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Income Tax Appellate Tribunal, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE
आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM श्री दुव्वूरु आर एल रेड्डी, न्याधयक सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER आयकर अपील सं./I.T.A.No.258/Viz/2021 (ननधधारण वर्ा / Assessment Year : 2018-19) Rajam Polypacks Limited Vs. Income Tax Officer Ponduru Road Ward-2 Rajam Srikakulam [PAN : AABCR0489G] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri YA Rao, AR प्रत्यधथी की ओर से / Respondent by : Shri ON Hari Prasad Rao, DR सुनवधई की तधरीख / Date of Hearing : 16.11.2022 घोर्णध की तधरीख/Date of Pronouncement : 16.12.2022 आदेश /O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in DIN & Order No.ITBA/NFAC/S/250/2021-22/ 1036317185(1) dated 12.10.2021 for the Assessment Year (A.Y.) 2018- 19. 2. The assessee raised the following grounds of appeal : 1. The order passed by learned Commissioner (Appeals), dated 12.10.2021 confirming the disallowance of Rs.56,448/- and Rs.2,53,947/- by invoking provisions of sec.36(1a) r.w.s. 43(b) of I.T.Act is illegal and unjust after relying on the amendment brought by Finance Act, 2021 to Sec.36(5A) r.w.s. (43b).
2 I.T.A. No.258/Viz/2021, A.Y. 2018-19 Rajam Polypacks (Ltd.)., Rajam
The learned Commissioner (Appeals) is not justified in not considering ground number 6, wherein the Appellant claimed that book profits liable to tax u/s 115JB stood at Nil whereas the assessing officer determined book profits at Rs.3,71,965/-. 3. The learned Commissioner (Appeals) is not justified in not relying on the information furnished by Tax Auditor in Form 3CD, since the tax Auditor has furnished complete details of remittance of amount collected from employees before the due date for filing I.T.Return dated 14.10.2018. 4. The learned Commissioner (Appeals) overlooked the fact that the order under sec.143(1) was passed on 25.12.2019, whereas the amendment brought by Finance Act 2021 was not in existence on the date of passing the order to conclude that there exists a prima facie mistake in the return submitted. 5. The authorities below are not justified in disallowance of claims made which were remitted before due date for filing return, which was a statutory requirement on the date of passing the order. 6. The learned Commissioner (Appeals) is not justified in not considering the decision rendered by Delhi High Court and ITAT Vizag in ACIT-3(1), VSKP Vs. Miracle Software Systems, Visakhapatnam ITA 150/VIZ/2019 and ACIT-5(1), VSKP Vs UNITED FREIGHT CARRIERS, VSKP ITA NO.484/VIZ/2018. 7. The learned Commissioner (Appeals) in applying the decision of Gujarat High Court in CIT Vs. Gujarat Road Transport Corporation (366 ITR 170) and decision of S.C. in CIT Vs. Atom Exclusions Limited (319 ITR.) wherein the facts considered therein are different. 8. Without prejudice to ground raised already, the authorities below are not justified in making adjustment in the order u/s 143(1) in view of favourable decision available on such disputed disallowance at the relevant time, which is not permissible as per provisions of I.T.Act. 9. For these and other grounds that may be urged at the time of hearing the Appellant prays for directions to authorities below to allow the claims made pertaining to remittance of PF.
3 I.T.A. No.258/Viz/2021, A.Y. 2018-19 Rajam Polypacks (Ltd.)., Rajam 3. Ground No.2 is not pressed by the assessee during the appeal hearing, hence dismissed as not pressed.
All grounds of appeal except ground No.2 are related to disallowance of PF which was remitted before the due date for filing return of income. Brief facts of the case are that the assessee filed it’s return of income declaring nil income after claiming set off of unabsorbed business losses and unabsorbed depreciation losses. The assessee also furnished certificate u/s 115JB of Income Tax Act, 1961 (in short ‘Act’) after claiming set off of earlier losses. The Assessing Officer (AO) / CPC considered the following disallowances, while arriving at taxable income at Rs.14,17,831/-, the details of which are given below :
a. Disallowance of penalty levied for default 1,08,461 under PF Act b. Delay in remittance PF/ESI etc (As per tax 56,448 audit report 3,10,995-less disallowance considered in total income statement Rs.2,53,947 c. Income under the head other sources 2,957 representing deviation in closing stock TOTAL 1,67,166 5. Aggrieved by the order of the AO, the assessee preferred appeal before the CIT(A). The assessee filed written submissions before the Ld.CIT(A) and submitted that the assessee has already considered disallowance of Rs.1,08,461/- while computing the income before set off,
4 I.T.A. No.258/Viz/2021, A.Y. 2018-19 Rajam Polypacks (Ltd.)., Rajam but the authorities failed to notice and further disallowance of Rs.1,08,461/- is unwarranted. The assessee further submitted that the assessee by mistake considered disallowance of Rs.2,53,947/- on account of delay in remittance of PF, even though there is no delay in the remittance of ESI and PF since they were remitted before the due date for filing of return of income and as such disallowance of Rs.2,53,947/- is unwarranted. Even the disallowance of Rs.56,448/- is also unwarranted since the Act has been amended whereby disallowance on account of delay in remittance need not be considered if the delayed amounts are remitted before the due date for filing the return of income. The assessee further submitted that a sum of Rs.2,957/- representing deviation in closing stock was already considered in the total income while arriving at income before set off at Rs.40,16,258/-. The assessee further submitted that the disallowances were considered by CPC due to mistakes committed by the assessee while uploading the return of income. The assessee submitted that credit for TCS of Rs.18,200/- was claimed in the return submitted (even though shown in the form 26AS) was rejected merely because the assessee included the amount of TCS under the head credit for TDS. After careful examination of the written submissions made by the assessee, the Ld.CIT(A) directed the AO to verify the
5 I.T.A. No.258/Viz/2021, A.Y. 2018-19 Rajam Polypacks (Ltd.)., Rajam assessee’s claim from record with regard to disallowance of claim of PF and allow as per law, if found to be correct and accordingly allowed for statistical purpose. The Ld.CIT(A) relied on the amendment brought by Finance Act 2021 to sec.36(5A) r.w.s.43B and confirmed the disallowance of Rs.2,53,947/- made by the AO.
Aggrieved by the order of the Ld.CIT(A) the assessee preferred an appeal before the Tribunal and reiterated the submissions made before the Ld.CIT(A). The Ld.AR pleaded to set aside the order passed by the Ld.CIT(A) and allow the appeal of the assessee.
On the other hand, the Ld.DR relied on the latest judgement of Hon’ble Supreme Court in the case of Checkmate Services Private Limited (supra) and submitted that the lower authorities have rightly disallowed the payments made belatedly as per the respective Acts. He further submitted that the Employees Contribution to PF is allowed as deduction, if the same is deposited on or before the due date specified under the provisions of Provident Fund Act. He further submitted that since the assessee has not deposited the contribution to respective fund account on the date as prescribed in Explanation to section 36(1)(va) of the Act, the disallowance made by the AO was just, proper and reasonable,
6 I.T.A. No.258/Viz/2021, A.Y. 2018-19 Rajam Polypacks (Ltd.)., Rajam therefore, submitted that the Ld.CIT(A) rightly confirmed the disallowance made by the AO, hence the addition is to be sustained.
I have heard both the parties and perused the material placed on record. It is apparent from records that the assessee has not deposited the employee contributions of EPF and ESI to respective fund account before the due date specified under the provisions of respective Acts, but deposited the same before the due date of filing of return of income u/s 139(1) of the Income Tax Act, 1961. Hon’ble Supreme Court in it’s latest judgement in the case of Checkmate Services Private Limited, Civil Appeal No.2833 of 2016 dated 2nd October 2022, held that delayed payment of employee contributions of PF / ESI are no longer available for deduction u/s 43B and should suffer disallowance u/s 36(1)(va). Hence, the above mentioned case law is no longer valid. For the sake of clarity and convenience, relevant part of the order of the Hon’ble Supreme Court is extracted as under : “54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer’s obligation to deposit the amounts retained by it or deducted by it from the employee’s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non- obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as
7 I.T.A. No.258/Viz/2021, A.Y. 2018-19 Rajam Polypacks (Ltd.)., Rajam deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or before the due date as a condition for deduction. 55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.” Respectfully, following the ratio laid down by the Hon’ble Supreme Court, I do not find any reason to interfere with the order passed by the Ld.CIT(A) and accordingly, dismiss the appeal of the assessee.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 16th December, 2022.
Sd/- (दुव्वूरु आर.एल रेड्डी) (DUVVURU RL REDDY) JUDICIAL MEMBER Dated :16.12.2022 L.Rama, SPS
8 I.T.A. No.258/Viz/2021, A.Y. 2018-19 Rajam Polypacks (Ltd.)., Rajam आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– Rajam Polypacks Limited, Ponduru Road, Rajam 2. रधजस्व/The Revenue – The Income Tax Officer, Ward-2, Srikakulam 3. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi 4. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम DR,ITAT, / Visakhapatnam 5 गधर्ा फ़धईल / Guard file . आदेशधनुसधर / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam