BALWAN SINGH,SONEPAT V. ITO,WARD-1 , SONEPAT

ITA 5393/DEL/2024

AI Insights

The case involves Balwan Singh, a service provider engaged in supplying manpower to various companies, who appealed against the addition of Rs.42,14,490 to his income on account of delayed payments to ESI and EPF contributions. The Centralized Processing Centre (CPC) initially made this addition under Section 143(1) of the Income-Tax Act, 1961, citing delays in the deposit of employee contributions to ESI and EPF. The Commissioner of Income Tax (Appeals) upheld this decision, leading to the current appeal before the ITAT. The ITAT, referencing a similar case and judicial precedents, decided to restore the issue to the Assessing Officer for a fresh examination, emphasizing the need to consider the actual date of salary disbursement for determining the due date of such contributions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312718 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2019-2020
• Other Referred Cases: Sh. Narender Singh Vs. ITO, Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-1, Kanoi Papers & Industries Ltd. Vs. Assistant Commissioner of Income Tax, Sai Computers Ltd. Vs. Assistant Director of Income Tax
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT KUMAR CHAUDHARY
• Assessee Lawyers: AKSHAT SHARMA
• Keywords: Set aside; Opportunity of being heard; Principle of natural justice

Judgement Text

" INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 5393/DEL/2024 Assessment Year: 2019-20 Balwan Singh, House No. 1338/14, near Neelam Mata Mandir, New Brahaman Colony, Sonepat 131001, Haryana PAN No. EVMPS7837C Vs. Income Tax Officer, Ward-1, Sonepat (Appellant) (Respondent) O R D E R PER VIMAL KUMAR, JUDICIAL MEMBER: The appeal filed by appellant/assessee is against order dated 19.09.2024 of the Learned Commissioner of Income Tax (Appeals), Mysore (hereinafter referred as “Ld. CIT(A)) arising from order dated 12.03.2020 passed by the CPC, Bangaluru (hereinafter referred as “Ld. AO”) under Section 143(1) of the Income-Tax Act, 1961 Assessee by: Shri Akshat Sharma, Adv. Department by: Shri Ravikant Kumar Chaudhary, Sr. DR Date of Hearing: 29.04.2025 Date of pronouncement: 29.04.2025 ITA No.5393/Del/2024 2 (hereinafter referred as “the Act”) for assessment year 2019-20. 2. Brief facts of the case are that assessee is doing business of supply of men power to the various companies as per the requirement of the customers. He filed return of income on 31.10.2019 along with audit report suss 44AB of the Act. The assessee declared income of Rs.7,96,730/-. The assessee being service provider receives payments from the customers and thereby complied with requirement of the law such as Service Tax, ESI and PPF etc. The Ld. AO (CPC) issued notice under Section 143(1) of the Act to the assessee pointing out delay in payments of ESI and PF. The CPC vide order dated 12.03.2020, made addition of Rs.42,14,490/- on account of delay in deposit of contribution to ESI and EPF of employees. 3. Against order dated 12.03.2020, appellant/assessee preferred appeal before Ld. CIT(A) which was dismissed vide order dated 19.09.2024. ITA No.5393/Del/2024 3 4. Learned Authorised Representative for appellant/assessee submitted that Ld. CIT(A) erred in confirming addition of Rs.42,14,490/- on account of employees contribution to ESI and EPF and that too by recording in correct facts and findings without observing the principles of natural justice. Reliance was placed on order dated 25.04.2025 of ITAT, Delhi in ITA No.136/Del/2023 titled as “Sh. Narender Singh Vs. ITO.” 5. Learned Authorised Representative for the Revenue relied on impugned orders. 6. From examination of record in light of aforesaid rival contentions that appellant/assessee is doing business of supply of men power to the various companies as per the requirement of the customers. He filed return of income on 31.10.2019 along with audit report suss 44AB of the Act. The assessee declared income of Rs.7,96,730/-. The assessee being service provider receives payments from the customers and thereby complied with requirement of the law such as Service Tax, ESI and PPF etc. The ITA No.5393/Del/2024 4 assessee had deposited contribution as early as possible after receiving from the customers as the amount of the contributions was very high as compared to the income of the assessee, hence, it is not impossible to pay on his own account. Moreover, the assessee tried best to deposit the payments but it was delayed on the part of the customers who have delayed the payments. Appellant/assessee also furnished details of deposited PPF/ESI of employee’s contribution of Rs.42,14,490/- mentioning complete data as due date of payment, actual date of payment, amount paid etc. 7. The issue is disallowance of assessee’s claim of deduction of Rs.42,14,490/- representing delayed payment of employees contribution to ESI and EPF. 8. A Co-ordinate Bench of the ITAT, Delhi in ITA No.136/Del/2023 titled as “Narender Singh, Gurgaon vs. ITO, Ward-3(1), Gurugram” decided on 25.04.2025 observed as under: ITA No.5393/Del/2024 5 “4. The issue arising for consideration is, disallowance of assessee’s claim of deduction of Rs.41,67,682/- representing delayed payment of employees’ contribution to Employees’ State Insurance (ESI) and Provident Fund (PF). 5. Briefly the facts are, while processing the return of income filed by the assessee for the impugned assessment year, the Centralized Processing Centre (CPC) noticed that employees’ contributions to PF and ESI were not paid within the due date as provided under Explanation -1 to section 36(1)(va) of the Incometax Act, 1961 (in short ‘the Act’). Accordingly, the deduction claimed was disallowed. Assessee contested the aforesaid disallowance before the first appellate authority. However, following the decision of the Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-1 [2022] 143 taxmann.com 178 (SC), learned first appellate authority sustained the disallowance. 6. We have heard learned Departmental Representative and perused the materials on record. Undisputedly, the assessee has paid employees’ contribution to ESI and PF beyond the due date prescribed in the relevant Acts governing such payments. Therefore, as per the ratio laid down by the Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. (supra), on first principle, the deduction in respect of such payment cannot be allowed. However, the Coordinate Bench in case of Sh. Narender Singh Narwal Vs. Asstt. Director of Income Tax, in ITA No. 3829/Del/2023 for AY: 2020-21, has held that the due date in terms of Explanation 1 to section 36(1)(va) has to be reckoned from the actual date of disbursement of ITA No.5393/Del/2024 6 salary irrespective of the month to which such salary relates. The observations of the Coordinate Bench are as under: “3. We have heard the parties and perused the materials on record. Briefly the facts are, while processing the return of income filed for the assessment year under dispute, the Centralized Processing Centre (CPC), having noticed that employees contribution to PF and ESI was not paid within the due date prescribed under the relevant Acts, disallowed the deduction claimed on account of such payment invoking the provisions of section 36(1)(va) of Income-tax Act, 1961 (in short ‘the Act’) read with its Explanations. The assessee contested the aforesaid disallowance by filing an appeal before learned first appellate authority. However, applying the ratio laid down by the Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-1 [2022] 143 taxmann.com 178 (SC), learned first appellate authority sustained the disallowance. 4. Learned counsel appearing for the assessee, though, conceded that the issue is squarely covered by the decision of Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. (supra), however, he submitted, the due date for deposit of employees’ contribution to PF and ESI has to be reckoned from the date of disbursement of salary to the employees’ regardless of the month to which the salary belongs. In this context, he relied upon a decision of the Hon’ble Calcutta High Court in case of Kanoi Papers & Industries Ltd. Vs. Assistant Commissioner of Income Tax [2002] ITA No.5393/Del/2024 7 75 TTJ 448 (Calcutta). He also relied upon a decision of the Coordinate Bench in case of Sai Computers Ltd. Vs. Assistant Director of Income Tax, in ITA No.2862/Del/2022 and Ors., order dated 18.10.2023. Thus, he submitted, the issue may be restored back to the Assessing Officer to factually verify whether the employees’ contribution of PF and ESI were actually paid to the Government within the due date having regard to the date of disbursement of salary. 5. Learned Departmental Representative relied upon the observations of the Assessing Officer and learned first appellate authority. 6. Having considered rival submissions, we find, limited submission of the assessee is to the effect that the due date as per Explanation 1 to section 36(1)(va) of the Act should be construed with reference to the actual date of disbursement of salary and not the month for which salary is paid. In case of Sai Computers Ltd. Vs. ADIT (supra), the Coordinate Bench has observed as under: “3. When the matter was called for hearing, the ld. Counsel for the assessee at the outset pointed out that the judgment rendered by the Hon'ble Supreme Court in Checkmate Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC) is on the first principles that timely payment under the respective Acts applies to the employees' contribution and the statute has treated employees and employers contribution differently after the insertion of Section 36(1)(va) in the statute. Thus, the crux of ITA No.5393/Del/2024 8 the judgment in Checkmate (supra) is that employees' contribution stands on a different footing than employer's contribution. However, the assessee is entitled to show that the employee's contribution to PF/ESIC has been timely deposited qua the due date of payment of salary under the respective statute. The Id. counsel pointed out that the Co-ordinate Bench of Tribunal in Kanoi Papers & Industries Ltd. vs. CIT 75 TTJ 448 (Cal) has examined the concept of due date implied in Section 36(1)(va) of the Income Tax Act as well as the respective Acts and observed that the due date should be reckoned from the end of the month during which the disbursement of salary was actually made for the purposes of determination of due date under the respective Acts for deposit of contribution to the PF/ESIC etc. The Id. counsel thus submitted that mere approval of liability towards payment of salary without actual disbursement would not fastened obligation for deposits of employees' contribution under the Labour Act per se as observed by the Co-ordinate Bench in Kanoi Papers (supra). The Id. counsel fairly submitted that this aspect has not been examined by the Revenue Authorities and therefore, this aspect needs to be examined for the purposes of determination of default in timely depositing contribution qua the due date as understood in Kanoi Papers case. 4. We find merit in such alternative plea towards timely deposit of employees' ITA No.5393/Del/2024 9 contribution to PF/ESIC qua the due date prescribed under relevant legislations and regulations. Thus while the action of the Revenue for making adjustments towards belated payment to employees' contribution is endorsed on first principles, the matter is restored back to the file of the designated Assessing Officer for the purposes of ascertaining whether there is any delay in deposit of such contributions qua the due date in the light of the Kanoi Papers (supra). It shall be open to the assessee to place all factual matrix before the Assessing Officer and take all pleas for evaluation and determination of the issue by the Assessing Officer. The Assessing Officer shall examine this alternative aspect and pass a fresh order in accordance with law after giving proper opportunity to the assessee of being heard.” 7. Keeping in view the aforesaid decision of the Coordinate Bench, we restore the issue to the Assessing Officer for deciding assessee’s claim of deduction afresh after providing due and reasonable opportunity of being heard to the assessee. Grounds are allowed for statistical purposes. 8. In the result, appeal is allowed for statistical purposes.” 9. In view of aforesaid material facts and by respectfully following judicial precedents in the interest of justice, orders of both the departmental authorities are ITA No.5393/Del/2024 10 set aside. The issue is restored to the file of the Ld. AO (CPC) to decide the matter afresh in accordance with law after giving proper opportunity to the assessee. It shall be open to the assessee to furnish such information and adduce evidence as may be considered proper in support of his claim. 10. In the result, the appeal filed by assessee is allowed for statistical purposes. Order pronounced in the open court on 29/04/2025. Sd/- Sd/- (PRADIP KUMAR KEDIA) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30/04/2025 Mohan Lal Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "