LAKESHORE HOSPITAL AND RESEARCH CENTRE LIMITED,KOCHI vs. ACIT, CORPORATE CIRCLE 1(2), KOCHI

This is an Appeal by the Assessee directed against the dismissal of it’s appeal contesting rectification order under section 154 of the Income Tax Act, 1961 (the Act) dated 28.01.2022 for Assessment Year (AY) 2016-17 by the Commissioner of Income Tax (Appeals), Income Tax Department [CIT(A)] vide it’s order dated 21.11.2022.

Vide the rectification order afore-mentioned, the Revenue has amended the assessment u/s.143(3) of the Act dated 24.12.2018 for the relevant year by disallowing Rs.21,96,064 qua the employee’s contribution u/s.36(1)(va) of the Act on account of it being paid belatedly on 16.2.2016, i.e., as against the due date of 15.2.2016. Reliance is placed on binding decisions by the Hon'ble jurisdictional High CourtinCIT vs. South India Corporation Ltd. [2020] 423 ITR 158 (Ker);CIT v. Harrisons Malayalam Ltd.[2019] 414 ITR 718 (Ker);Popular Vehicles& Services P. Ltd. vs. CIT [2018] 406 ITR 150 (Ker); and CIT vs. Merchem Ltd.[2015] 378 ITR 443 ITANo. 71/Coch/ 2023 (AY 2016-17) Lakeshore Hospital and Research Centre Ltd. vs. Dy. CIT (Ker), all to the effect that employee’s contribution to the employee welfare fund is covered u/s. 36(1)(va) read with s. 2(24)(x) of the Act, and not u/s. 43B of the Act, which concerns the employer’s contribution thereto only. The assessee’s explanation of a technical snag being responsible for the one-day delay, sought to be exhibitedwith reference to the correspondence entered into with EPFO portal on 15.02.2016 and 16.02.2016 (PB pgs. 7 & 8), was found not acceptable by the Revenue as the grace period of 5 days, i.e., beginning the 16th of following month, was withdrawn by the EPFO Circular No. WSU/9(1) 2013/Settlement/35031, dated 08.01.2016.That is, the allowance of 5 daysbeyond the due date of 15th of the following month, stands withdrawn w.e.f. January, 2016, the payment for which month stands made belatedly by the assessee on 16.2.2016. Aggrieved, the assessee is in second appeal.

We have heard the parties, and perused the material on record. There is, clearly, no legal bar for effecting a rectification on the basis of a binding decision by Hon'ble jurisdictional High Court, and toward which the Revenue rightly relies on the decisionsinAsst. CIT vs. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227(SC)and KilKotagiri Tea & Coffee Estate Co. Ltd. vs. ITAT [1988] 174 ITR 579 (Ker). The same does not, however, exclude the scope for consideration of the assessee’s case, only on hearing whom a rectification u/s. 154, where prejudicial,could be in lawmade. The issue arising is the consequence of inability to pay in view of the non-acceptance of the payment by the due date due to a technical glitch, which stands established on the basis of the material on record, whereby the EPFO admits thereto, as indeed its removal on the following day, i.e., 16.2.2016, on which date, in the morning itself, i.e., prior to receipt of the revert from the said office, the assessee had made the payment, establishing once again it’s bona fides in the matter, which we clarify, though relevant, is not in issue. The time period prescribed by law presumes granting of that period. No adverse inference or action, as confirmed by Ms. Thampi, the learned counsel for the Page 2