Biswajit Nayak, Rajgangpur V. ITO Ward-2, Rourkela

ITA 17/CTK/2022

AI Insights

This case involves an appeal by Biswajit Nayak against the rectification order passed under section 154 of the Income Tax Act, which disallowed certain contributions and taxes claimed in the return for the assessment year 2018-19. The disallowances pertained to employees' and employer's contributions to PF and ESI, and CGST & SGST, all of which were paid beyond the prescribed due dates but before the due date of filing the return. The Tribunal considered the legal precedents and submissions from both parties, ultimately deciding to restore the matter to the AO for verification of the payment dates and re-evaluation of the claims under the correct legal provisions.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 300260 (ITAT-CUTTACK)
• Duration Of Justice: 12 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 24-11-2022
• Assessment Year: misc
• Appeal Filed On: 20-06-2010
• Other Referred Cases: Checkmate Services Pvt Ltd vs CIT, Nirakar Security & Consultancy Services Pvt Ltd vs ITO, CIT v. Alom Extrusions Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Rectification of order
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND ARUN KHODPIA, ACCOUNTANT MEMBER Biswajit Nayak, C/O. Biswajit Nayak, Banthupara Rajgangpur, Sundargarh 770017 PAN/GIR No. (Appellant Assessee by Per Bench This is an appeal filed by the assessee CIT(A)-NFAC, Delhi No.ITBA/NFAC/S/.250/2021 2018-19. 2. S/Shri S.K.Agarwalla assessee and Shri S.C.Mohanty, ld SR DR appeared on behalf of the revenue. IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND ARUN KHODPIA, ACCOUNTANT MEMBER ITA No17/CTK/2022 Assessment Year : 2018-19 Biswajit Nayak, C/O. Biswajit Nayak, Banthupara Rajgangpur, Sundargarh- Vs. ITO, Ward PAN/GIR No.ABWPN 2210 J (Appellant) .. ( Respondent Assessee by : S/Shri S.K.Agarwalla, CA and S.K.Hota Revenue by : Shri S.C.Mohanty, SR Date of Hearing : 25/11 Date of Pronouncement : 25/11 O R D E R This is an appeal filed by the assessee against the order NFAC, Delhi dated 23.12.2021 ITBA/NFAC/S/.250/2021-22/1038053683(1) for the assessment year S.K.Agarwalla, CA and S.K.Hota, AR appeared on behalf of the assessee and Shri S.C.Mohanty, ld SR DR appeared on behalf of the Page1 | 6 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER ITO, Ward-2, Rourkela Respondent) and S.K.Hota, AR S.C.Mohanty, SR DR 11/2022 11/2022 against the order of the ld 23.12.2021 in Appeal for the assessment year appeared on behalf of the assessee and Shri S.C.Mohanty, ld SR DR appeared on behalf of the ITA No17/CTK/2022 Assessment Year : 2018-19 Page2 | 6 3. It was submitted by ld AR that the return filed by the assessee came to be processed u/s.143(1) of the Act and subsequently, rectification order u/s. 154 of the Act was passed on 30.6.2019, wherein, the employees contribution to PF & ESI paid beyond the due date under the P.F.Act but before the due date of filing of the return had been disallowed as also the employer’s contribution in respect of PF & ESI paid beyond the due date of the PF Act but before the due date of filing of the return had been disallowed. Similarly, CGST & SGST paid beyond the due date but before the due date of filing the return of income had been disallowed. It was the submission that admittedly in respect of employees contribution, the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT in Civil Appeal No.2833 of 2016 dated 12.10.2022 has categorically held that if the employees contribution to PF and ESI has been paid beyond the time prescribed under the relevant PF Act, then same is not allowable under section 36(1)(va) and 43B even though the payment has been made before the due date of filing of return under the Income tax Act. It was the submission that the allowance of the same under the provisions of section 37(1) of the Act has not been considered. It was the submission that he had no objection if the issue is restored to the file of the AO for examination in the light of the decision of the Co-ordinate Bench of this Tribunal in the case of Nirakar Security & Consultancy Services Pvt Ltd vs ITO in ITA No.98/CTK/2022 for Assessment Year 2016-17, order dated ITA No17/CTK/2022 Assessment Year : 2018-19 Page3 | 6 17.10.2022. In respect of issue of employer’s contribution to PF and ESI paid beyond the due date under the PF Act but before the due date of filing of return of income, the same was covered by the decision of the Hon’ble Supreme Court in the case of CIT v. Alom Extrusions Ltd., (2009) 319 ITR 306 (SC), wherein, it has been held that deletion of second proviso to section 43B by Finance Act, 2003 is retrospective and it would operate with effect from 1.4.1988. Accordingly, the amount paid before the date of filing of the return under the Act, the deduction is allowable. It was the submission that the disallowance was not called for. 4. In regard to CGST & SGST, it was the submission that in view of the provisions of section 43B, as the taxes has been paid in respect of the relevant assessment year before the due date of filing of return, same was allowable. 5. In reply, ld Sr DR submitted that the rectification u/s.154 of the Act has been specifically made and the reasons have been mentioned in page 4 of the rectification order, which reads as follows: “As seen from the e-filed return of income and the rectification request filed by the assessee, the assessee has not correctly filed schedules in the return like BP/DEP/DPM/DOA/P&L/PART A-OI of the Income tax return. The system has correctly computed the income as per the details entered by the assessee in the ITR, ITA No17/CTK/2022 Assessment Year : 2018-19 Page4 | 6 In case, the assessee desires rectification, the assessee is required to file an online rectification request, after logging in at http://www/incometax.indiafiling.govt.in by opening the ‘e-filing’ tab therein and selecting the ‘taxpayer is correcting the data in rectification’ under the rectification request type. The assessee should then tick the appropriate box therein, for selecting the rectification reason and then upload the rectification XML, after making the necessary conditions in the requisite schedule.” 6. It was the submission that as the defects had not been rectified, the disallowance has been made. It was the submission that the defects are yet to be cured and the disallowance as made is liable to be sustained. 7. We have considered the rival submissions. In respect of the issue of employees contribution to PF and ESI, admittedly, the issue is squarely covered by the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd (supra), wherein, it has been categorically held that if the employees contribution to PF and ESI has been paid beyond the time prescribed under the relevant PF Act, then same is not allowable under section36(1)((va) and 43B even though the payment has been made before the due date of filing of return under the Income tax Act. However, as regards the claim of allowance u/s.37(1) of the Act, the issue is covered by the decision of this Co-ordinate Bench in the case of Nirakar Security & Consultancy Services Pvt Ltd(supra), wherein, the issue is restored to the file of the Assessing officer with the following directions: ITA No17/CTK/2022 Assessment Year : 2018-19 Page5 | 6 “6. Liberty is granted to the ld AR to make all submissions in respect of allowability of disallowed contribution of the employees to PF and ESI under other relevant provisions in the interest of justice. This direction is being given because ld AR has submitted that as the amount is not allowable under section 36(1)(va) of the Act and same is also not covered under section 43B of the Act, the amount of delayed contribution to PF and ESI in respect of employees contribution would be treated as income in the hands of the assessee u/.s.2(24)(x) and on subsequent payment of the same, it would be a business expenditure, which can be claimed u/s.37(1) of the Act. We are not expressing any opinion in regard to his arguments as it has not been examined by the lower authorities. Liberty is also granted to the assessee to raise all arguments as are found necessary by him before the lower authorities.” Hence, on identical findings this issue is restored to the file of the AO for re-adjudication after granting the assessee adequate opportunity of being heard. 8. In regard to the issue of employer’s contribution to PF and ESI, as it is noticed that the issue is covered by the decision of Hon’ble Supreme Court in the case of Alom Extrusions Ltd(supra), the disallowance is directed to be deleted. However, for the purpose of verification as to whether the amounts have been paid before the due date of filing of return, the issue is restored to the file of the AO. If the payments have been made before the due date of filing of the return, then no disallowance is to be made. 9. Similarly, in respect of CGST and SGST, the issue is restored to the file of the AO for examination as to whether same had been paid before the due date of filing of return under the Income tax Act. If the same has been paid before the due date of filing of return, then in view of the provisions of section 43B, no disallowance is called for. ITA No17/CTK/2022 Assessment Year : 2018-19 Page6 | 6 10. The argument of ld Sr DR is that the assessee has not rectified the defects. As the issue is restored to the file of the AO for readjudication, in the course of re-adjudication, defects would automatically stands cured. 11. In the result, appeal of the assessee is partly allowed for statistical purposes. Order dictated and pronounced in the open court on 25/11/2022. Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 25/11/2022 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant : Biswajit Nayak, C/O. Biswajit Nayak, Banthupara Rajgangpur, Sundargarh-770017 2. The Respondent: ITO, Ward-2, Rourkela 3. The CIT(A)- NFAC, Delhi 4. Pr.CIT-, Sambalpur 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//