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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU R L REDDY, HON’BLE & SHRI S. BALAKRISHNAN, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM (Through web-based video conferencing platform) BEFORE SHRI DUVVURU R L REDDY, HON’BLE JUDICIAL MEMBER & SHRI S. BALAKRISHNAN, HON'BLE ACCOUNTANT MEMBER I.T.A. Nos. 187 & 188/VIZ/2021 (Asst. Years : 2018-19 & 2019-20)
M/s. Cosmic Power Systems Vs. DCIT, Circle-1(1), Pvt. Ltd., D.No. 47-9-39/17, Visakhapatnam. Flat No.3C, Dwaraka Nagar, Visakhapatnam.
PAN No. AABCC 4468 Q (Appellant) (Respondent)
Assessee by : Shri G.V.N. Hari, Advocate. Department by : Shri S.P.G. Kudaliar, Sr.DR Date of hearing : 03/02/2022. Date of pronouncement : 16/02/2022.
O R D E R PER S. BALAKRISHNAN, AM
These appeals are filed by the assessee against the orders of Commissioner of Income Tax (Appeals) [for short, “CIT(A)”], National Faceless Appeal Centre in order Nos.ITBA/NFAC/S/ 250/2021-22/1035749841(1) and ITBA/NFAC/S/250/2021-22/ 1035749902(1), both dated 21/09/2021 for the A.Ys. 2018-19 & 2019-20. Since facts and issues are common in both the appeals, clubbed and heard together and disposed of by way of this consolidated order.
2 ITA No. 187 & 188/VIZ/2021 (M/s. Cosmic Power systems Pvt. Ltd.) ITA No.187/VIZ/2021
The assessee has raied the following grounds of appeal:-
Sl.No. Grounds of appeal Tax effect relating to each ground of appeal 1 The order of the ld.CIT(A) is contrary to the --- facts and also the law applicable to the facts of the case. 2 The ld.CIT(A) ought to have held that the --- adjustment of Rs. 5,61,729/- is outside and scope of intimation u/sec. 143(1) of the Act 3 Without prejudice to the above, the ld.CIT(A) --- is not justified in sustaining the adjustment of a total sum of Rs. 5,61,729/- made in the intimation u/sec. 143(1) of the Act towards disallowance of delayed remittance of Employees’ contribution to PF and ESTI 4 Any other grounds may be urged at the time --- of hearing. Total tax effect 1,40,433/-
In this case, the assessee filed its return of income on 28/03/2019 declaring total income of Rs. 40,96,440/-. The return was processed u/sec. 143(1) of the Act by CPC on 16/10/2019 by disallowing an amount of Rs. 5,61,729/- u/sec. 36(1)(va) of the Act on account of delay in payment of employees’ contribution to PF & ESI under the respective Acts.
Aggrieved by the intimation u/sec. 143(1) of the Act, the assessee filed an appeal before the CIT(A) which was migrated to the NFAC in terms of notification No.76/2020 in S.O.No.3296(E), dated 25/09/2020 from CBDT. The appeal before the ld.CIT(A) was made with a delay of 28 days, which was condoned. Before the ld.CIT(A), the assessee reiterated that disallowance of employees
3 ITA No. 187 & 188/VIZ/2021 (M/s. Cosmic Power systems Pvt. Ltd.) share of contribution of PF on account of late payment, even though the same were paid before the end of the previous year in most of the instances and in any case all were paid before the due date of filling the return of income u/s 139(1). The ld.CIT(A) after considering the submissions of the assessee and relying on the amendment made to section 43B as well as section 36(1)(va) by insertion of explanations to those sections by the Finance Act, 2021, dismissed the appeal filed by the assessee.
Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before this Tribunal.
Ld.AR argued that debatable issues cannot be permitted to be made adjustments u/sec. 143(1) of the Act.
Ld.DR accepted the fact that the payments were made on or before due date of filing of return u/s 139(1).
We have heard both the parties and perused the material placed on record. In the instant case, there is no dispute that the return was processed u/s 143(1) and there was no scrutiny assessment made u/s 143(3) of the Act. It is settled issue that no debatable issues are permitted to be made adjustments u/s 143(1) of the Act. In the instant case, what was added in the intimation u/s 143(1) was the employees’ contribution to PF and ESI. Hon’ble Madras High Court in the case of Redington (India) Ltd. held that employees contribution to PF and ESI is also allowable deduction, if the same, is paid before the due date for filing the return of income. This Tribunal in the case of Andhra Trade Development Corporation in I.T.A. No.434/Viz/2019, dated 05.05.2021 held that debatable issues are not permitted to be made adjustments while processing
4 ITA No. 187 & 188/VIZ/2021 (M/s. Cosmic Power systems Pvt. Ltd.) the return of income u/s 143(1) of the Act. For the sake of clarity and convenience, we extract para No.6 of the order in Andhra Trade Development Corporation which reads as under:-
“We have heard both the parties, perused the material placed on record. As per the adjustments made by the CPC, Bangalore to the extent of Rs. 7,31,016/- u/sec. 143(1)(a) is an issue which required to be verified with the relevant documents. Therefore, the adjustments are not within the scope provided u/sec. 143(1) (a) of the Act. As per proviso to section 143(1)(a), the AO is required to give an intimation before making such adjustments, either in writing or in electronic mode and the department has not demonstrated that it has given an intimation to the assessee proposing to make such adjustments. Therefore, the adjustment made by the CPC u/sec. 143(1)(a) is beyond the scope of the said section, hence, not permissible and accordingly deleted.” Even otherwise, the ld. CIT(A) has followed the decision of this Tribunal while allowing the set off of losses and the department did not place any other decision of the superior Court to controvert the decision relied upon by the ld. CIT(A) cited supra. Therefore, the issue is squarely covered by the decision of this Tribunal against the Revenue, hence, we find no reason to interfere with the order of ld. CIT(A) and dismiss the appeal of the Revenue.”
Since, the facts are identical respectfully following the view taken by this Tribunal, we hold that the addition made by the CPC u/s 143(1) is unsustainable, accordingly deleted. The appeal of the assessee is allowed.
On merits also, this Tribunal has consistently viewed that the employees’ contribution to PF and ESI is allowable deduction if the same is paid before the due date of filing the return of income. In the case of APEPDCL in I.T.A.No.609/V/2014 dated 29.07.2016, the coordinate bench of ITAT, Visakhapatnam after considering the decision of Hon’ble Karnataka High Court in the case of Essae Teraoka (P) Ltd. Vs. DCIT 366 ITR 408 and the decision of
5 ITA No. 187 & 188/VIZ/2021 (M/s. Cosmic Power systems Pvt. Ltd.) coordinate bench of ITAT Hyderabad in the case of Tetra Soft (India) Pvt. Ltd. Vs. ACIT (2015) 40 ITR (Trib) 470 and also taking support from the decision of Hon’ble Supreme Court in the case of CIT Vs. M/s Vegetables Products Ltd., 88 ITR 192, decided the issue in favour of the assessee.
Therefore, respectfully following the view taken by the Tribunal in the above cases, we hold that on merits also, the assessee succeeds in appeal. Accordingly, appeal of the assessee relating to this issue is allowed.
Since the appeal is allowed based on merits, ground No.2 is not adjudicated, therefore, same is dismissed as infructuous. Thus, the appeal filed by the assessee is partly allowed.
ITA No.188/VIZ/2021
The facts of this case are similar to the facts of ITA No.187/VIZ/2021. Therefore, the order passed in ITA No.187/VIZ/2021 shall apply mutatis mutandis to this appeal also.
In the result, both the appeals filed by the assessee are partly allowed.
Order Pronounced in open Court on this 16th day of Feb., 2022.
sd/- sd/- (DUVVURU R L REDDY) (S. BALAKRISHNAN) Judicial Member Accountant Member
Dated: 16th Feb., 2022.
6 ITA No. 187 & 188/VIZ/2021 (M/s. Cosmic Power systems Pvt. Ltd.) vr/- Copy to: 1. The Assessee - M/s. Cosmic Power Systems Pvt. Ltd., D.No. 47-9-39/17, Flat No.3C, Dwaraka Nagar, Visakhapatnam. 2. The Revenue – DCIT, Circle-1(1), Visakhapatnam. 3. The CIT(A), NFAC, Delhi. 4. The D.R., Visakhapatnam. 5. Guard file. By order
(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.