SHRI ASHOK KUMAR,AMRITSAR vs. INCOME TAX OFFICER WARD - 5 (1), AMRITSAR

ITA No. 18/Asr/2022 Ashok Kumar CIT(A), NFAC, Delhi 29/11/2021

ITA No. 19/Asr/2022 Kochar Sung UP Acrylic CIT(A), NFAC, Delhi 25/11/2021

Since the issues involved are common in all the above appeals and the appeals were heard together, therefore, these are being disposed off by this common order for the sake of convenience and brevity.

The grounds raised by the assessee in ITA No. 05/Asr/2022 for the A.Y. 2018-19 read as under:-

The Ld. CIT(A), National Faceless Appeal Centre, Delhi erred on facts and law in confirming the action of the AO of disallowing the amount of Rs. 13,02,609/- u/s 36(i)(va) on account of payment of employees contribution beyond the due date as prescribed under the relevant Act as the issue is covered by the judgments of the Hon'ble PStH High Court. 2. The Ld. CIT(A), National Faceless Appeal Centre, Delhi erred on facts and law in confirming the action of the AO of disallowing the amount of Rs. 13,02,609/- u/s 36(i)(va) on account of payment of employees contribution beyond the due date as prescribed under the relevant Act because the amendment by Finance Bill 2021 is prospective and not retrospective as held by the Chandigarh/ Ahmadabad bench of the ITAT and CIT(A), National Faceless Appeal Centre, Delhi in various cases.

The Ld. CIT(A), National Faceless Appeal Centre, Delhi erred on facts and law in confirming the action of the AO of disallowing the amount of Rs.13,02,609/- u/s 36(i)(va) on account of payment of employees contribution beyond the due date as prescribed under the relevant Act because the CIT(A), National Faceless Appeal Centre, Delhi has acted against the principles of judicial consistency as held by the Hon'ble Supreme Court in various cases. 4. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.

The only grievance of the assessee relates to the disallowance of Rs. 13,02,609/- made by the A.O. on account of late payments towards EPF and ESI under section 36(1)(va) of the Income Tax Act, 1961 (for short the ‘Act’), however, before furnishing the return of income under section 139(1) of the Act. When the matter was taken to the Ld. CIT(A) the said disallowance was sustained.

Now the assessee is in appeal.

The contention of the Ld. Counsel for the assessee was that the issue under consideration is squarely covered vide common order dated 20/10/2021 passed by the ITAT, Chandigarh Bench in ITA Nos.191 & 192/Chd/2021 for the assessment years 2017-18 & 2018-19 in the case of Raja Ram Vs. ITO, Yamunanagar and in the case of Sanchi Management Services Private Limited Vs. ITO, Chandigarh in ITA No. 190/Chd/2021 for the A.Y. 2018-19.

In his rival submissions, the Ld. Sr. DR strongly supported the orders of the authorities below and reiterated the observations made by the Ld. CIT(A) in the impugned order.

We have considered the submissions of both the parties and perused the material available on record. In the present cases, it is noticed that an identical issue having similar facts has already been adjudicated by the ITAT, Chandigarh Bench in the aforesaid referred to cases, wherein one of us is author of the order dated 20/10/2021. In the said order it has been held vide paras 8 to 10 in ITA Nos.191&192/Chd/2021 in case of Raja Ram Vs. ITO, Yamunanagar as under:-

I have considered the submissions of both the parties and perused the material available on record. 9. In the present cases, it is noticed that an identical issue having similar facts has already been adjudicated by the ITAT, Jodhpur Bench in the aforesaid referred to case, wherein the undersigned is author of the order dated 28.09.2021 and it has been held vide paras 7 to 10 in ITA in ITA Nos.71 & 72/Jodh/2021 as under:- “7. We have considered the submission of both the parties and perused the material available on record. 8. In the present cases, it is not in dispute that the assessees deposited the contribution of PF & ESI belated in terms of section 36(1)(va) of the Act, however, the said deposits were made prior to filing of return of income u/s 139(1) of the Act. 8.1 Identical issue with the similar facts have already been adjudicated by the various Benches of the ITAT. 8.2 In the case of HarendraNathBiswasvs DCIT Koltaka, ITA No. 186/Kol/2021 for the A.Y. 2019-20, similar issue has been decided vide order dated 16.7.2021 by the ITAT ‘B’ Bench, Kolkata. The Relevant findings have been given in para 4 of the said order, which read as under;- “4. We have heard both the parties and perused the record. First of all we do not countenance this action of the Ld. CIT(A) for the simple reason that the Explanation 5 was inserted by the Finance Act, 2021, with effect from 01.04.2021 and relevant assessment year before us is AY 2019-20. Therefore the law laid down by the Jurisdictional Hon’ble High Court will apply and since this Explanation-5 has not been made retrospectively. So we are inclined to follow the same and we reproduce the order of Hon’ble Calcutta High Court in the case of Vijayshree Ltd. supra wherein the Hon’ble Calcutta High Court has taken note of the Hon’ble Supreme Court decision in CIT vs. Alom Extrusion Ltd. reported in 390 ITR 306. The Hon’ble Calcutta High Court’s decision in Vijayshree Ltd. supra is reproduced as under: “This appeal is at the instance of the Revenue and is directed against an order dated 28th April, 2011 passed by the Income Tax Appellate Tribunal, “A” Bench, Kolkata in ITA No. 1091/Kol/2010 relating to assessment year 2006-07 by which the Tribunal dismissed the appeal preferred by the Revenue against the order of CIT(A). The only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of Employees ‘Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not.

Similar view has been taken by the ITAT Hyderabad ‘SMC” Bench in ITA No. 644/Hyd./2020 for the AY 2019-20 in the case of Salzgitter Hydraulics Private Ltd, Hyderabad vs ITO vide order dt 15.6.2021. The relevant findings given in para 2 of the said order read as under:-

On an identical issue, this Bench of the Tribunal vide order dated 12.8.2021 in the case of Mohangarh Engineers and Construction Company, Jodhpur & Others vs CPC, Banglore in ITA No. 5/Jodh/2021 and others held vide para 13 to 18 as under:-

The issue is no more res integra in light of series of decisions rendered by the Hon’ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions.

In this regard, we may refer to the initial decision of Hon’ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner & Jaipur wherein the Hon’ble High Court after extensively examining the matter and considering the various decisions of the Hon’ble Supreme Court and various other High Courts has decided the matter in favour of the assessee. In the said decision, the Hon’ble High Court was pleased to held as under:

A conjoint reading of the proviso to Section 43-B which was inserted by the Finance Act, 1987 made effective from 01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f), are omitted from the above proviso and, further more second proviso was removed by Finance Act, 2003 therefore, the deduction towards the employer's contribution, if paid, prior to due date of filing of return can be claimed by the assessee. In our view, the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income under Section 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income. It is also clear that Sec.43B starts with a notwithstanding clause & would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue

We have already observed that till this provision was brought in as the due amounts on one pretext or the other were not being deposited by the assessees though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts were not deposited. It is pertinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act.

Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act.”

The said decision has subsequently been followed in CIT vs. Jaipur VidyutVitran Nigam Ltd. (supra), CIT vs. Udaipur DugdhUtpadakSahakariSangh Ltd. (supra), and CIT vs Rajasthan State Beverages Corportation Limited (supra). In all these decisions, it has been consistently held that where the PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income under section 139(1), the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act.

We further note that though the ld. CIT(A) has not disputed the various decisions of Hon’ble Rajasthan High Court but has decided to follow the decisions rendered by the Hon’ble Delhi, Madras, Gujarat and Kerala High Courts. Given the divergent views taken by the various High Courts and in the instant case, the fact that the jurisdiction over the Assessing officer lies with the Hon’ble Rajasthan High Court, in our considered view, the ld CIT(A) ought to have considered and followed the decision of the jurisdictional Rajasthan High Court, as evident from series of decisions referred supra, as the same is binding on all the appellate authorities as well as the Assessing officer under its jurisdiction in the State of Rajasthan.

In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the addition by way of adjustment while processing the return of income u/s 143(1) amounting to Rs 4,38,530/- so made by the CPC towards the delayed deposit of the employees’s contribution towards ESI and PF though paid well before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act in view of the binding decisions of the Hon’ble Rajasthan High Court. “

Since the facts of the present cases are identical to the facts involved in the aforesaid referred to cases, therefore respectfully following the earlier orders as referred to herein above of the different Benches of the ITAT, the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI & PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted.

In the result, both the appeals of the assessees are allowed.” 10. So respectfully following the aforesaid referred to order of the Coordinate Bench of the Tribunal, the disallowances sustained by the Ld. CIT(A) are deleted.

Since the facts involved in the present case are identical to the facts involved in the case of Raja Ram Vs. ITO, Yamunanagar (supra). So respectfully following the aforesaid referred to order of the Coordinate Bench of the Tribunal, the disallowances sustained by the Ld. CIT(A) are deleted.

In other appeals also the facts are identical to the facts involved, in ITA No. 05/Asr/2022 for the A.Y. 2018-19, the only difference is in the amount of disallowance made by the A.O. and sustained by the Ld. CIT(A). Therefore our findings given in the former part of this order shall apply mutatis mutandis for other appeals also.

In the result, the appeals of the assessees are allowed.

The Appellant 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Amritsar 6. Guard File