Colorz N Style Private Limited, New Delhi V. Circle-6(1), New Delhi

ITA 1492/DEL/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7877 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2019-2020
• Appeal Filed On: 20-10-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 43B; 143(1)

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.1492/Del/2021 [Assessment Year : 2019-20] Colorz N Style Pvt.Ltd., Flat No.32E, Fourth Floor, Sector-3, Dwarka, New Delhi-110078. PAN-AAFCC9409B vs Asst.DIT, CPC, Bangalore APPELLANT RESPONDENT Appellant by None Respondent by Shri Anil Kumar Sharma, Sr.DR Date of Hearing 16.02.2022 Date of Pronouncement 25.02.2022 ORDER PER KUL BHARAT, JM : This appeal filed by the assessee for the assessment year 2019-20 is directed against the order of Ld. CIT(A), National Faceless Appeal Centre (“NFAC”) dated 26.08.2021. The assessee has raised following grounds of appeal:- 1. “That on the facts and circumstances of the case and in law, the Asst. Director of Income Tax, CPC, Bangalore ('the Ld. AO') has erred in law and facts in not providing the opportunity of being heard to the Appellant on the debatable issue. Page | 2 2. That on the facts and circumstances of the case and in law, the Ld. CIT(Appeals) [or CIT(A)] & the Ld. AO have erred in law in invoking/ upholding the provisions of section 143(1) of the Act for the adjustment of employee contribution of Employee State Insurance (ESI) and Employee Provident fund (EPF) and thus, the order passed under section is bad in law. 2.1 That the Ld. AO has grossly erred in law and on facts of the case in making adjustments to the total income under section 143(1)(a) which are not apparent from the information in the return of income and thus, adjustments are without any jurisdiction. 2.2 That the Ld. AO has grossly erred in law and on facts in invoking the provisions of section 143(1)(a) for a debatable issue, which is neither an arithmetical error, nor an incorrect claim, nor a prima-facie disallowance which is a pre-requisite for making any adjustment under section 143(1). 2.3 That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the scope of prima facie adjustments in the section 143(1)(a) are co-terminus with the scope of mistake apparent from record within the meaning of section 154, and that there existed judicial precedents which are favourable to the case of the assessee, thereby resulting in Page | 3 such an adjustment under section 143(1) to be void-ab- initio. 2.4 That the Ld. AO has erred in making the adjustment and the Ld. CIT(A) has erred in upholding the adjustment made by Centralized Processing Center, Bengaluru vide intimation issued u/ s 143(1)( a) of the Act without even mentioning the clause of section 143(1)(a) under which the disallowance is alleged to fall while the Appellant contends that the disallowance is outside the scope of that section. 3. That on the facts and circumstances of the case and in law, the Ld. AO & Ld. CIT(A) have erred in disallowing the employee contribution to provident fund and ESI alleging the same ought to be paid within the due dates as prescribed under the relevant Acts and that the same is not allowable if paid before filing of the return of income for AY 2019-20. 3.1 That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the various judgements including the jurisdiction High Court, supporting the allowance of employee contribution paid before the due date of filing the return of income. 3.2 That the Ld. CIT(A) has failed to appreciate the fact the amendment by the Finance Act, 2021 on the section 36(1)(va) & section 43B is prospective in nature and cannot be applied retrospectively. Page | 4 The Appellant craves leave to add, amend, alter, delete, rescind, forego or withdraw any of the above grounds of appeal either before or during the proceedings before the Hon'ble Tribunal in the interest of the natural justice. The aforesaid grounds are mutually exclusive and without prejudice to each other.” 2. No one appeared on behalf of the assessee at the time of hearing. Therefore, the appeal was taken up for hearing in the absence of assessee. 3. Facts giving rise to the present appeal are that the assessee is a domestic private company, stated to be engaged in the business of trading of leather finishing foils, and job work of finished leather goods. The assessee filed its return of income for the Assessment Year 2019-20 on 30.10.2019, declaring total income at Rs.38,89,880/-, comprising of income from business and profession. The return of income was taken up for processing and the intimation order under section 143(1) of the Income Tax Act, 1961 (“the Act”) was passed on 30.04.2020 wherein the total income was determined at Rs.46,20,600/-. In computing the total income, an amount of Rs.7,30,718/- was disallowed u/s 36(1)(va) of the Act, being sum received from employees as contribution to the employees provident fund which was not credited to the employees Page | 5 account before the due date under the respective law. The disallowance was made by the Assessing Officer, which processing the return income as a prima facie adjustment, in accordance with the provisions of section 143(1)(a) of the Act. 4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who confirmed the addition. 5. Now, the assessee is in appeal before this Tribunal. 6. Ld. Sr. DR vehemently submitted that law is clear in this respect and he relied upon the decision of Ld.CIT(A). 7. I have heard the Ld. Sr.DR and perused the material available on record and gone through the orders of the authority below. The issue in this appeal is related to disallowance of expenditure on account of delay in deposit of employees contribution related to EPF & ESI. The issue is squarely covered by the judgement of Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd. in ITA No.983/2018 [Del.] order dated 10.09.2018 held as under:- “In view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, (2010) 321 ITR 508 (Del.) the issue is covered against the Page | 6 Revenue and, therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee’s Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act.” Therefore, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court in the above-mentioned binding precedent, I hereby direct the Assessing Officer to delete the disallowance. Thus, grounds raised by the assessee are allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 25 th February, 2022. Sd/- (KUL BHARAT) JUDICIAL MEMBER *Amit Kumar* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI