BLOOMS,JAMSHEDPUR V. INCOME TAX OFFICER, JAMSHEDPUR

ITA 170/RAN/2023

AI Insights

The case involves an appeal by Blooms against the order of the Commissioner of Income Tax (Appeals) regarding the late payment of employees' contributions towards ESI & PF for the Assessment Year 2018-19. The primary legal issue was whether the late payment of contributions that included both employees' and employer's portions should be treated differently for tax purposes. The Tribunal considered the Supreme Court's decision in Checkmate Services P. Ltd. vs. CIT-1, which clarified that employees' contributions are only deductible if paid by the statutory due dates. The Tribunal found that the CIT(A) had not adequately addressed the bifurcation of the contributions and remanded the matter for a detailed factual verification.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 46664 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 04-08-2023
• Other Referred Cases: Checkmate Services P. Ltd. vs. CIT-1 in Civil Appeal No. 2833 of 2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Principle of natural justice
• Section: 250; 154; 43B

Judgement Text

"आयकर अपीलीय अधिकरण र ांची 'एसएमसी' पीठ, र ांची में IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI ‘SMC’ BENCH, RANCHI श्री प र्थ स रर्ी चौिरी, न्य धयक सदस्य क े समक्ष Before SRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER I.T.A. No.: 170/RAN/2023 Assessment Year: 2018-19 Blooms....................................................................................Appellant [PAN: AAGFB 6110 L] Vs. ITO, Jamshedpur.................................................................Respondent Appearances: Assessee represented by: Binod Khemka, AR. Department represented by: None. Date of concluding the hearing : October 21st, 2024 Date of pronouncing the order : October 22nd, 2024 ORDER Per Partha Sarathi Chaudhury, Judicial Member: This appeal preferred by the assessee emanates from the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as 'ld. CIT(A)'] dated 09.06.2023 for Assessment Year 2018-19 as per the grounds of appeal on record. 1.1. At the time of hearing, None appeared for the Department. However, an adjournment petition was filed which is extracted as follows: \"This is to bring to your kind attention that unavoidable requirement, I will not be able to appear before the honourable Bench on 21.10.2024. Under these circumstances, I would be deeply obliged if the cases are kindly adjourned, and fixed for hearing on any other suitable date. I am extremely apologetic for this unforeseen event and inconvenience caused is deeply regretted.\" I.T.A. No.: 170/RAN/2023 Assessment Year: 2018-19 Blooms. Page 2 of 5 1.2. It is noticed from the adjournment petition that no specific reasons have been enumerated therein which calls for adjournment. Therefore, keeping in mind the directives of the Hon'ble Supreme Court that adjournment should not be granted on a routine manner the adjournment petition is rejected and I hereby proceed to hear the matter after considering the documents on record and the submissions of the ld. AR. Furthermore, this appeal has been preferred by the assessee for which the assessee has paid the Tribunal fees and therefore, it is all the more essential that justice should not be delayed and since the ld. AR is present in the Court, the matter should be adjudicated and heard. 2. This matter pertains to the late payment of employees' contribution towards ESI & PF. The Hon'ble Supreme Court of India in its recent judgment in the case of Checkmate Services P. Ltd. vs. CIT-1 in Civil Appeal No. 2833 of 2016 has held that an employees' contribution to the PF is only deductible if it is paid on or before the due date as prescribed in the respective statutes therein. The Hon'ble Court had ruled that the amounts received or deducted by the employer from an employee's income are considered income unless the employer deposits the amount on or before the due date given in the respective statutes. It was also held that the conditions of Section 43B of the Income Tax Act, 1961 (hereinafter the 'Act') do not apply to the provisions of Section 36(1)(va) of the Act. Meaning thereby a taxpayer can claim a deduction of the employees' contribution of provident fund only if it is deposited on or before the due date prescribed in the relevant Labour Laws. In the present matter before this Bench, it is not disputed that the payments were made beyond the due date as prescribed in the relevant statutes. However, it was contended by the ld. AR of the assessee that such payment of contributions included both employees' and employer's contribution. Therefore, it was submitted that the amount to the extent of employer's contribution which has been deposited beyond the due date should accordingly be adjusted and the addition may be restricted only to the late payment of employees' contribution. In this regard, the ld. AR had submitted the bifurcation which is extracted as follows: I.T.A. No.: 170/RAN/2023 Assessment Year: 2018-19 Blooms. Page 3 of 5 \"The employee and employer contribution to P.F and ESIC of the disallowed amount is bifurcated as under: PF ESIC Total Employer Contribution 10,18,633 399,154 14,17,787 Employee Contribution 9,26,251 147,555 10,73,806 Total 19,44,884 546,709 24,91,593 Sir, it is humbly prayed that the assessee be given relief of the amount disallowed under employer contribution that is inadvertently reported in the report.\" 2.1. The ld. AR also submitted a copy of the order passed u/s 250 read with Section 154 of the Act wherein the assessee had moved a rectification petition before the ld. CIT(A) on the same prayer of bifurcation of the employer's contribution from the employees' contribution. However, ld. CIT(A) had dismissed the petition by stating that there is no mistake apparent from record, hence, the rectification petition u/s 154 of the Act is not maintainable. 3. I have considered the facts and circumstances in this case, given careful consideration to the documents on record and the statements made by the ld. AR. It is the claim of the assessee that late payment to ESI & PF inadvertently includes both the contribution of the employer and employee. It is an admitted fact that there has been a delay in payment of the contribution to the ESI & PF with regard to the due date mentioned in the respective statutes. The only prayer of the assessee had been that to the extent of employer's contribution, the necessary amount may be adjusted and the addition may be restricted only to the late payment of the employees' contribution to the respective funds. To this aspect, the assessee had even preferred a rectification petition before the ld. CIT(A) which was rejected. In my considered view, in the interest of natural justice, the Department should consider the prayer of the assessee. That even in the earlier hearing of this case, the ld. DR was directed by the Bench to bring out the correct position as regards the employer's and the employees' contribution. However, today on the date of hearing, the ld. DR was absent and no submissions have been filed on record. At the same time, the assessee has given a calculation bifurcating the said employer's and the I.T.A. No.: 170/RAN/2023 Assessment Year: 2018-19 Blooms. Page 4 of 5 employees' contribution made to the respective funds. That the rectification petition proceeded by the assessee was rejected only on the ground that there was no mistake apparent on record. However, nothing is emanating from the order of the ld. CIT(A) as to what was the reasoning and the documents considered to come to such a conclusion. In any case the fact of the matter is that the addition as per the decision of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. (supra) is only applicable to the late payment of employees' contribution to ESI & PF. Therefore, a proper verification as to what exactly is the total amount which has to be disallowed for late payment needs to be ascertained in a clear and unambiguous manner. Therefore, it calls for a factual verification. In view thereof, I set aside the order of the ld. CIT(A) in this case and remand the matter back to his file to determine the claim of the assessee as per law complying with principles of natural justice. If the claim is found to be correct, then the amount which represents the employer's contribution has to be bifurcated and kept out of the purview of taxation. The amount of employees' contribution only which has been deposited beyond the due date shall be subjected to addition. Needless to say that the assessee shall be given an opportunity of hearing. As per the above terms, the grounds of appeal stand allowed for statistical purposes. 4. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 22nd October, 2024. Sd/- [Partha Sarathi Chaudhury] Judicial Member Dated: 22.10.2024 Bidhan (P.S.) I.T.A. No.: 170/RAN/2023 Assessment Year: 2018-19 Blooms. Page 5 of 5 Copy of the order forwarded to: 1. Blooms, Top Floor, Aditya Tower, Main Road, Bistupur, Jharkhand, 831001. 2. ITO, Jamshedpur. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Ranchi Benches, Ranchi. //True copy // By order Private Secretary (On Tour) ITAT, Ranchi Benches Ranchi "