Systematic Enterprises, Visakhapatnam V. Income-tax Officer, Ward-3(1), Visakhapatnam

ITA 185/VIZ/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8732 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2019-2020
• Appeal Filed On: 06-10-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Period of limitation
• Section: 154; 43B; 143(3); 143(1); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM (Through web-based video conferencing platform) BEFORE SHRI DUVVURU R L REDDY, HON’BLE JUDICIAL MEMBER & SHRI S. BALAKRISHNAN, HON'BLE ACCOUNTANT MEMBER I.T.A. No. 184 & 185/VIZ/2021 (Asst. Year : 2018-19 & 2019-20) Systematic Enterprises, 13, Prince Apartments, CBM Compound, Visakhapatnam Vs. Income Tax Officer Ward-3(1) Visakhapatnam. PAN No. ABVFS 3765 N (Appellant) (Respondent) Assessee by : Shri I.Kama Sastry, CA. Department by : Shri S.P.G. Mudaliar, Sr.DR Date of hearing : 03/02/2022. Date of pronouncement : 16/02/2022. O R D E R PER S. BALAKRISHNAN, ACCOUNTANT MEMBER: These appeals are filed by the assessee against the orders of Commissioner of Income Tax (Appeals) [for short, “CIT(A)”], National Faceless Appeal Centre in order Nos.ITBA/NFAC/S/250/ 2021-22/1035664690(1) and ITBA/NFAC/S/250/2021-22/ 1035665018(1) both dated 17/09/2021 for the A.Ys.2018-19 & 2019-20 respectively. Since facts and issues in both the appeals are common, clubbed and heard together and disposed of by way of this consolidated order. 2 ITA Nos. 184 & 185/VIZ/2021 (Systematic Enterprises) ITA No. 184/VIZ/2021 2. The assessee has raised the following grounds of appeal:- “1. The National Faceless Appeal Centre, (NFAC for short) Delhi is not justified in dismissing the appeal of the assessee in limine as being belated for the reason that: i. NFAC has considered the date of uploading the intimation under section 143(1)(a) in the registered account of the assessee on the ITBA portal in the absence of any SMS alert on the registered mobile number or email on the registered e mail Id of the assessee. ii. NFAC has not considered the CBDT Circular No. 10/2021 extending the period of limitation with respect to appeals falling due for filing on or after 15.03.2020 in obedience to the Honourable Supreme Court decision on this issue due to the unprecedented COVID-19 Pandemic. 2. The Central Processing Centre (CPC for short) is not justified in making an addition of Rs.3,90,877/- being Employees' Contribution to Provident Fund and Employees' State Insurance Contribution on the plea that the same have been paid after the due dates under the respective acts though the same have been paid within the due date for filing the return of income under section 139(1) of the Income-tax Act, 1961. 3. The appellant prays to add to; delete; alter; modify all or any the above grounds of appeal.” 3. In this case, assessee filed its return of income on 06/10/2018 which was later rectified u/sec. 154 of the Act. The return was processed u/sec. 154 of the Act by CPC by disallowing an amount of Rs. 3,90,877/- u/sec. 36(1)(va) of the Act on account of delayed payment made to employees’ contribution towards PF & ESI under the respective Acts. 3 ITA Nos. 184 & 185/VIZ/2021 (Systematic Enterprises) 4. Aggrieved by the order u/sec. 154 r.w.s. 143(1), the assessee filed an appeal before the ld.CIT(A) on 08.03.2021, which was migrated to the NFAC in terms of Notification No. 76/2020 in S.O.No.3296(E) dated 25/09/2020 by CBDT. The ld.CIT(A) noticed that the order of demand was raised on 16/03/2020 and concluded that there was a delay of 273 days in filing the appeal as accepted by the assessee as per column 14 of Form No.35 for the reasons given therein which are extracted as under:- “Due to covid the appellant has failed appeal. The issue is well settled and the condonation is hereby requested in the interest of justice.” The ld.CIT(A), therefore dismissed the appeal filed by the assessee. 5. Aggrieved by the order of the ld.CIT(A), the assessee has filed this appeal before this Tribunal. 6. Ld.AR relied on the decision of Hon'ble Supreme Court in Misc. Application No. 665/2021 in SMW(C) No.3/2020 dated 27/04/2021. Ld.AR argued that the Hon'ble Supreme Court has taken suo motu cognizance and directed vide order dt 23.03.2020, on the issue of period of limitation in filing petitions/ applications/suits/appeal/all other proceedings, irrespective of the period of limitation prescribed under the general or special laws. The ld AR said that the suo moto proceedings were disposed of by a direction to exclude the period from 15.03.2020 to 14.03.2021 for the purpose of computing limitation under various Acts. 7. Ld.DR has accepted the same. 4 ITA Nos. 184 & 185/VIZ/2021 (Systematic Enterprises) 8. Based on the decision of the Hon'ble Supreme Court in Misc. Application No. 665/2021 read with CBDT circular No. 10/2021 dated 25/05/2021, the period of limitation is to be considered after excluding the period from 15/03/2020 to 14/03/2021. 9. Respectfully following the directions of the Hon'ble Supreme Court, the order passed by the ld.CIT(A) is hereby quashed. 10. Ld.AR further argued that there is a delay in payment of Rs.3,90,877/- being employees’ contribution to the PF & ESI under the respective Acts, but the same has been paid on or before the due date of filing of return u/sec. 139(1) of the Act. 11. Ld.DR accepted the fact that the payment has been made before due date of filing of return u/sec. 139(1) of the Act. 12. We have heard both the parties and perused the material placed on record. In the instant case, there is no dispute that the return was processed u/s 143(1) and there was no scrutiny assessment made u/s 143(3) of the Act. It is settled issue that no debatable issues are permitted to be made adjustments u/s 143(1) of the Act. In the instant case, what was added in the intimation u/s 143(1) was the employees’ contribution to PF and ESI. Hon’ble Madras High Court in the case of Redington (India) Ltd. held that employees contribution to PF and ESI is also allowable deduction, if, the same is paid before the due date for filing the return of income. This Tribunal in the case of Andhra Trade Development Corporation in I.T.A. No.434/Viz/2019 dated 05.05.2021 held that debatable issues are not permitted to be made adjustments while processing the return of income u/s 143(1) of the Act. For the sake of clarity 5 ITA Nos. 184 & 185/VIZ/2021 (Systematic Enterprises) and convenience, we extract para No.6 of the order in Andhra Trade Development Corporation which reads as under:- “We have heard both the parties, perused the material placed on record. As per the adjustments made by the CPC, Bangalore to the extent of Rs. 7,31,016/- u/sec. 143(1)(a) is an issue which required to be verified with the relevant documents. Therefore, the adjustments are not within the scope provided u/sec. 143(1) (a) of the Act. As per proviso to section 143(1)(a), the AO is required to give an intimation before making such adjustments, either in writing or in electronic mode and the department has not demonstrated that it has given an intimation to the assessee proposing to make such adjustments. Therefore, the adjustment made by the CPC u/sec. 143(1)(a) is beyond the scope of the said section, hence, not permissible and accordingly deleted.” Even otherwise, the ld. CIT(A) has followed the decision of this Tribunal while allowing the set off of losses and the department did not place any other decision of the superior Court to controvert the decision relied upon by the ld. CIT(A) cited supra. Therefore, the issue is squarely covered by the decision of this Tribunal against the Revenue, hence, we find no reason to interfere with the order of ld. CIT(A) and dismiss the appeal of the Revenue.” 13. Since, the facts are identical respectfully following the view taken by this Tribunal, we hold that the addition made by the CPC u/sec. 154 r.w.s 143(1) is unsustainable, accordingly deleted. The appeal of the assessee is allowed. 14. On merits also, this Tribunal has consistently viewed that the employees’ contribution to PF and ESI is allowable deduction if the same is paid before the due date of filing the return of income. In the case of APEPDCL in I.T.A.No.609/V/2014 dated 29.07.2016, the coordinate bench of ITAT, Visakhapatnam after considering the decision of Hon’ble Karnataka High Court in the case of Essae Teraoka (P) Ltd. Vs. DCIT 366 ITR 408 and the decision of coordinate bench of ITAT Hyderabad in the case of Tetra Soft (India) Pvt. Ltd. Vs. ACIT (2015) 40 ITR (Trib) 470 and also taking 6 ITA Nos. 184 & 185/VIZ/2021 (Systematic Enterprises) support from the decision of Hon’ble Supreme Court in the case of CIT Vs. M/s Vegetables Products Ltd., 88 ITR 192, decided the issue in favour of the assessee. For the sake of clarity and convenience, we extract para No.5 to 10 which reads as under: “5. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. made additions towards belated payment of employees’ contributions to PF. According to the A.O., employees’ contribution to provident fund is deductible under the provisions of section 36(1)(va) of the Act, if the same is paid on or before the due date specified under the provident fund Act. The A.O. further was of the opinion that in view of the clear provisions of section 2(24)(x) r.w.s. 36(1)(va) of the Act, any recovery from employees towards provident fund contribution is deemed to be income of the assessee, if the employer not paid the same to the provident fund account of the employee within due date specified under the provisions of PF Act. It is the contention of the assessee that second proviso to section 43B of the Act provides that no deduction shall be allowed unless such sum is actually been paid on or before due date as specified in explanation to 36(1)(va) of the Act which was omitted by the Finance Act, 2003 w.e.f. 1.4.2004 and accordingly, there was no special provision regarding employees’ contribution to PF. It is further contended that as per the amended provisions of section 43B of the Act, any sum payable by the assessee as an employer by way of contribution to PF shall be allowed, if the same is paid on or before the due date of filing of return of income u/s 139(1) of the Act. 6. The only issue to be resolved is whether the assessee would be entitled to claim deduction for the employees’ contribution made to PF after the due date prescribed under the PF Act, but before the due date prescribed for filing of income tax return in the light of the provisions contained in section 36(1)(va) of the Act and section 43B(b) of the Act. It is the contention of the assessee that there is no distinction between employer and employee contribution after omission of second proviso of section 43B of the Act by Finance Act, 2003 w.e.f. 1.4.2004. We find force in the arguments of the assessee for the reason that there is no difference between employees and employer contribution under the PF Act. Section 6 of Provident Fund Act provides for contribution and the manner in which such contribution shall be made. Paragraph 30 of the PF Scheme provides for payment of contributions. As per the said scheme, the employer at the first instance shall make the total contribution including employees’ share. Paragraph 32 provides for recovery of member share of contribution and as per the scheme, the employer can recover the employees’ share from the wages paid to the employee. Therefore, as per the PF Act and 7 ITA Nos. 184 & 185/VIZ/2021 (Systematic Enterprises) scheme of contributions, the contributions means and include both employees’ and employer’s share. Similarly, section 2(c) of the Provident Fund Act defines the contribution to mean a contribution payable in respect of a member under the scheme or the contribution payable in respect of an employee to whom the scheme applies. There is a prescribed mode of payment of contributions under the PF Act. Under the said Act, the employer shall contribute both employees and employer share along with administrative charges before the due date specified under the PF Act. The Act prescribed only one due date for depositing the contribution i.e. 15 th of subsequent month with the grace period of 5 days which indicates that there is no difference between employee and employer contribution. If the legislature intends to differentiate employees and employer contribution, then there would have been two due dates like in the case of Income Tax Act. Therefore, from the above, it is clear that the Provident Fund Act does not differentiate employees and employer contribution and contribution means both employees and employer contribution under the PF scheme. 7. Section 43B of the Act provides for certain deductions to be allowed only on actual payment basis. Sub clause (b) of section 43B of the Act covers any sum payable by the assessee as an employer by way of contribution to any Provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees. The proviso to section provides that any sum paid by the assessee on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made under the provisions of section 43B of the Act. A careful consideration of section 43B of the Act, it is clear that an extension is granted to the assessee to make the payment of PF contributions or any other fund till the due date of furnishing return of income u/s 139(1) of the Act. Therefore, in our opinion, there is no difference between employees and employer contribution to PF and if such contribution is made on or before the due date of furnishing return of income u/s 139(1) of the Act, then deduction is to be allowed under the provisions of section 43B of the Act. 8. The Hon’ble Karnataka High Court, in the case of Essae Teraoka (P) Ltd. Vs. DCIT 366 ITR 408 took the view that the word contribution occurring in section 43B of the Act would include employees’ contribution to PF in the light of the definition of the word contribution as per the provisions of section 2(c) of the PF Act. As per the said section, contribution would mean both employer’s contribution and employees’ contribution. Accordingly, it was held that the provisions of section 43B of the Act allowing deduction for payment made before the due date of filing of Income Tax return cannot be ignored. Similarly, the ITAT, Hyderabad Tribunal in the case of Tetra Soft (India) Pvt. Ltd. Vs. ACIT (2015) 40 ITR (Trib) 470 held that when assessee remitted employees’ 8 ITA Nos. 184 & 185/VIZ/2021 (Systematic Enterprises) contribution to PF within due date of filing return of income u/s 139(1) of the Act, amount of employees’ contribution to PF cannot be disallowed. Similar view was upheld by the Chennai bench of the ITAT, in the case of ACIT Vs. Farida Shoes Pvt. Ltd. (2016) 46 CCH 29. The coordinate bench held that if assessee had not deposited employees’ contribution towards provident fund up to the due date as prescribed under relevant statute, but before due date of filing of return no disallowance could be made in view of the provisions of section 43B of the Act. In the case of CIT Vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. 35 Taxman 616, the Hon’ble High Court of Rajasthan, after referring to the apex court decision in the case of CIT Vs. Alom Extrusions Ltd. 319 ITR 306 & CIT Vs. Vinay Cement Ltd. held that the deductions should be allowed for the payment of employees’ contribution made before the due date of filing of return. Similarly, in the case of CIT Vs. State Bank of Bikaner, the Hon’ble Rajasthan High Court held that contribution paid after the due date under the respective Act, but before filing the return of income u/s 139(1) of the Act cannot be disallowed u/s 43B of the Act and or u/s 36(1)(va) of the Act. 9. The Ld. D.R. relied upon the decision of Hon’ble High Court of Kerala, in the case of CIT vs. Merchem Ltd, reported in (2015) 378 ITR 443 and submitted that employees’ contribution to provident fund is allowed as deduction, if the same is deposited on or before the due date specified under the provisions of provident fund Act. The D.R. also relied upon the decision of Gujarat High Court, reported in (2014) 366 ITR 170, wherein the Hon’ble Gujarat High Court held that since assessee had not deposited said contribution to respective fund account on the date as prescribed in explanation to section 36(1)(va) of the Act, disallowance made by the A.O. was just and proper. Though, the D.R. relied upon certain judicial precedents which are in favour of the revenue, in view of the decision of Hon’ble Supreme Court, in the case of CIT Vs. M/s. Vegetables Products Ltd. reported in 88 ITR 192, wherein the Hon’ble Supreme Court held that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted, therefore, by respectfully following the decision of Supreme Court, when divergent views are expressed by different judicial forums, we prefer to follow the views expressed by the Courts which are in favour of the assessee. 10. Considering the facts and circumstances of this case and also following the judicial precedents as discussed above, we are of the view that there is no distinction between employees’ and employer contribution to PF, and if the total contribution is deposited on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made towards employees’ contribution to provident fund. The CIT(A) after considering the relevant details rightly deleted the additions made by the A.O. We do not see 9 ITA Nos. 184 & 185/VIZ/2021 (Systematic Enterprises) any reasons to interfere with the order of the CIT(A). Hence, we inclined to uphold the CIT(A) order and dismiss the appeal filed by the revenue.” Therefore, respectfully following the view taken by the Tribunal in the above cases, we hold that on merits also, the assessee succeeds in appeal. Accordingly, appeal of the assessee is allowed. ITA No.185/VIZ/2021 15. The facts of this case are similar to the facts of ITA No.184/VIZ/2021. Therefore, our decision in ITA No. 184/VIZ/2021 shall apply mutatis mutandis to this appeal also. 16. In the result, both the appeals filed by the assessee are allowed. Order Pronounced in open Court on this 16 th day of Feb., 2022. sd/- sd/- (DUVVURU R L REDDY) (S. BALAKRISHNAN) Judicial Member Accountant Member Dated: 16 th Feb., 2022. vr/- Copy to: 1. The Assessee – Systematic Enterprises, 13, Prince Apartments, CBM Compound, Visakhapatnam. 2. The Revenue – ITO, Ward-3(1), Visakhapatnam. 3. The CIT(A), NFAC, Delhi. 4. The D.R., Visakhapatnam. 5. Guard file. By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.