Happiest Minds Technologies Limited, Bangalore V. Deputy/Assistant Commissioner of Income-Tax, Circle-3(1)(1), Bangalore

ITA 1087/BANG/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 4021 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-01-2024
• Assessment Year: 2021-2022
• Appeal Filed On: 14-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V PARITHIVEL
• Assessee Lawyers: PRATHIK P; PRADEEP KUMAR S
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA No.1087/Bang/2023 Assessment Year : 2021-22 Happiest Minds Technologies Ltd., 53/1-4 Madivala, Madivala S.O Bangalore South Bangalore-560 068. PAN : AACCH 6301 G Vs. The Dy. Commissioner of Income-tax, Circle-3(1)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Prathik P and Shri Pradeep Kumar S, C.A Revenue by : Shri V Parithivel, JCIT (DR) Date of hearing : 01.02.2024 Date of Pronouncement : 02.02.2024 O R D E R PER SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER This is an appeal filed by the assessee against the order passed by the NFAC, New Delhi on 16/10/2023 in DIN No. ITBA/NFAC/S/250/2023-24/1057086310(1)for the assessment year 2021-22 on the following grounds: ITA No.1087/Bang/2023 Page 2 of 10 “1. Technical Issue with the Bill desk administered by PF department: With respect to disallowance of u/s 36(1)(va) amounting to Rs.1,38,36,988/- i.e., Employees PF contribution for the month of Jan 2021 which has to be paid on or before 15 Feb 2021. Appellant has paid the same along with the Employer Contribution totaling to Rs.2,56,76,864/- on 12th Feb 21 (well before the due date). However due to some technical issues with the Bill desk administered by the PF department (Copy of Banker letter confirming the technical issue with the Bill desk is attached - Ref Annex I), the same amount got rejected and reversed to the Appellant bank a/c on 20th Feb 21. In the meantime, Appellant has highlighted this issue to PF officer with a written communication (Copy attached - Ref Annex II). Appellant has re initiated the same and paid it on 24th Feb 21. February month bank statement attached - Ref Annex Ill. Here there was no intention to delay the payment from Appellant side, which is evident from the fact that, the Appellant has initiated and made the payment on 12th Feb 2021. The amount got debited to Appellant account on the same date, i.e., 12th Feb 2021. Thereafter, due to the technical issue same amount got reversed to Appellant account on 20th Feb 21, which is after the due date (i.e., 15th Feb 21). During those 8 days (i.e., between 12th to 20th Feb 21), Appellant was not in the possession of the above mentioned PF amount, which clearly says that Appellant has not utilized this amount for any other purpose. (Tax Effect of this ground being Rs.34,82,493/-) 2. Non-applicability of "Principle of Unjust enrichment": Appellant has paid the PF amount relating to January 2021 on 12th Feb 2021, well before the actual due date of 15th Feb 2021. Due to technical issue with the Bank, payment got failed and same got reversed to Appellant bank account on 20th Feb 2021. During the above period, said amount was not in the possession of the Appellant, which clearly says that the Employer (Appellant) is not got unjustly enriched by keeping the money belonging to the employees. The Finance Act, 1987, introduced section 2(24), the definition clause (x), with effect bon 1 April 1988; it also brought in section 36(1)(va). The memorandum explaining these ITA No.1087/Bang/2023 Page 3 of 10 provisions. in the Finance Bill, 1987, presented to the Parliament, is extracted below: Measures of penalising employers mis-utilising contributions to the provident fund or any funds set up under the provisions of the Employees State Insurance Act, 1948, or any other fund for the welfare of employees 12.1 The existing provisions provide for a deduction in respect of any payment by way of contribution to the provident fund or a superannuation fund or any other fund for welfare of employees in the year in which the liabilities are actually discharged (Section 43B). The effect of the amendment brought about by the Finance act, is that no deduction will be allowed in the assessment of the employer, unless such contribution is paid into the fund on or before the due date. "Due date" means the date by which an employer is required to credit the contribution to the employees account in the relevant fund or under the relevant provisions of any law or term of the contract of service or otherwise. (Explanation to Section 36 (1) of the Finance Act) 12.2 In addition, contribution of the employees to the various funds which are deducted by the employer from the salaries and wages of the employees will be taxed as income within brackets insertion of new [clause (x) in clause (24) of Section 2] of the employer, if such contribution is not credited by the employer in the account of the employee in the relevant fund by the due date. Where such income is not chargeable to tax under the head "profits and gains of business or profession" it will be assessed under the head "income from other sources." (Ref Para 35 in the attached extract of SC Judgement in case of "Checkmate Services (P) Ltd Vs CIT" - Annex IV) As clearly enacted in the Act, intention of introducing this section is to penalize Employers mis-utilising contributions to the Provident Fund or any funds set up under the provisions of the Employees State Insurance Act, 1948, or any other fund for the welfare of employees. In the present case, Appellant neither intended to delay the payment nor got unjustly enriched by utilizing the money. (Tax Effect of this ground being Rs.34,82,493/-) 3. The Appellant's inaction was not deliberate : The Hon. CIT (A) has dismissed the grounds raised by the Appellant based on fact that "the Appellant was inactive from 20.02.2021 to till 24.02.2021 ." ITA No.1087/Bang/2023 Page 4 of 10 Appellant had raised this "Technical issue with respect to delay in clearance of PF Payment" with the jurisdictional PF office and hopeful that the payment made on 12 th Feb 2021 will get processed as it is. However the amount got credited back to the account on 20th Feb 2021 and Appellant reinitiated and made the payment on 24th Feb 2021. Such delay was not intentional, as the 20th and 21st of February 2021 were non-working days (i.e., Saturday and Sunday). Furthermore, owing to the substantial volume of transactions and due to Covid situation, the Appellant was able to identify the reversed amount on 24th of February 2021. Thereafter, immediately on the same day, the appellant promptly re-initiated the payment, thereby fulfilled its obligation without any lapse or failure. It is clearly apparent from the aforementioned bona-fide facts such delay was not intentional. Hence, it is inappropriate to disallow the specified sum solely based on the above mentioned fact. (Tax Effect of this ground being Rs.34, 82,493/-) 4. The Appellant craves leave to add/ alter/ modify or delete any ground of appeal during the course of appellate proceedings. 2. The brief facts of the case are that the assessee filed return of income of Rs.1,51,38,58,160/- on 05.03.2022. The case was selected for complete scrutiny and statutory notices were issued to the assessee. During the course of assessment proceedings, it was noticed from the record that there is variance between amount disallowed by auditor in Form No.3CD and amount disallowed in ITR. The variance is of Rs.1,38,36,988/-, which was the employees’ PF contribution for the month of January 2021 which was to be paid on or before 15/02/2021. In this regard, the assessee was asked for the mismatching in the ITA No.1087/Bang/2023 Page 5 of 10 figures reported, the assessee submitted that the assessee paid the employees’ contribution on 12.02.2021 through banking channel & amount was debited from the company’s bank account but due to some technical glitches, it was not credited in respective account before the due dates. The assessee also produced the bank statement and correspondence with P. F. Commissioner letter dated 17.02.2021. The assessee’s reply was not accepted by the AO and he disallowed Rs.1,38,36,908/- u/s 36(1)(a)(v) of the Act and one more addition were also made by the AO as per para No.4.1. Accordingly, the AO completed the assessment. 3. Aggrieved from the above order, the assessee filed appeal before the CIT(A) and he also submitted documents for proving the technical glitches and the payment was not credited in the concerned account. The CIT(A) after examining the records, observed as under:- “6. The disallowance made u/s. 36(1)(va) is on account of delay in remittance of PF contribution collected from the employees by the appellant. The AO observed that there is delay in remittance and since it was a statutory liability and the same was not credited to the respective account on or before the due date, he made the disallowance of Rs. 1,38,36,988/-. 6.1 It is seen from the records and the documents produced by the appellant that the amount of Rs. 2,56,76,864/- (in which the amount of Rs. 1,38,36,988)-included being PF ITA No.1087/Bang/2023 Page 6 of 10 contribution of Employees for the month of January 2021) w deducted from the appellant's bank account held with RBL Bank on 12.02.2-2' which was before the due date. As the challan status was showing in the EPF portal as "payment Failed. Retry again", the appellant wrote to the PF Commissioner on 17.02.2021 seeking solution to download the print receipt/paid challan. Subsequently, the amount got reversed to the appellant company's bank account on 20th Feb 2021. The Appellant thereafter reinitiated the payment. 6.2 From the above, it is clear that the payment of employee's contribution to PF was remitted to the respective account beyond the due date. The liability of making payment to the PF department within the time limit lies with the appellant and the appellant failed to do so. Having collected the contributions from the employees in January 2021, the appellant should have made the payment without waiting for the due date to come. The appellant conveniently stated that from 12.02.2021 to 20.02.2021, it was not in possession of the above mentioned PF amount; however. the facts reveal that even after possessing the amount on 20.02.2021, the remittance happened only on 24.02.2021 as verified from the bank account statement produced by the appellant. Thus, the appellant was inactive from 20.02.2021 to till 24.02.2021. Considering the above discussion, it is clear that tF appellant was in default by making the delay in payment 6f employee contribution to PF, and thus the action of the AO is upheld. Hence the g 0unds of appeal raise in this connection are hereby dismissed. 4. Aggrieved from the above order, the assessee filed appeal before the ITAT. 5. The ld.AR reiterated the submission made before the CIT(A) and he submitted that the CIT(A) has quoted the entire submissions of the assessee in his order. He further submitted that the contribution for the month of January ITA No.1087/Bang/2023 Page 7 of 10 2021 was to be deposited on or before 15/02/2021. The assessee initiated payment on 12/02/2021, which was debited from the account of the assessee and the same amount got reversed by the bank on 20/02/2021. The moment, assessee came to know about the amount that has been reversed by the bank in the bank account, immediately the assessee paid it on 25/02/2021 and during the period of 8 days from 12/02/2021 to 20/02/2021, the amount was not in the possession of the company and the company had not utilized the said amount for any other purpose. Once the assessee’s bank account debited the payment of requisite due, then the assessee’s liability was got discharged. It was beyond the control of the assessee and he referred to the appeal set page No.44, which is a certificate issued by the bank. As per the certificate, the date of payment is on 12/02/2021 and the status is showing success under the merchant name “EPFO”, it shows that the payment was discharged by the assessee which is as under. On 17/02/2021, the assessee informed by way of letter to the PF, Commissioner stating that the challan status in EP portal is showing payment failed but still the amount was not credited in the bank account of the assessee, whereas ITA No.1087/Bang/2023 Page 8 of 10 the amount had already been debited on 12/02/2021 and to this effect, bank statement was enclosed. Thus, assessee took all possible effort for making payments and he paid also. Therefore , the disallowance should not be made u/s 36(1)(va) of the Act. 6. The ld.DR relied on the order of the lower authorities and strongly contested that the payment was not made within the due date as prescribed under the relevant Act. The payment was made by the assessee on 12/02/2021 was got reversed on 20/02/2021 and the assessee paid only on 25/02/2021. Accordingly, there was a delay of 4 days in remitting the amount., Therefore, the CIT(A) has rightly disallowed. He further submitted that when the challan was not generated, he should have taken steps immediately . He relied on the judgement of Hon’ble Apex Court in case of Checkmete Servixes (P) Ltd. vs CIT. reported in (2022) 143 taxmann.com 178 (SC) 7. Considering the rival contentions, we note that the dispute is only regarding payment of employees contribution to PF account within the time limit as per provisions of the respective Act. We noted from the documents that the CIT(A) has noted facts of the case ITA No.1087/Bang/2023 Page 9 of 10 completely in his order as noted (Supra) and there is no dispute of initial payment deposited on 12/02/2021of P.F. and it got reversed on 20/02/2021 and which is clear from the bank statement enclosed with Appeal set at page No.48 and finally the amount was debited on 24/12/2021. In the first instance as per bank statement, it is clear that the amount had been debited through the bank but the challan was not generated. After writing a letter to the PF Commissioner on 17/02/2021, the amount was got reversed into the bank account of the assessee. Initially, the assessee discharged his duties for making payment within the due date as per the respective Act. However, non generating of challan was beyond the control of the assessee. As per the submission of the assessee, when he came to know that the amount was credited into the bank account of the assessee, immediately, the assessee paid the due amount to the EPFO, which is clear from the transaction no. EPFO VRTC9776756703 2629611403 VALUE DATE 24.02.2021. In the peculiar facts of the case, the assessee made payment within the due date as defined in the P.F. Act, but due to some technical glitches the challan was not generated and the amount was reversed. Subsequently the assessee made payment again. Considering the entire submissions and fact of the present case, we allow the appeal of the assessee. ITA No.1087/Bang/2023 Page 10 of 10 8. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in court on 2 nd day of February, 2024 Sd/- Sd/- (GEORGE GEORGE K) (LAXMI PRASAD SAHU) Vice President Accountant Member Bangalore, Dated : 02.02.2024. Vms Copyto: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.