CHECKMATE FACILITY AND ELECTRONIS SOLUTIONS PRIVATE LIMITED,VADODARA V. THE DY.CIT, CIRCLE-1(1)(1), VADODARA

ITA 706/AHD/2024

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The case involves Checkmate Facility and Electronic Solutions Pvt. Ltd., which appealed against the orders of the Commissioner of Income Tax (Appeals) regarding disallowances made for the Assessment Years 2019-20 and 2021-22. The disallowances were related to late contributions to PF and ESIC for employees, initially processed under Section 143(1) of the Income Tax Act by the Central Processing Centre, Bangalore. The main legal contention was whether the disallowances were justified under Section 36(1)(va) of the Act, considering the contributions were not made within the prescribed deadlines. The Tribunal referenced a significant Gujarat High Court decision, which supported the AO's position and led to the dismissal of the appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41004 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Other Referred Cases: Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax (2022), Principal Commissioner of Income-tax vs. Suzlon Energy Ltd. [2020]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NITIN VISHNU KULKARNI
• Assessee Lawyers: KAUSHANI SHAH
• Section: 143(1); 43B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. Nos.473&706/Ahd/2024 (Assessment Years: 2019-20&2021-22) Checkmate Facility and Electronic Solutions Pvt. Ltd., 6 to 9 Amaan Towers, Fatehgunj Main Road, Vadodara-390002 Vs. Deputy Commissioner of Income Tax, Circle-1(1)(1), Vadodara [PAN No.AACC5367P] (Appellant) .. (Respondent) Appellant by : Ms. Kaushani Shah, A.R. Respondent by: Shri Nitin Vishnu Kulkarni, Sr. D.R. Date of Hearing 25.02.2025 Date of Pronouncement 25.03.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: Both appeals have been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), ADDL/JCIT (A)-1, Lucknow vide orders dated 09.02.2024 & 15.03.2024 passed for A.Y. 2010-20 & 2021-22. 2. The brief facts of the case are that an appeal was filed by the aseessee before Ld. CIT(Appeals), against an order passed under Section 143(1) of the Income Tax Act, 1961 (Act) dated August 8, 2020, for the Assessment Year 2019-20, by the, Central Processing Centre, Bangalore (AO). The aseessee had filed its Income Tax Return for the relevant assessment year on March 3, 2020, declaring a total income of Rs. 1,81,75,290/-. The return was processed on August 8, 2020, and the total income was computed at a figure of Rs. ITA Nos. 473&706/Ahd/2024 Checkmate Facility and Electronic Solutions Pvt. Ltd. vs. DCIT Asst. Years –2019-20 & 2021-22 - 2– 2,18,48,042/-, by making disallowance towards late contribution towards ESI/PF, which led to the filing of the appeal before Ld. CIT(Appeals). 3. The main issue in the appeal before Ld. CIT(Appeals) was the disallowance of Rs. 36,72,752/- made by the CPC under Section 36(1)(va) of the Act for delayed payments of employee contributions towards PF and ESIC. Upon reviewing the facts, Ld. CIT(Appeals) noted that the disallowance was based on discrepancies between the Tax Audit Report and the Income Tax Return, particularly regarding the due dates for contributions under Section 36(1)(va) of the Act. Ld. CIT(Appeals) noted that the assessee failed to deposit employee contributions to the PF/ESI within the due date, as per the provisions of the Act. The Tax Audit Report highlighted that there was a variance between the prescribed due dates and the actual payment dates, leading to the disallowance under Section 36(1)(va) of the Act. Ld. CIT(Appeals) referred to the judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax (2022), which held that the non-payment of employee contributions within the due date would lead to disallowance, irrespective of whether the employer had paid the amount before the return filing date. The amendments made by the Finance Act, 2021, to Section 36 and Section 43B of the Act further clarified the issue, supporting that the provisions related to employee contributions were not subject to the same leeway as employer contributions. Accordingly, Ld. CIT(Appeals) held that the disallowance made by the AO was in accordance with the provisions of the Act and did not merit interference. The appeal was thus dismissed, and the addition made by the ITA Nos. 473&706/Ahd/2024 Checkmate Facility and Electronic Solutions Pvt. Ltd. vs. DCIT Asst. Years –2019-20 & 2021-22 - 3– AO for the delayed payment of employee contributions towards PF/ESIC was upheld. 4. The assessee is in appeal before us against the order passed by Ld. CIT(Appeals). The assessee has taken the following Grounds of Appeal: ITA No. 473/Ahd/2024 (A.Y. 2019-20) “1. On the facts and circumstances of the case as well as law on the subject, the learened CIT(A) has erred in confirming addition of Rs. 36,72,752/- on account of debatable and contentious issue as prima-facie adjustment u/s 143(1)(a) of the Act. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 36,72,752/- on account of delay in payment of employees’ PF and ESIC contribution even when at the relevant time different High Courts have given contradictory judgments. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” ITA No. 706/Ahd/2024 (A.Y. 2021-22) “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 1,00,35,800/- on account of debatable and contentious issue as prima-facie adjustment 143(1)(a) of the Act. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 1,00,35,800/- on account of delay in payment of employees’ PF and ESIC contribution even when at the relevant time different High Courts have given contradictory judgments. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 1,00,35,800/- on account of delay in payment of employees’ PF and ESIC contribution without considering the fact that payment is not made to the employees and hence, there is no question of deduction of the sum and in-turn payment under relevant acts. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 5. Further, the assessee has also taken the following Additional Ground of Appeal: ITA Nos. 473&706/Ahd/2024 Checkmate Facility and Electronic Solutions Pvt. Ltd. vs. DCIT Asst. Years –2019-20 & 2021-22 - 4– “4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 36,72,752/- on account of delay in payment of employees’ PF and ESIC contribution without considering the fact that payment is not made to the employees and hence, there is no question of deduction of the sum and in-turn payment under relevant acts.” 6. Before us, the Counsel for the assessee initially argued that while considering the delay in payment of ESI/ PF, the period of 15 days has to be reckoned from the actual date of payment of salary to the employee and not the close of the month. Viewed from this perspective, there is no delay in contribution of ESI/ PF and no disallowance is called for u/s 36(1)(va) of the Act. However, the Bench confronted the Counsel for the assessee with the decision of the Gujarat High Court in the case of Principal Commissioner of Income-tax vs. Suzlon Energy Ltd. [2020] 115 taxmann.com 340 (Gujarat)/[2020] 423 ITR 608 (Gujarat) vide order dated 11-02-2020, in which Gujarat High Court held that where assessee had not deposited employees' contributions towards PF and ESI within prescribed period in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified. Further, in the said decision, the Gujarat High Court held that section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 makes it obligatory for the employer before paying him his wages to deduct the employee's contribution along with the employer's own contribution as fixed by Government. The employer is further obliged to pay the same within fifteen days of the close of every month pay i.e. such contribution and administrative charges. The reference to fifteen days of the close of the month must be in relation to month during which the payment of wages is to be made and corresponding liability to deduct employee's ITA Nos. 473&706/Ahd/2024 Checkmate Facility and Electronic Solutions Pvt. Ltd. vs. DCIT Asst. Years –2019-20 & 2021-22 - 5– contribution to the fund arises. This Court held that the expression \"within fifteen days of the close of every month\" therefore, must be interpreted as having reference to the close of the month, for which, the wages are required to be paid with corresponding duty to deduct employee's contribution and to deposit the same in the fund. 7. Thereafter, the Counsel for the assessee submitted that in light of the above decision of Gujarat High Court referred to above, he wishes to withdraw the present appeals and does not wish to argue the matter further. 8. Therefore, in light of the jurisdictional High Court decision in the case of Suzlon supra and the request of the Counsel for the assessee, the appeal of the assessee is dismissed. 9. Since common facts and issues for consideration are involved for both the years under consideration, both the appeals filed by the assessee are hereby dismissed as withdrawn. 10. In the result, both the appeals filed by the assessee are dismissed. This Order is pronounced in the Open Court on 25/03/2025 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 25/03/2025 TANMAY, Sr. PS TRUE COPY ITA Nos. 473&706/Ahd/2024 Checkmate Facility and Electronic Solutions Pvt. Ltd. vs. DCIT Asst. Years –2019-20 & 2021-22 - 6– आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 24.03.2025(Dictated by Hon’ble Member on his dragon software) 2. Date on which the typed draft is placed before the Dictating Member 24.03.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 24.03.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 25.03.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 25.03.2025 7. Date on which the file goes to the Bench Clerk 25.03.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… "