SONIA CHAWLA,FARIDABAD vs. ITO,WARD-2(4), FARIDABAD

PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi (‘CIT(A)’ in short) dated 12.01.2023 arising from the rectification order dated 13.11.2019 passed by the Assessing Officer (AO) under Section 154 of the Income Tax Act, 1961 (the Act) concerning AY 2018-19.

5. The assessee preferred appeal before the CIT(A) against the proposed adjustment. The CIT(A) also denied the relief in the light of judgment of Hon’ble Supreme Court in the case of Check Mate Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC).

6. Aggrieved by the first appellate order, the assessee is in appeal before the Tribunal.

EMPLOYEES STATE INSURANCE (EMPLOYEE SHARE)

S.No. Month Actual Date The ESI Amount Paid

1. April, 2017 26.05.2017 37718 2 May, 2017 03.07.2017 42701

3. June, 2017 12.08.2017 47395

4. July, 2017 07.09.2017 46734

5. August, 2017 21.09.2017 52520

6. September, 2017 10.11.2017 51108

7. November, 2017 04.01.2018 45227

8. December, 2017 19.09.2018 45733

9. January, 2018 23.02.2018 55297

10. February, 2018 16.03.2018 53988

11. March, 2018 17.05.2018 49441

Total 527862 PROVIDENT FUND (EMPLOYEE SHARE)

Month Actual The PF Amount S.No. Date Paid

3. April, 2017 15.06.2017 37442

7. May, 2017 03.07.2017 16806

8. May, 2017 12.07.2017 32421

10. May, 2017 03.07.2017 2066

11. June, 2017 16.04.2018 131431

12. June, 2017 17.07.2017 1674

2377748 Total

Identical issue cropped up in the case of the Sentinel 9. Consultants P. Ltd. (supra). The relevant observation of the Co- ordinate Bench in the matter is reproduced hereunder:

9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees’ contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy. 9.1 We notice at the outset that an opportunity was given via electronic platform of the deptt. for the proposed adjustments and in the absence of e-response, the adjustments were carried out the CPC-Bengluru and intimation was issued enhancing the assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees’ contribution to PF/ESIC in the light of the judgment rendered by the Hon’ble Supreme Court in Checkmate Pvt. Ltd. vs. CIT, (2022) 143 taxmann.com 178 (SC). The contention of the Assessee that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co- ordinate bench in the case of Weather Comfort Engineers Private Limited vs. ACIT-CPC order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e-response. 9.2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1)(va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of the assessee. Thus, in view of such mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon’ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. Such view also draws support from the observations made in recent judgment of the Hon’ble Supreme Court in the case of Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit. 9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal). This aspect has not been found to be examined by the Assessing Officer or CIT(A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.

10. As regards the justifications advanced on behalf of the assessee towards improper disallowances under S. 43B and 40(a)(ia) in respect of service tax liability and non-deduction of TDS on interest etc. we are not in a position to express any view in the absence of requisite documentary evidences. These issues are also restored to the file of AO. The assessee shall be at liberty to adduce all legal and factual arguments before the Assessing Officer for logical conclusion in the matter. The AO shall determine the issues involved in accordance with law after giving proper opportunity.

11. Hence, in terms of such observations, the intimations for both Assessment Years 2018-19 and 2019-20 are set aside and the issues in appeal are restored back to the file of the Assessing Officer for its fresh determination in accordance with law.