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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
अपीलधथी की ओर से/ Appellant by : Shri Paradeep Tayal & Ors प्रत्यधथी की ओर से / Respondent by : Dr.Satyasai Rath, CIT(DR) सुनवधई की तधरीख / Date of Hearing 10.10.2023 : घोर्णध की तधरीख/Date of Pronouncement : 29.11.2023 आदेश /O R D E R
Per Shri Duvvuru RL Reddy, Judicial Member :
1. This appeal is filed by the assessee against the order of Principal Commissioner of Income Tax (PCIT], Visakhapatnam-1 vide DIN & Order No.ITBA/COM/F/17/2022-23/1051598025(1) dated 29.03.2023, arising out of assessment order passed u/s 143(3) r.w.s.143(3A) & 143(3B) of the Income Tax Act, 1961 (in short ‘Act’) dated 12.03.2021 for the Assessment Year (A.Y.) 2018-19.
Sri Seetaramanjaneya Sortex, Kakinada
Brief facts of the case are that the assessee, a firm, filed it’s return of income for the A.Y.2018-19 on 19.09.2018 admitting total income of Rs.1,02,00,389/-. The case was selected for complete scrutiny under e- assessment scheme 2019, to verify duty drawback, unsecured loan and business expenses. Accordingly, the assessment was completed u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act on 12.03.2021 by accepting the income returned. Under the powers vested with the PCIT, as per the provisions of section 263 of the Act, the assessment records for the A.Y.2018-19 were called for and the same were examined and the Ld.PCIT observed as follows :
i. As seen from P&L a/c and balance sheet of ITR, the assessee has shown Loan from bank - Nil Loan from others – Rs.11,96,85,759 Interest debited to P&L a/c Rs.94,32,456/- and no TDS is deducted. The same expenditure attracts the provision of section 40(a)(ia) of IT Act and 30% of the said expenditure will be disallowed. ii. Remitted PF employee contribution of Rs.1,57,890/- to Govt. Account after the due dates prescribed in the PF Act. Hence the same is disallowed u/s 36(1)(va) of I.T.Act. iii. As seen from Form-3CA, the assessee has remitted ESI employee contribution of Rs.1,14,111/- to Govt. Account after the due dates prescribed in the ESI Act. Hence the same is disallowed u/s 36(1)(va) of I.T Act.
Sri Seetaramanjaneya Sortex, Kakinada iv. On perusal of Form-3CD (Col.No.34a), it is seen that the assessee has deducted TDS from the following expenditure and has not deposited to Central Govt. Account. Further, it is also noticed that in Form-3CD(Col.No.34b) stated that the assessee is not required to furnish the statement of tax deducted or tax collected. Hence, the same are attracted the provision of section 40(a)(ia) of I.T.Act and 30% of the said expenditure will be disallowed.
Commission Rs.86,16,730 2. Contract Rs.4,46,16,749 3. Prof. Charges Rs.14,54,820 The Ld.PCIT held that the assessment order u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 12.03.2021 for the A.Y.2018-19 was prima facie erroneous in law and prejudicial to the interest of revenue, therefore, proposed for revision u/s 263 of the Act and issued show cause notice dated 14.03.2023 to show cause as to why the assessment should not be revised. There was no compliance from the assessee in response to the above show cause notice. Later, the assessee submitted a letter on 20.03.2023 requesting 15 days time to submit the information. Accordingly, a final show cause notice was issued on 23.03.2023, giving fresh opportunity to the assessee to submit the information. In response, the assessee submitted a letter on 27.03.2023. With regard to deduction of TDS on interest payment, the assessee submitted that interest of Rs.1,04,10,886/- debited to P&L account is against the bank loan of Rs.11,16,33,331/- from Andhra Bank and ECL Finance Limited. As per
Sri Seetaramanjaneya Sortex, Kakinada proviso of section 194A(3)(iii) of I.T.Act, TDS is not applicable on interest paid to banking company and interest of Rs.2,448/- paid to ECL finance Limited does not attract TDS provision as the interest amount does not exceed the threshold limit as specified in section 194A(3)(i)(d) of I.T.Act. In support of the same, the assessee has not furnished any documentary evidence to verify the transactions, hence, the Ld.PCIT set aside the matter to the file of the AO and directed the AO to call for the details of loan taken by the assessee and applicability of TDS provisions of the expenditure towards interest payment. With regard to late remittance of PF & ESI employee contribution, the assessee submitted that an amount of Rs.1,26,591/- towards PF employee contribution and an amount of Rs.26,684/- towards ESI employee contribution has been deposited belatedly to government account. No documentary evidences such as challan copies, ledgers were submitted in respect of PF and ESI employee contribution. Hence, the Ld.PCIT held that the belated payments aggregating to the extent of Rs.1,53,275/- are to be treated as the income of the assessee company u/s 2(24)(x) r.w.s.36(1)(va) of the Act. With regard to TDS deducted, but not deposited to Govt. Account from the expenses made towards Commission Contract and Professional
Sri Seetaramanjaneya Sortex, Kakinada charges, the assessee submitted copies of TDS deducted and deposited to Govt. Account during the F.Y.2017-18 and also stated that all the quarterly e-TDS returns Form 26Q were filed by the assessee within the due dates. To substantiate it’s claim, the assessee has not furnished any documentary evidence such as TDS challans, copy of all quarterly e-TDS returns and respective head-wise ledgers etc. The Ld.PCIT held that in the absence of documentary evidences, the same are not verified, hence, directed the AO to obtain all necessary documents of the above expenditure and examine the applicability of TDS provisions as per section 40(a)(ia) of I.T.Act. The Ld.PCIT held that the assessment passed is not only erroneous, but also prejudicial to the interest of revenue, hence set aside the assessment order u/s 143(3) r.w.s. 143(3A) & 143(3B) dated 12.03.2021 to the file of the AO for the purpose of verification of the issues of late remittance of payments made in respect of employees’ contribution towards PF and ESI as per the provision of section u/s 2(24)(x) r.w.s. 36(1)(va) and applicability of TDS provision on expenditures towards interest, commission, contract & professional charges and directed the AO to pass a suitable order giving reasonably opportunity of being heard to the assessee.
Sri Seetaramanjaneya Sortex, Kakinada
Aggrieved by the order of the Ld.PCIT, the assessee preferred an appeal before the Tribunal by raising the following grounds of appeal :
1. That the Ld.PCIT has not given opportunity of being heard virtually as order u/s 263 dated 29.03.2023 has been passed ex- parte, which is unlawful and against the principal of natural justice. 2 That the Ld.PCIT has not made proper inquiry before passing the order inspite of the fact that all the details were already available on income tax portal.
3. Further, show cause notice dated 14.03.2023 should have been initiated timely and sufficient opportunity should have been given to us to produce the required additional documentary evidence.
4. With regard to TDS not deducted on interest of INR 94,32,456/- and claim of the good office of Pr.CIT that loan from Bank is Nil and Loan from others is Rs, 11,96,85,759/-. It is humbly submitted that the details of loan of INR 11,96,85,759/- are clearly evident from the trial balance attached in our submission dated 25th Jan 2021 during the assessment proceeding under Section 143(3) of the Act. It has been clearly mentioned that the loan is secured loan obtained from Banks only. Hence, this query should not have been raised by the Pr.CIT office.
5. With regards to TDS deducted but not deposited to Government account from the expenses made towards commission, Contract and Professional Charges, It has been mentioned in Para 5.3 of the impugned order that the assessee has not furnished any documentary evidence such as TDS Challans, copy of all Quarterly e- TDS returns and respective head wise ledgers etc. It is humbly submitted that all the details are available electronically and the assessee has duly filed all the E- challans and E- returns. The learned Pr.CIT office should have verified the details from online Income Tax Portal.
6. With regard to late deposition of ESI and PF employee contribution to the Govt Account after the due dates prescribed in the respective Acts, it is humbly submitted that the EPF employee contribution of INR 1,26,591/- and ESI employee contribution of INR 26,684/- only has been deposited late to the Government account under the relevant Acts. It is to be noted that the same has been paid before due date of return under Section 139(1) of the Income Tax Act. There are judicial pronouncements of various High Courts which Sri Seetaramanjaneya Sortex, Kakinada have allowed that deduction of EPF and ESI employee contribution is allowed, if the same is paid to the Government account before due date of return under the Income Tax Act. The Assessee has relied upon those judgements since they were law of the land at the time of filing return by the assessee, So, in the assessment proceeding Id.AO has not taken any cognizance of the matter in view of various judgements, So, the order of AO was not prejudicial in the interest of 7. That the order of the Pr.CIT is against law and facts.
That the appellant craves for permission to add, delete or amend the grounds of appeal
and for granting of any consequential relief and on legal claim arising in the interest of substantial justice to avoid protracted litigation before or at the time of hearing of appeal.
9. In view of above submission, the order of Pr.CIT u/s 263 is bad in law and may please be quashed.
4. Ground No.1 to 3 and 7 to 9 are general in nature which does not require specific adjudication.
5. With regard to Ground No.6, now the law is settled after a view had been taken by Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd., in Civil Appeal No.2833 of 2016, order dated 12.10.2022. In the case on hand also, the assessee made remittances before filing the return of income u/s 139(1), but not within the due date specified by the respective PF / ESI Acts. For the sake of clarity and convenience, relevant part of the order of the Checkmate Services Pvt. Ltd.(supra) is extracted as under : “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
Sri Seetaramanjaneya Sortex, Kakinada retained, and deemed an income is treated as a deduction. Thus, it is an essential condition for deduction that such amounts are deposited on or before the due date.” Since the decision of the Hon’ble Supreme Court pronounced the correct legal position of the allowability of belated payment of PF and ESI under the provisions of the Act, we have no hesitation to come to a conclusion that the disallowance made by the AO as well as the Ld.CIT(A) needs no interference, in view of the decision of the Hon’ble Supreme Court mentioned supra. Accordingly, ground No.6 is dismissed.
With regard to ground No.4 and 5, since the Ld.PCIT has set aside the assessment order u/s 143(3) r.w.s. 143(3A) & 143(3B) dated 12.03.2021 to the file of the AO for the purpose of verification of applicability of TDS provision on expenditures towards interest, commission, contract & professional charges and directed the AO to pass a suitable order. The Ld.AR submitted that the Ld.PCIT passed the order without giving reasonable opportunity of being heard to the assessee. He, therefore pleaded to afford one more opportunity of being heard before the Ld.PCIT. Keeping in view the facts and circumstances of the case, we are inclined to remit the matter back to the file of the Ld.PCIT to give one more opportunity of being heard to the assessee. The assessee is also directed to adhere to the notices issued by the revenue authorities and Sri Seetaramanjaneya Sortex, Kakinada furnish relevant material evidences to substantiate it’s case. Accordingly, Ground No.4 and 5 are allowed for statistical purpose. 7. In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on 29th November, 2023.
Sd/- Sd/- (एस बालाकृष्णन) (दुव्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER Dated : 29.11.2023 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– Sri Seetaramanjaneya Sortex, 1-2015/A, Uppalanka, Kakinada 2. रधजस्व/The Revenue – The Principal Commissioner of Income Tax, Visakhapatnam 3. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम / DR,ITAT, Visakhapatnam 4..गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam