HOWE ROBINSON SHIPPING INDIA PVT. LTD.,GURGAON V. ACIT CIRCLE 10(1), NEW DELHI

ITA 2437/DEL/2024

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The case involves Howe Robinson Shipping India Pvt. Ltd., the appellant, contesting the additions made by the Income Tax Officer (ITO) under section 143(1) of the Income Tax Act, 1961, for the assessment year 2020-21. The additions included a contingent liability of Rs. 83,46,490 and an EPF contribution disallowance of Rs. 1,69,124. The appellant argued that these additions were unjustified as the contingent liability was not charged to the profit and loss account, and the EPF contributions were disallowed despite being within the scope of section 143(1). The Tribunal, after hearing the Departmental Representative and considering the absence of the appellant's representation, decided to set aside the Addl./JCIT(A)'s order and restore the matter to the Assessing Officer for further examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31581 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs CIT, Sentinel Consultants (P) Ltd. vs. ACIT, Kanoi Paper & Industries Ltd. vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Keywords: Opportunity of being heard; Capital expenditure; Principle of natural justice; TDS
• Section: 143(1); 153; 37

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRIBRAJESH KUMAR SINGH, ACCOUNTANT MEMBER आ.अ.सं/.I.T.A No.2437/Del/2024 िनधा\tरणवष\t/Assessment Year:2020-21 Howe Robinson Shipping India Pvt. Ltd. 9th floor, Block-B,Vatika Towers, Golf Course Road, Gurgaon, Haryana-122003, बनाम Vs. ACIT, CPC, Income Tax Office, Bengaluru-560100 Or “JAO” Range Code-42, Circle-10, Delhi अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent PAN:AACCC3050D Assessee by None Revenue by Shri Rajesh Kumar Dhanesta, Sr. DR सुनवाईक\bतारीख/ Date of hearing: 19.12.2024 उ\u000eोषणाक\bतारीख/Pronouncement on 07.02.2025 आदेश /O R D E R PER BRAJESH KUMAR SINGH, AM, This appealis filed by the assessee against the order of the Addl./JCIT (A)-1, Nashik,dated 26.03.2024 for the AY2020-21, arising out of order u/s 143(1) of the Act dated 18.12.2021. 2. The assessee has raised the followinggroundsin his appeal: ITA No.2437/Del/2024 2 “1. On the facts and circumstances of the case and in law, the Ld. ITO has erred in making addition of the contingent liability of Rs. 83,46,490, when the said sum was not charged & debited to profit & loss account, which is bad in law and uncalled for. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition of the contingent liability of Rs. 83,46,490 which is bad in law and uncalled for. 3. On the facts and circumstances of the case and in law, the Ld. ITO has erred in making disallowance for EPF Contribution of Rs. 1,69,124 in the income tax return u/s 143(1), which is out of the scope of section 143(1) and bad in law. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the disallowance for EPF Contribution of Rs. 1,69,124 in the income tax return u/s 143(1), which is out of the scope of section 143(1) and bad in law. 5. On the facts and circumstances of the case and in law, the Ld. ITO has erred in making these adjustment mechanically without addressing the response and reasons submitted by the appellant, which is bad in law and against the principal of natural justice.” 3. The assessee is engaged in the business of Ship brokering and filed its original return of income at NIL on 11.02.2021. The same was processed u/s 143(1) of the Act on 18.12.2021 in which an amount of Rs.83,46,490/- was disallowed on account of contingent liability and further a sum of Rs.1,69,124/- being EPF contribution was also disallowed. At the time of hearing, none appeared on behalf of the assessee and similarly when the case was fixed earlier on ITA No.2437/Del/2024 3 18.09.2024, no one had appeared on behalf of the assessee. On perusal of the facts in this case and due to none appearance of the assessee, this appeal is being decided after hearing the ld. DR. 4. On perusal of the records, it seen that the ld. AR had submitted before the ld. Addl./JCIT(A) that the disallowanceofcontingent liability of Rs.83,46,490/- was not justified when the said sum was not charged and debited to the Profit & Loss Account. The Addl./JCIT(A) in para no.5.5 of his order noted that the assessee had claimed in audit report in Sr. No.1 in row ‘g’ being particulars debited to profit & loss account being income tax demand of penalty of Rs.10,49,010/- and TDS of Rs.72,97,480/- totaling Rs.83,46,490/-. However, on verification, it is seen that row ‘g” was the particulars of any liability of contingent innature and not the amount debited the Profit & Loss Account. Further, on perusal, the column-7 of the return represented amount debited to Profit & Loss Account to the extent disallowable u/s 37 of the Act in which capital expenditure amounting to Rs.6,644/- is mentioned. Therefore, it appears that the confirmation by the Addl./JCIT(A) of the contingent ITA No.2437/Del/2024 4 liability amounting to Rs.83,46,490/- needs re-verification. We, therefore, set-aside the order of the Addl./JCIT(A) to his file for necessary verification after allowing reasonable opportunity of being heard to the assessee. Therefore, Ground no.1 and 2 are allowed for statistical purposes. 5. Ground No.3 to 4 are against the disallowance of Rs.1,69,124/- being employees contribution to provident fund u/s 36(1)(va) of the Act. 5.1. The Addl./JCIT(A) confirmed the above disallowance in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs CIT in Civil Appeal No.2833 of 2016. The Addl./JCIT(A) held as under:- “The appellant has furnished its reply citing judgments in support of its averments.However, the issue of delayed payment of PF/ESI received from the employees to the employer has been settled by the Hon'ble Supreme Court's Judgment in the case of Checkmate Services private limited Vs CIT, as mentioned above in the notice. The Apex Court has decided that employees' contribution to PF/ESI, unlike employer s contribution, are amount deducted from the employees and are to be deposited in terms of such welfare enactments and that upon deposit in terms of those enactments on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for that deduction that such amounts are deposited on or before the due dates. As per the order, it is mandatory to make payment of PF/ESI received from the employees within due date as mandated by such laws. However, the appellant has failed to make payment within the due ITA No.2437/Del/2024 5 date.Hence, in the light of the Hon'ble Supreme Court's Judgment in the case of Checkmate Services private limited Vs CIT, the addition made by the CPC are found to be justified and are hereby confirmed. Accordingly, the above ground of appeal raised by the appellant are dismissed.” 5.2. In view of the order of the Addl./JCIT(A) in relying upon the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs CIT (supra), the order of the Addl./JCIT(A) is justified. However, the Co-ordinate Bench in the case of Sentinel Consultants (P) Ltd. vs. ACIT on 12 June, 2023 [2023] 153 taxmann.com 151restored this issue to the file of the Assessing Officer to consider that the due date of deposit of PF & ESI contributions shall be reckoned from the month in which disbursement of salary was made.In this case, the Tribunal restored the appeal to the file of the Assessing Officer in the light of the observations of the Kolkata Bench of the Tribunal in the case of Kanoi Paper & Industries Ltd. vs. ACIT(75 TTJ448). The Tribunal observed as under: “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 ITA No.2437/Del/2024 6 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.” 6. Respectfully following the above said decision we restore this issue to the file of the Assessing Officer to decide the issue in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. vs. ACIT and Sentinel Consultants (P) Ltd. vs. ACIT (supra). Needless to saythat the Assessing Officer shall provide adequate opportunity of being heard to the assessee andthe assessee is at liberty to provide all the necessary information in support of its contention. Ground no.3 and 4 of the appeal are allowed for statistical purposes. 7. Ground No.5 of the appeal is general in nature and needs no separate adjudication. Hence, the same is dismissed. 8. In the result, appeal of the assessee isallowed for statistical purpose. Order pronounced in the open court on 07th February, 2025. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 07.02.2025. f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ ITA No.2437/Del/2024 7 Copy forwarded to: 1. Assessee 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "