HI-TECH INSTRUMENTS & SYSTEMS , VISAKHAPATNAM V. INCOME TAX OFFICER, WARD-4(1), VISAKHAPATNAM

ITA 15/VIZ/2023

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The case involves Hi-Tech Instruments & Control Systems, a partnership firm, which appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. The appeal was against the addition of Rs. 2,92,252 to their income, which included employees' contributions to PF & ESI amounting to Rs. 2,43,809 and Rs. 48,443 respectively. The Income Tax Officer had made this addition during the processing of the return under section 143(1) of the Income Tax Act, 1961, contending that the contributions were not deposited within the due dates specified under the respective Acts. The CIT(A) upheld this decision, referencing the Supreme Court's judgment in Checkmate Services Private Limited vs. CIT, which clarified that such contributions must be deposited by the due dates specified under the respective statutes to be eligible for deduction under section 36(1)(va) of the Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128601 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2023
• Appeal Filed By: Assessee
• Order Result: DismissedDismissed
• Bench Allotted: SMC
• Next Hearing Date: 26-02-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 10-01-2023
• Other Referred Cases: Checkmate Services Private Limited vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 43B; 143(1); 139(1)

Judgement Text

आयकर अपीलȣयअͬधकरण, ͪवशाखापटणम पीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įी दुåवूǽ आर एल रेɬडी, ÛयाǓयक सदèय एवं Įी एस बालाकृçणन, लेखा सदèय के सम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER आयकर अपील सं./ I.T.A. No.15/Viz/2023 (Ǔनधा[रण वष[ / Assessment Year :2019-20) Hi-Tech Instruments & Control Systems, Visakhapatnam. PAN: AADFH 9770 K Vs. Income Tax Officer, Ward-4(1), Visakhapatnam. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸ कȧ ओर से/ Appellant by : Sri D. Madhusudhana Rao, CA Ĥ×याथȸ कȧ ओर से / Respondent by : Sri ON Hari Prasada Rao, Sr. AR सुनवाई कȧ तारȣख / Date of Hearing : 27/02/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 28/02/2023 O R D E R PER SHRI DUVVURU RL REDDY, JUDICIAL MEMBER This appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [CIT(A)-NFAC] vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1047457202(1), dated 16/1/2022 arising out of the order passed U/s. 143(1) of the Income Tax Act, 1961 [the Act] for the AY 2019-20. 2 2. The assessee has raised the following grounds of appeal: “1. On the fac ts and in the circumstances of the case the order of the Ld. CIT(A) erroneous in law and fac ts of the case. 2. On the fac ts and in the circumstances of the case the Ld. CIT(A) ought to have appreciated that the provisions of sec tion 2(24)(x) r.w.s 36(1)(va) and section 43B of the Act being late deposit of employees contribution towards ESIC/PF amounting to Rs. 2,92,250/- which has been duly deposited on or before the due date of filing of return of inco me as per the provisions u/s. 139(1) OF THE Act. E mployee contribution towards ESI and PF paid after the due date of the respec tive statute but before filing of income tax return due date u/s. 139(1) is allowed u/s. 43B and should no t be disallowed u/s. 36(1)(va) of the Ac t. 3. On the fac ts and in the circumstances of the case the Ld. CIT(A) ought to have appreciated that amend ments brought in Finance Act, 2021 in the provisions of sec tion 36(1)(va) and 43B of the Ac t shall be applicable w.e.f 1/4/2021. Thus, Explanation-2 and Explantion-5 in section 36(1)(va) and section 43B of the Ac t respectively shall be deemed to have prospective effect and shall no t be applicable for AY 2019-20. 4. The appellant craves leave to add to, al ter, amend, substitute, dele te, modify all or any of the above grounds.” 2. Brief facts of the case are that the assessee is a partnership firm filed its return of income for the AY 2019-20 declaring a total income of Rs. 2,76,830/- on 30/10/2019 and claimed refund of Rs. 1,90,120/-. The return was processed U/s. 143(1) of the Act by the CPC and the income was determined at Rs. 3 5,69,080/- by making an addition of Rs. 2,92,252/- which includes employee’s contribution to PF & ESI amounting to Rs. 2,43,809/- and Rs. 48,443/- respectively. This addition resulted decrease in income tax refund of Rs. 91,187/-. It is the contention case of the Revenue that the employee’s contribution to PF & ESI was paid after the due date specified under the respective Act. Aggrieved by the decision of the Ld. AO in making addition of Rs. 2,92,252/- on account of belated payments of employees share contribution towards PF & ESI, the assessee filed an appeal before the Ld. CIT(A)-NFAC. On appeal, the Ld. CIT(A)-NFAC, dismissed the appeal of the assessee by relying on the decision of the Hon’ble Apex Court in the case of Checkmate Services Private Limited vs. CIT (Civil Appeal No. 2833 of 2016, dated 12/10/2022). Aggrieved by the decision of the Ld. CIT(A)- NFAC, the assessee is in appeal before the Tribunal by raising the above mentioned grounds of appeal. 3. At the outset, the Ld. AR submitted that t he Ld. CIT (A) has erred in confirming the addition made by the Ld. AO towards belated payment of employees’ contribution of PF & ESI in the respective fund accounts though they were remitted in the Government Treasury within the due date of filing the income tax return. On this issue, the Ld.AR 4 reiterated the submissions made before the Ld. CIT(A)-NFAC and pleaded for deletion of the addition made by the Ld. AO and confirmed by the Ld. CIT(A)-NFAC. 4. On the other hand, the Ld. DR relied on the latest judgment of Hon’ble Supreme Court in the case of Checkmate Services Private Limited (supra) and submitted that the lower authorities have rightly disallowed the payments made belatedly as per the respective Acts. He further submitted that the Employees Contribution to PF / ESI is allowed as deduction, if the same is deposited on or before the due date specified under the provisions of the respective Acts. He further submitted that since the assessee has not deposited the employees contribution to the respective fund account on the date as prescribed in Explanation to section 36(1)(va) of the Act, the disallowance made by the Ld. AO was just, proper and reasonable, therefore, submitted that the Ld.CIT(A)- NFAC rightly confirmed the disallowance made by the AO, hence the addition is to be sustained. 5. I have heard both the parties and perused the material placed on record. It is apparent from records that the assessee has not deposited the employee contributions of PF and ESI to the respective fund account before the due date specified under the provisions of respective Acts, but deposited the same before the due date of filing of return of income u/s 5 139(1) of the Income Tax Act, 1961. Hon’ble Supreme Court in its judgment in the case of Checkmate Services Private Limited, Civil Appeal No.2833 of 2016 dated 2 nd October 2022, held that delayed payment of employee contributions of PF / ESI are no longer available for deduction u/s 43B and should suffer disallowance u/s 36(1)(va). Hence, the above mentioned case law is no longer valid. For the sake of clarity and convenience, relevant part of the order of the Hon’ble Supreme Court is extracted as under : “54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer’s obligation to deposit the amounts retained by it or deducted by it from the employee’s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and 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 the deduction that such 6 amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or before the due date as a condition for deduction. 55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.” 6. Respectfully, following the ratio laid down by the Hon’ble Supreme Court (supra), I do not find any reason to interfere with the order passed by the Ld.CIT(A)-NFAC and accordingly, dismiss the appeal of the assessee. 7. In the result, the appeal of the assessee is dismissed. Pronounced in the open Court on the 28 th February, 2023. Sd/- (दुåवूǽ आर.एल रेɬडी) (DUVVURU RL REDDY) ÛयाǓयकसदèय/JUDICIAL MEMBER Dated :28.02.2023 OKK - SPS 7 आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee – Hi-Tech Instruments & Control Systems, Plot No.30, Block-B, Opp. Canara Bank, Gajuwaka, Auto Nagar, Visakhapatnam, Andhra Pradesh – 530012. 2. राजèव/The Revenue – Income Tax Officer, Ward-2(1), D.No.50-92- 35, Infinity Towers Building, Shankaramatham Road, Shanthipuram, Visakhapatnam, Andhra Pradesh – 530016. 3. The Principal Commissioner of Income Tax, 4. आयकर आयुÈत (अपील)/ The Commissioner of Income Tax 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, ͪवशाखापटणम/ DR, ITAT, Visakhapatnam 6. गाड[ फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam