DCIT,Circle 7(1) , New Delhi V. Eagle Hunter Solution Ltd, New Delhi

ITA 2150/DEL/2022

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The case involves the Deputy Commissioner of Income Tax (DCIT) appealing against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] which had deleted the addition made by the Assessing Officer (AO) regarding delayed payment of employee contributions to PF/ESI. The revenue argued that the CIT(A) erred in law and facts by not upholding the addition of Rs. 2,46,27,875, which was made due to the late deposit of employee contributions. The tribunal referenced the Supreme Court's judgment in Checkmate vs. CIT, which clarified the legal position that such contributions, if not deposited by the due date, do not qualify for deduction under the Income Tax Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121946 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 01-09-2022
• Other Referred Cases: Checkmate vs. CIT
• Laws Referred To: Section 2(24)(x), Section 36(1)(va), Section 43B
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Period of limitation; Time period of passing order; Condonation of delay
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B: NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.2150/Del/2022 Assessment Year: 2017-18 The DCIT 1(1), Circle-7(1),New Delhi 110002 vs. M/s. Eagle Hunter Solution Ltd., Eagle House, 61C, Kalu Sarai, New Delhi 110016 PAN AABCE 0565 E (Appellant) (Respondent) For Revenue : Shri Vipul Kashyap, Sr. DR For Assessee : Shri Vagish Kumar (On behalf of assessee) Date of Hearing : 18.04.2023 Date of Pronouncement : 07.06.2023 ORDER PER CHANDRA MOHAN GARG, J.M. This appeal has been filed against the order of CIT(A)-3, New Delhi dated 14.01.2020 for AY 2017-18. 2. The grounds of appeal raised by revenue are as follows:- 1. Whether on the facts and in the circumstances of the case and in law the CIT(A) is correct in deleting the addition amounting to Rs. 2,46,27,875/- made by AO on account of delayed payment of ESI/PF. 2. Whether on the facts and in the circumstances of the case and in law the CIT(A) has erred in deleting the addition amounting to Rs. 2,46,27,875/- in violating of the provisions of section 2(24)(assessee) r.w.s. 36(1)(va) on account of delayed payment of employee contribution towards PF/ESI. Application of assessee for condonation of delay 3. The ld. Senior DR submitted that the ld. CIT(A) passed assessment order on 14.01.2020 and the date of limitation for filing appeal before Tribunal, including period of limitation extended by Hon’ble Supreme Court under suo motto order, was 28.05.2022 causing delay of 65 of working days. The ld. Senior DR submitted that there was total mess in the Department and therefore appeal was delayed by 65 days and [2] ITA No.2150/Del/2022 there is no fault or deliberate omission on the part of appellant/AO. Therefore delay may kindly be condone. 4. The ld. AR opposed to the condonation of delay. However keeping in view the limitation period extended by the Hon’ble Supreme Court and the problems and mess created due to Covid-19, we find it appropriate to condone the delay of 65 days in filing appeal as there is no deliberate omission or negligence or fault on the party of appellant in filing delayed appeal. Thus appeal is admitted for hearing. Ground no. 1 & 2 of Revenue 5. The ld. Senior DR submitted that under the facts and in the circumstances of the case and in law the CIT(A) was not correct in deleting the addition amounting to Rs. 2,46,27,875/- made by AO on account of delayed payment of ESI/PF. He further submitted that in the present facts and in the circumstances of the case and in law the CIT(A) has erred in deleting the addition amounting to Rs. 2,46,27,875/- in violating of the provisions of section 2(24)(assessee) r.w.s. 36(1)(va) on account of delayed payment of employee contribution towards PF/ESI. He submitted that after judgment of Hon’ble Supreme Court in the case of Checkmate vs. CIT dated 12.10.2022, the issue is no more res integra therefore ground of revenue may kindly be allowed by setting aside the first appellate order and restoring that of the Assessing Officer. 6. Replying to the above, the ld. AR strongly supported the first appellate order. 7. On careful consideration of above, first of all, we note that the Hon’ble Supreme Court in the case of Checkmate vs. CIT (supra) held thus:- 53. The distinction between an employer’s contribution which is its primary liability under law – in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers’ income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. 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 [3] ITA No.2150/Del/2022 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 amounts are deposited on or before the due date. If such nterpretation 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. 8. In view of above preposition rendered by Hon’ble apex court we are inclined to hold that the first appellate order granting relief to the assessee is not sustainable as the amount of contribution of employee to the ESI/PF, which was not paid within prescribed time limit and the same was paid delayed payment then it is has to be held that the omission is violation of provision of section 2(24)(x) r.w.s. 36(1)(va) of the Act and the same is not allowable to the assessee. Therefore first appellate order is reversed and assessment order is restored upholding the disallowance. Accordingly both the grounds of revenue are allowed. 9. In the result, the appeal of the revenue is allowed. Order pronounced in the open court on 07.06.2023. Sd/- Sd/- (M. BALAGANESH) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 07 th June, 2023. [4] ITA No.2150/Del/2022 NV/- Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR // By Order // Asstt. Registrar, ITAT, New Delhi