of India is succeeded, the assessee may be allowed similar relief. 4. On the other hand, Ld. Sr -DR for the Revenue supported the order of lower authorities on both issues. On Ground No.2, the Ld. Sr DR

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for the revenue submits that once the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. (supra) has already taken a decision that no deduction is allowable for delaying in deposit of employee’s contribution on account of ESIC/PF, no such deduction is permissible as the decision of Hon’ble Apex Court with a law of the land. As per Article-141 of the Constitution of India. 5. In short rejoinder, Ld.AR of the assessee submits that in the event of allowing some relief granted by Hon’ble jurisdictional High Court in the case of M/s AS Construction (supra), the assessee may be allowed similar relief, though at this stage, he accepts that the relief claimed in Ground No.2 is against the assessee. 6. We have considered the rival submission of both the parties and have gone through the order of lower authorities carefully. So far as Ground No.1 raised by assessee is concerned, we find that merit in the submission of Ld.AR of the assessee that no disallowance of unpaid service tax liability can be made when such deduction is not claimed by assessee in his profit and loss account. Therefore, we direct the Assessing Officer to verify the fact and allow full relief to the assessee. In the result, this ground of appeal is allowed. 7. So far as Ground No.2, which relates to disallowance of deduction under section 36(1)(va) r.w.s. 43B are concerned, we find that this ground of appeal raised by assessee is covered against the assessee by the decision of Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. (supra). However, we find that the Hon’ble

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jurisdictional High Court has admitted the Special Civil Application No.270 of 2022 in the case of M/s A S Construction (supra) in challenging the Constitutional validity under provision of section 36(1)(va) with Explanation 2 and the Explanation 5 to Section 43B of the Act. Thus, at this stage the ground No.2 raised by the assessee is dismissed, however, the assessing officer is directed that in case such petition in AS Construction (supra), is succeeded in getting relief from High Court, the assessee be allowed similar relief, with this direction, the Ground No.2 is dismissed. 8. In the result, appeal of assessee is partly allowed. Order pronounced in the open court on 28/12/2023. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) [लेखा सद�य/ACCOUNTANT MEMBR] [�याियक सद�य JUDICIAL MEMBER] Surat, Dated: 28/12/2022 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. PCIT 4. DR 5. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat