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Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
ORDER PER YOGESH KUMAR U.S., JM: This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-29 New Delhi [“Ld. CIT(A)”, for short], dated 22.12.2022 for Assessment Year 2019-20. Grounds taken in this appeal are as under:
GD Foods and Manufacturing (India) Pvt. Ltd. vs. DCIT
“1. That the order of the Ld. CIT (A) dated 22.12.2022 passed in respect of the appeal emanating from the intimation issued to the assessee u/s 143(1) of the Income tax Act, 1961 (here in after referred to as the "Act") dated 09.07.2020 is bad in law and on facts.
That the Id. CIT(A) has erred in law and on facts by confirming the disallowance of Rs 19,37,001/- made u/s 36(1)(va) read with section 43B of the Act on account of late payment of employee contribution towards EPF and ESIC beyond the due date specified in the respective Acts, but before the due date as defined under section 139 of the Act, under the intimation /order passed u/s 143(1) of the Act dated 09.07.2020.
That the ld. CIT(A) was unwavering in accepting the plea of the assessee that the deposit was delayed by 1 day only due to the due date under the respective Acts falling either on Sunday or Gazzetted Holiday and thus, the said delay is covered by the section 10 of the General Clauses Act, 1977 as well as the section 4 of the Limitation Act, 1963 as per which if any due date falls on a day when any Court or Income Tax Office is closed then such due date shall be the next working day when the Court or the Income tax Office reopens.
3.1 That the ld. CIT(A) has also failed to appreciate the various CBDT Circulars and decisions cited by the assessee in support of the plea that if the assessee files a return or deposits a tax on the next working day following a holiday or Sunday then such return or tax shall have to be considered as filed or deposited, as the case may be, within the statutory time limit.
4. That the ld. CIT(A) has also failed to appreciate the plea of the assessee that due date for payment of EPF is governed by the clause (1) of Paragraph 38 of Employers Provident Fund Scheme, 1952 according to which the Employer's liability to deduct employee's contribution arises before paying wages to employees (and not as and when wages are earned by employees) in respect of any period or part of period. Thus, the relevant month for determining the due date ought to be considered as "Wage disbursal month and not the month or period to which the wages relate.
5. That the ld. CIT(A) has erred in law and on facts in upholding the action of the ld. ADIT, CPC, Bangalore under section 143(1)(a) of the Act by confirming the disallowance of late contribution of the EPF and ESIC without appreciating that the scope of section 143(1)(a) of the Act is a limited one which is not for a debatable adjustment or something which is controversial.
GD Foods and Manufacturing (India) Pvt. Ltd. vs. DCIT
5.1 The Id. CIT(A) has also failed to appreciate that at the time of processing of the return of income of the assessee u/s 143(1) of the Act, the decisions of the Hon'ble Supreme Court and jurisdictional Delhi High Court and several other High Courts were in favour of the assessee on the issue that if the employee contribution towards EPF and ESIC were deposited after the due dates mentioned in the respective Acts but before the filing of return of income u/s 139(1) of the Act, the said contribution would not be disallowed u/s 36(1)(va) r.ws 43B of the Act. Thus, the action of the Id. CIT(A) of upholding the disallowance which was prima-facie debatable and was made u/s 143(1)(a) of the Act, is not justified on the basis of subsequent decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. in Civil Appeal No. 2833/2016.
6. That the ld. CIT(A) has erred in law and on facts by not appreciating the principle of lex prospicit, non respicit meaning as a general rule, laws shall apply only prospectively, unless there is a specific mention that they are to be applied retrospectively.
7. That the Id. CIT(A) has erred in law and on facts in confirming the addition of the profit on sale of fixed asset of Rs 2,066/- without appreciating the fact that the whole block of fixed assets was not disposed off during the year under assessment.
8. That the order passed by the ld. CIT(A) is against the principles of natural justice.
9. That the appellant craves leave to add, alter, amend, substitute, delete and modify any or all the grounds of appeal
, which are without prejudice to one another, before or at the time of hearing of the appeal.”
3. Brief facts of the case are that, the assessee company received an intimation from ADIT, CPC, Bangalore, (hereinafter referred as A.O.) dated 09/07/2020 u/s 143(1) of the Act, wherein the business income has been increased by Rs. 26,44,255/- on account of disallowance of late payment of PF& ESI Rs. 26,42,189/- (Employee’s Contribution) and profit on sale of fixed asset of Rs. 2,066/-. Aggrieved by intimation dated 09/07/2020, the assessee preferred an Appeal before the CIT(A). The ld. CIT(A) vide order dated 22/12/2022 upheld the disallowance on account of late payment of ESI of Rs. Page 3 of 8
GD Foods and Manufacturing (India) Pvt. Ltd. vs. DCIT 6,64,200/- and PF of Rs. 19,77,986/- of Employees Contribution. Further, in so far as addition of Rs. 2,066/- on account of profit of sale of fixed asset the same has been remanded to the file of the A.O. for adjudicating the issue afresh. Aggrieved by the order of the ld. CIT(A) the assessee preferred the present appeal on the grounds mentioned above.
The Ld. Counsel for the assessee fairly submitted that the issue regarding allowabilty of late payment of ESIC/EPF contribution belatedly as prescribed under the respective ESI & PF Act has been settled by the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT-1 in Civil Appeal No. 2833 of 2016, vide order dated 12/10/2022 held that delayed deposit of the contribution EPF & ESIC beyond the stipulated period prescribed in the respective Acts are not allowable.
The Ld. Counsel submitted that the ld. CIT(A) committed an error in not accepting the plea of the assessee that the deposit of ESI contribution for the month of June and July, 2018 of Rs. 3,89,086/- and EPF contribution of Rs. 15,47,915/- for the month of June and July, 2018 was delayed by one day, wherein the due date under the respective Acts falling either on Sunday or gazetted holiday therefore, the same is allowable. Further submitted that, the said delay is covered/condonable in view of Section 10 of General Clauses Act 1977 as well as Section 4 of the Limitation Act, 1963. The Ld. Counsel further submitted that except the said additions, other additions/disallowance made
GD Foods and Manufacturing (India) Pvt. Ltd. vs. DCIT by the A.O. which has been upheld by the CIT(A) are not pressed in the present Appeal in view of the ratio laid down in the case of Checkmate Services (supra).
The Ld. Counsel for the assessee taken us through the provisions of General Clauses Act and also various judicial pronouncements and submitted that the above mentioned disallowance deserves to be deleted.
Per contra, the Ld. Departmental Representative relied on the order of the CIT(A).
We have heard both the parties and perused the material available on record. The only issue remains for consideration in the present Appeal that whether the contributions of ESIC and EPF made by the Assessee with one day delay is allowable when the due date for payment of ESIC and EPF contributions prescribed in the respective acts of ESI & PF falls on Sunday or gazetted holiday?.
It is not in dispute that the assessee had deposited ESI & EPF with one day delay and it is also not in dispute that the due date under the respective Acts falling either on Sunday or gazetted holiday. The details of the payments are as under:-
GD Foods and Manufacturing (India) Pvt. Ltd. vs. DCIT ESI for AY 2019-20
Month of Amount of Due date of payment Actual date of Remarks deduction pertain employee payment to/Bok Entry date contribution (amount Rs.) June 2018 1,94,673/- 15.07.2018 16.07.2018 1 Day due to (Sunday) previous day- Holiday July 2018 1,94,413/- 15.08.2018 16.08.2018 1 Day due to (Holiday previous day- Holiday EPF for AY 2019-20
Month of Amount of Due date of payment Actual date of Remarks deduction pertain employee payment to/Bok Entry date contribution (amount Rs.) June 2018 780547 15.07.2018 16.07.2018 1 Day due to (Sunday) previous day- Holiday July 2018 767368 15.08.2018 16.06.2018 1 Day due to (Holiday previous day- Holiday
The Ld. Ld. Departmental Representative, the Revenue neither disputed the above facts nor produced any material contrary to the above data givgen by the Assessee.
The Section 10 of the General Clause Act, 1897 reads as under:-
“Section 10 in The General Clauses Act, 1897
10 Computation of time. —
(1) Where, by any 19 [Central Act] or Regulation made after the commencement of this Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or GD Foods and Manufacturing (India) Pvt. Ltd. vs. DCIT proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open: Provided that nothing in this section shall apply to any act or proceeding to which the Indian Limitation Act, 1877 20, applies .
2). This Section applies also to all 19 [Central Acts] and Regulations made on or after the fourteenth day of January, 1887.”
Thus, in our opinion, considering the fact that the due date for depositing the contribution of ESIC & EPF falls on Sunday and gazetted holiday, the said delay of one day deserves to be condoned as per Section 10 of General Clauses Act. Further it is also observed that the assessee has no intention not to deposit the contribution of ESI & EPF well within the time, depositing the contribution very next day of Holiday proves the bona-fide of the Assessee. Therefore, in our opinion, the authorities have committed error in disallowing the deposit made with one day delay where the due date under respective acts falls either on Sunday or on gazetted holiday.
In view of the above discussion, we allow Ground No. 3 of the assessee and delete the disallowance of delay deposit of one day on account of public holiday/Sunday on ESIC of Rs. 3,89,086/- and EPF of Rs. 15,47,915/-.
Since the assessee has restricted Appeal to Ground No. 3 and the to the amount mentioned above, the Ground No. 1,2, 4 to 9 are dismissed as not pressed.
GD Foods and Manufacturing (India) Pvt. Ltd. vs. DCIT