M/s Riken Instrumentation Ltd., Panchkula V. DCIT, Panchkula

ITA 1154/CHANDI/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1586 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 29-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: N K SAINI
• Section: 43B; 40A(3); 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.1154/CHD/2014 ASSESSMENT YEAR:2010-11 RIKEN INSTRUMENTATION LTD., VS. DCIT PLOT NO. 369, INDUSTRIAL AREA PANCHKULA CIRCLE PHASE-II, PANCHKULA PANCHKULA PAN NO. AABCR4407J (APPELLANT) (RESPONDENT) APPELLANT BY : SH. N.K. SAINI RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 20/08/2015 DATE OF PRONOUNCEMENT :01/09/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) PANCHKULA DT. 19/11/2014. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER PASSED BY THE LEARNED CIT(A) IS CONTRARY TO LAW & FACTS OF THE CASE. 2. THE LEARNED CIT(APPEAL) HAS ERRED IN LAW IN CONFIRM ING THE DISALLOWANCE OF RS. 2,23,728/- FOR ALLEGED DEFAULT IN DEPOSITING EMPLOY EES CONTRIBUTIONS BY DUE DATE U/S 36(1)(V) (DEPOSITED BEFORE DUE DATE OF FILING OF RE TURN), IS ARBITRARY AND UNJUSTIFIED IGNORING THE JURISDICTIONAL HIGH COURT JUDGMENT. 3. THE LEARNED CIT(APPEAL) HAS ERRED IN LAW IN CONFIRM ING THE DISALLOWANCE OF A SUM OF RS. 3,68,647/- PAID TOWARDS LATE DEPOSIT OF PF RESO RTING TO THE PROVISIONS OF SECTION 37(1) OF THE IT ACT. 4. THE LEARNED CIT(APPEAL) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 51,721/- WHICH IS ARBITRARY AND UNJ USTIFIED. 5. THE LEARNED CIT(A) HAS FURTHER ERRED IN CONFIRMING DISALLOWANCE OF PROVISIONS OF GRATUITY APPLYING PROVISIONS OF SECTION 40A(7). 6. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISA LLOWANCE OF RS. 7101/- BEING DONATION PAID. 7. THE APPELLANT CRAVES LEAVE TO ADD TO OR AMEND ANY G ROUND OF APPEAL BEFORE THE DISPOSAL OF APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME ON 15/10/2010 DECLARING INCOME OF RS. 78,81,320/-. THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DT. 01/03/2013, AT AN INCOME OF RS. 85,42,700. AFTER MAKING VARIOUS DISALLOWANCES UNDER SECTION 36 (1)(VA) OF RS. 2,23,728/-, UNDER SECTION 37(1) OF RS. 3,68,647/-, UNDER SECTIO N 40A(3) OF RS. 10,182/-, ON ACCOUNT OF PRIOR PERIOD EXPENSES OF RS. 51,721/- AN D ON ACCOUNT OF DONATION OF RS. 7,101/-. 4. THE LD. CIT(A) VIDE HIS ORDER DT. 19/11/2014, UP HELD ALL THE DISALLOWANCES MADE AND DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THE SAME, THE ASSESSEE HAS FILED TH IS APPEAL BEFORE US. 6. GROUND NO. 1 AND 7 BEING GENERAL IN NATURE NEED NO ADJUDICATION. 7. GROUND NO. 4,5 AND 6 HAVE NOT BEEN PRESSE D BEFORE US AND THE SAME MAY BE TREATED AS DISMISSED BEING NOT PRESSED. 8. GROUND NO. 2 IS AGAINST THE DISALLOWANCE OF R S. 2,23,728,/- FOR DEFAULT IN DEPOSITING EMPLOYEES CONTRIBUTION BY THE DUE DATE UNDER SECTION 36(1)(VA) OF THE INCOME TAX ACT 1961. 9. BRIEF FACTS OF THE CASE ARE THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE AO FOUND ON PERUSAL OF THE TAX AUD IT REPORT THAT EMPLOYEES CONTRIBUTION TO PF OF RS. 1,76,680/- AND TOWARDS ES I OF RS. 47,048/- WERE MADE ON 31/03/2010 AND 03/06/2010. THE AO HELD THAT THE PAY MENTS WERE MADE AFTER DUE DATE SPECIFIED FOR THE RELEVANT FUNDS, AND THER EFORE HE DISALLOWED THE ENTIRE SUM OF RS. 2,23,728/- UNDER SECTION 36(1)(VA ) OF THE ACT. 10. THE LD. CIT(A) UPHELD THE DISALLOWANCE BY RELYI NG UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. GUJAR AT STATE ROAD CORPORATION (2014) 41 TAXMANN.COM 100 WHEREIN IT WAS HELD THAT WHERE ASSESSEE DID NOT DEPOSIT EMPLOYEES CONTRIBUTION TO EMPLOYEES ACCOUN T IN RELEVANT FUND BEFORE THE DUE DATE PRESCRIBED IN EXPLANATION TO SECTION 3 6(1)(VA), NO DEDUCTION WOULD BE ADMISSIBLE EVEN THOUGH HE HAD DEPOSITED TH E SAME BEFORE DUE DATE UNDER SECTION 43B OF THE ACT. 11. BEFORE US THE LD. AR ARGUED THAT THE ENTIRE EMP LOYEES CONTRIBUTION HAD BEEN DEPOSITED BEFORE THE DUE DATE OF FILING THE RE TURN OF INCOME I.E; 30/09/2010 AND THEREFORE, BY VIRTUE OF THE PROVISIO NS OF SECTION 36(1)(VA) READ WITH SECTION 43 B THE SAME WAS ALLOWABLE AS DEDUCTI ON. IN SUPPORT OF HIS CONTENTION, THE AR PLACED RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HEMLA EMBROIDERY MILLS LTD. (2014) 366 ITR 167 ( PUNJAB & HARYANA) , THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. ANGLO FRENCH TEXTILE LTD. (2002) 254 ITR 31 4 (MAD) AND FURTHER ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF STANDARD CHEMICAL CO. PVT. LIMITED VS. CIT (1998) 229 ITR 193 (ALLD.) 12. THE LD. DR ON THE OTHER HAND PLACING RELIANCE O N THE DECISION OF GUJARAT HIGH COURT IN CASE OF CIT VS. GUJARAT STATE ROAD CO RPORATION(SUPRA) AND ON THE ORDER OF LD. CIT(A) ARGUED THAT THE DISALLOWANCE WA S RIGHTLY MADE BY THE AO. 13. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. 14. WE FIND THAT IT IS NOT IN DISPUTE THAT DURING T HE IMPUGNED AY EMPLOYEES CONTRIBUTION TO EPF OF RS. 1,76,680/- AND TOWARDS E SI OF RS. 47048/- WERE DEPOSITED BY THE APPELLANT ON 31/03/2010 & 03/06/20 10, WHICH WAS WELL BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME I.E; 30/ 09/2010 FOR THE IMPUGNED ASSESSMENT YEAR. THE ONLY ISSUE THEREFORE IS WHETHE R DEDUCTION U/S 36(1)(VA) IS ALLOWABLE IF EMPLOYEE CONTRIBUTION TO ESI & PF HAS BEEN DEPOSITED PRIOR TO FILING OF RETURN U/S 139(1). 15. THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE AS SESSEE BY THE APEX COURT IN CIT VS ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) AND FOLLOWING THE SAME WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCT ION IN RESPECT OF EMPLOYEES CONTRIBUTION TO ESI AND PF AS THE SAME HAS BEEN DEP OSITED PRIOR TO THE DUE DATE OF FILING OF RETURN UNDER SECTION 139(1). THE DISALLOWANCE MADE BY THE AO OF RS. 2,23,728/- IS THEREFORE DELETED. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREFORE ALLOWED. 16. GROUND NO.3 IS AGAINST THE DISALLOWANCE OF A SU M OF RS. 3,68,647/- PAID TOWARDS LATE DEPOSIT OF PF BY RESORTING TO THE PROV ISIONS OF SECTION 37(1) OF THE INCOME TAX ACT. 17. DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTED THAT THE ASSESSEE HAD PAID RS. 3,68,647/- AS PENALTY FOR LATE DEPOSIT OF PF FOR THE YEAR 2006-07 AND 2007-08.THE AO HELD THE SAME TO BE NOT ALLOWABLE AS PER THE EXPLANATION TO 37(1) OF THE ACT AND ADDED THE SAME TO THE RETURN O F INCOME OF THE ASSESSEE. DURING APPELLATE PROCEEDINGS THE LD. CIT(A) UPHELD THE DISALLOWANCE FOR THE REASONS THAT BOTH IN THE TAX AUDIT REPORT AS WELL A S IN THE P&L ACCOUNT OF THE ASSESSEE THE AMOUNT HAD BEEN SHOWN AS PENALTY. THE LD. CIT(A) FURTHER HELD THAT THOUGH THE ASSESSEE HAD SUBMITTED THAT THE PAY MENT WAS NOT IN THE NATURE OF PENALTY FOR VIOLATION OF ANY LAW OR BREACH OF LA W OR RULES OR ILLEGAL ACT ON ACCOUNT OF LATE DEPOSIT OF PF, THE ASSESSEE HAD NOT SUBMITTED ANY EVIDENCE TO SUBSTANTIATE THE SAME. PLACING RELIANCE ON THE DECI SION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. BHARATH PLYWOOD & TIMB ER PRODUCTS(P)LTD. 137 CTR 520 AND HONBLE DELHI HIGH COURT IN THE CASE OF ROH TAK TEXTILES MILLS LTD. VS. CIT 226 ITR 485, THE LD. CIT(A) UPHELD THE DISALLOWANCE . 18. BEFORE US, THE AR REPEATED HIS ARGUMENTS MADE B EFORE THE CIT(A) THAT THE IMPUGNED PAYMENT WAS NOT IN THE NATURE OF PENAL TY. THE BENCH,IN THE INTEREST OF JUSTICE, ASKED THE AR TO SUBSTANTIATE H IS ARGUMENT BY PRODUCING COPY OF THE ORDER UNDER THE PF ACT WHEREBY THE ALLEGED PENALTY HAD BEEN LEVIED ON THE ASSESSEE. THE AR EXPRESSED HIS INABILITY TO PRO DUCE THE DOCUMENTS. 19. THE DR ON THE OTHER HAND RELIED UPON THE ORDER OF LD. CIT(A). 20. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. 21. WE FIND THAT THE IMPUGNED AMOUNT OF RS. 3,67,64 7/- HAS BEEN DEBITED UNDER THE HEAD DAMAGE AND PENALTY IN THE P&L ACCO UNT OF THE ASSESSEE. MOREOVER IN THE TAX AUDIT REPORT ,IT HAS BEEN SHOWN AS PENALTY ON LATE DEPOSIT OF PF. THE ASSESSEE HAS FAILED TO PRODUCE BEFORE US AN Y EVIDENCE TO EXPLAIN THE NATURE OF THE EXPENSES. IT IS SETTLED LAW THAT FOR THE PURPOSES OF CLAIMING ANY EXPENDITURE THE BURDEN IS ON THE ASSESSE TO PROVE T HE CLAIM. IN THE PRESENT CASE, THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS STAND, DESPITE NUMBER OF OPPORTUNITIES GIVEN TO THE ASSESSEE , THAT THE IMPUGNED EXPENDITU RE WAS NOT PENAL IN NATURE. IN VIEW OF THE ABOVE WE ARE UNABLE TO AGREE WITH TH E ASSESSEE THAT THE AMOUNT REPRESENTED MERELY PAYMENT FOR LATE DEPOSIT TO PF A ND WAS NOT IN THE NATURE OF PENALTY. WE THEREFORE, UPHOLD THE DISALLOWANCE MADE OF RS. 3,67,647/-.THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREFORE DISM ISSED. 22. IN THE RESULT APPEAL OF THE ASSESSE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2015 SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :01/09/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR