Pankaj Fashion Pvt.Ltd., Surat V. Dy.CIT Circle -2(1)(1), Surat

ITA 238/SRT/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4852 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 14-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGHLA
• Keywords: Capital asset converted into stock in trade
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRIPAWAN SINGH, JM &DR. A.L.SAINI, AM ./ITA NO.238/SRT/2017 ( / ASSESSMENT YEAR: (2013-14) (VIRTUAL COURT HEARING) PANKAJ FASHION PVT. LTD., 309-310M, PLOT NO.1 TO 5, TATITHIYA, PALSANA, SURAT 394327. VS. THE DCIT, CIRCLE-2(1)(1), SURAT. ./ ./ PAN/GIR NO.: AADCP1627J (ASSESSEE) (RESPONDENT) ASSESSEE BY :SHRI MEHUL SHAH, CA REVENUE BY :MS ANUPAMA SINGHLA, SR. DR / DATE OF HEARING : 01/09/2021 /DATE OF PRONOUNCEMENT : 27/09/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR (AY) 2013-14, IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-2, SURAT [IN SHORT THE LD. CIT(A)] IN APPEAL NO. CAS/2/579/2016-17 DATED 04.09.2017, WHICH IN TURN ARISE OUT OF ANASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3)OF THE ACT (HEREINAFTER REFERRED TO AS THE ACT), DATED 28.03.2016. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING EMPLOYEES AND EMPLOYERS CONTRIBUTION TO PF & ESIC OF RS 24,99,5647- U/S. 36(1 )(VA) R.W.S. 2(24)(X) OF THE ACT, 1961. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING EMPLOYERS CONTRIBUTION TOWARDS PF & ESIC OF RS 18,24,311/-. 3. IT IS THEREFORE PRAYED THAT THE ABOVE ADDITION MADE BY ASSESSING OFFICER AND CONFIRMED BY LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) MAY PLEASE BE DELETED. 4. ASSESSEE CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL. PAGE | 2 ITA NO.238/SRT/2017 ASSESSMENT YEAR.2013- 14 PANKAJ FASHION PVT. LTD. 3.BRIEF FACTS OF THE ISSUE IN DISPUTE ARE STATED AS UNDER. DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTED THAT ASSESSEE HAS PAID EMPLOYEES' CONTRIBUTION FOR EPF AND ESI VERY LATE, THEREFORE THESE LATE PAYMENTS ARE NOT ALLOWABLE.AS PER EXPLANATION TO SECTION 36(L)(VA) OF THE ACT, FOR THE PURPOSE OF SAID CLAUSE, 'DUE DATE' MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDIT THE EMPLOYEES' CONTRIBUTION TO THE EMPLOYEES' ACCOUNT IN THE RELEVANT FUND UNDER THE ACT, RULE, ORDER OR NOTIFICATION ISSUED THERE UNDER OR UNDER ANY STANDING ORDER. LOOKING TO THE ABOVE FACTS AND POSITION OF THE LAW, IT IS WELL SETTLED THAT EMPLOYEES' CONTRIBUTION FOR EPF AND ESI ARE ALLOWABLE ONLY WHEN THEY ARE PAID WITHIN DUE DATE. ASSESSING OFFICER NOTED THAT IN THE CASE OF ASSESSEE, THE AMOUNT OF EMPLOYEES CONTRIBUTION FOR EPF OF RS.28,623/- AND ESI OF RS,24,70,941/-, TOTALING TO RS.24,99,564/- IS NOT ALLOWABLE U/S 36(L)(VA) OF THE ACT AND TO BE TREATED AS INCOME OF THE ASSESSEE U/S2(24)(X) OF THE ACT FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER ALSO RELIED ON THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE TRANSPORT CORPORATION VS. CIT DATED 26/12/2012. 4.THE ASSESSEE CONTENDED BEFORE ASSESSING OFFICER THAT THE EMPLOYEE CONTRIBUTION AS MENTIONED ABOVE WAS PAID BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME AND AS SUCH NO DISALLOWANCE SHOULD BE MADE AS PAYMENT HAS BEEN PAID AS PER TIME LIMIT BEING PRESCRIBED U/S 43B OF THE INCOME TAX ACT, 1961. HOWEVER, ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND RELYING ON THE JURISDICTIONAL HIGH COURT ORDER IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION (SUPRA), HELD THAT THE EMPLOYEES PF/ESIC CONTRIBUTION IS NOT COVERED BY SECTION 43B OF THE ACT AND IS ONLY ALLOWABLE AT DEDUCTION U/S 36(1)(VA) OF THE ACT AND THEREFORE HE MADE AN ADDITION OF RS.24,99,564/-. 5. ON APPEAL, LD CIT(A) HELD THAT ASSESSEE HAS CREDITED EMPLOYEES CONTRIBUTION TO PF BEYOND THE PRESCRIBED DUE DATE UNDER THE RELEVANT ACT. THE EMPLOYEES' CONTRIBUTION IS CREDITED TO EMPLOYEES' ACCOUNT IN THE RELEVANT FUND AFTER THE DUE DATE SPECIFIED U/S 36(L)(VA) OF THE ACT. THEREFORE, THIS IS INCOME OF THE ASSESSEE UNDER THE MEANING OF SECTION 2(24)(X) OF THE INCOME TAX ACT AND AS IT IS CREDITED PAGE | 3 ITA NO.238/SRT/2017 ASSESSMENT YEAR.2013- 14 PANKAJ FASHION PVT. LTD. TO EMPLOYEES' ACCOUNT BEYOND THE DUE DATE PRESCRIBED U/S 36(1)(VA) OF THE ACT. THEREFORE HE UPHELD THE ADDITION MADE BY THE AO OF RS.24,99,564/-. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 7. LEARNED COUNSEL FOR THE ASSESSEE SUBMITS BEFORE US THAT DURING THE YEAR UNDER CONSIDERATION, ON PERUSAL OF PROFIT & LOSS ACCOUNT, ASSESSING OFFICER NOTICED THAT ASSESSEE COMPANY HAS NOT DEPOSITED THE AMOUNT OF RS.28,623/- RECEIVED FROM EMPLOYEES TOWARDS CONTRIBUTION TO PROVIDENT FUND AND RS.24,70,941/- TOWARDS CONTRIBUTION TO ESIC, RESPECTIVELY INTO THE GOVT. ACCOUNT WITHIN THE DUE DATE PRESCRIBED. THEREFORE, ASSESSING OFFICER ON THE BASIS OF HIS OBSERVATIONS AT PARA NO 6 OF THE ASSESSMENT ORDER [PAGE 5-7], DISALLOWED RS.24,99,564/- AS INCOME FORMING PART U/S 36(1)(VA) R.W.S 2(24)(X) AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE FOLLOWING THE ORDER OF GUJARAT HIGH COURT OF GUJARAT STATE TRANSPORT CORPORATION VS. CIT DATED 26.12.2012. THE LD COUNSEL SUBMITTED THAT SECTION 43B OF THE ACT PROVIDES THE DUE DATE BY WHICH EMPLOYERS CONTRIBUTION TO PF ETC. SHALL BE DEPOSITED AND THEREFORE THE DUE DATE WHICH GIVEN UNDER THE PROVISIONS OF SECTION 43B OF THE ACT IS REQUIRED TO BE SEEN FOR THE PURPOSE OF MAKING ANY DISALLOWANCE IN RESPECT OF EMPLOYEES CONTRIBUTION UNDER THE ACT. THE ASSESSEE RELIED ON CERTAIN DECISIONS IN SUPPORT OF ITS CONTENTION. 8.ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 9.WE HAVE HEARD LEARNED ARGUMENTS ON BOTH SIDES, AND WE PROCEED TO RECORD OUR OPINION. WE NOTE THAT EMPLOYEE CONTRIBUTION AND EMPLOYER CONTRIBUTION TO PROVIDENT FUND AND ESI PAID BY ASSESSEE COMPANY ARE MENTIONED IN THE FOLLOWING TABLES: PROVIDENT FUND MONTH (1) EMPLOYEE CONTRIBUTION (2) EMPLOYER CONTRIBUTION (3= 4-2) TOTAL (4) APR-12 146 1665 3134 MAY-12 1615 1834 3449 JUN-12 120C 1362 2562 JUL - 12 868 985 1853 PAGE | 4 ITA NO.238/SRT/2017 ASSESSMENT YEAR.2013- 14 PANKAJ FASHION PVT. LTD. THE AMOUNTS HIGHLIGHTED RS.1310/- SHOWS AMOUNT PAID WITHIN DUE DATE/ GRACE PERIOD. HENCE THE TOTAL EMPLOYEE CONTRIBUTION ALLEGEDLY SUBJECTED TO SECTION 2(24)(X) SHALL BE 13,409 (14,719 -1,310). THE EMPLOYER CONTRIBUTION OF RS.16,701/- IS SUBJECTED TO 43B WHICH IS PAID WITHIN DUE DATE OF FILING RETURN OF INCOME AND HENCE, IT IS ALLOWABLE DEDUCTION UNDER THE ACT. ESI MONTH(1) EMPLOYEE CONTRIBUTION(2) EMPLOYER CONTRIBUTION (3 = 4-2) TOTAL (4) APR-12 49392 141142 190534 MAY-12 63481 178297 241778 JUN - 12 57957 164510 222467 JUL-12 63883 173989 237872 AUG-12 64560 175439 239999 SEP-12 69575 188251 257826 OCT-12 83412 225147 308559 NOV-12 58317 157058 215375 DEC-12 78102 209668 287770 JAN - 12 76279 204173 280452 FEB-12 70156 189498 259654 MAR-12 68459 184130 252589 TOTAL 803573 2191302 2994875 THE AMOUNTS HIGHLIGHTED IN ABOVE TABLE SHOWS THAT AMOUNT HAS BEEN PAID WITHIN DUE DATE/GRACE PERIOD. HENCE, THE TOTAL EMPLOYEE CONTRIBUTION ALLEGEDLY SUBJECTED TO SECTION 2(24)(X) SHALL BE RS. 5,93,385/- (RS.8,03,573 -RS.83,412 RS.58,317 - RS.68,459). THE EMPLOYER CONTRIBUTION OF RS.21,91,302/- IS SUBJECTED TO 43B WHICH IS PAID WITHIN DUE DATE OF FILING RETURN OF INCOME AND HENCE ALLOWABLE UNDER THE PROVISIONS OF THE ACT. 10. LEARNED DR FOR THE REVENUE HAS STATED BEFORE THE BENCH THAT SECTION 43B DOES NOT APPLY IN RESPECT OF EMPLOYEES CONTRIBUTION TOWARDS ESI AND PF. TO AUG-12 1110 1260 2370 SEP-12 1463 1658 3121 OCT-12 1331 1510 2841 NOV-1 1310 1487 2797 DEC - 12 1520 1725 3246 JAN-12 491 556 1047 FEB - 12 1207 1370 2577 MAR-12 1135 1288 2423 TOTAL 14719 16701 31420 PAGE | 5 ITA NO.238/SRT/2017 ASSESSMENT YEAR.2013- 14 PANKAJ FASHION PVT. LTD. BUTTRESS HER STAND, SHE RELIED ON THE JUDGMENT OF HON`BLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. GUJRAT STATE ROAD TRANSPORT CORPORATION (2014) WHEREIN IT HAS BEEN HELD THAT THE EMPLOYEES SHARE OF CONTRIBUTION TOWARDS PF AND ESI IS NOT GOVERNED BY SECTION 43B OF THE ACT BUT IT IS GOVERNED BY SECTION 36(1)(VA) OF THE ACT. THUS, WE NOTE THAT BALANCE EMPLOYEE CONTRIBUTION TO ESI, SUBJECTED TO SECTION 2(24)(X) OF THE ACT OF RS. 5,93,385/- AND EMPLOYEE CONTRIBUTION TO PROVIDENT FUND SUBJECTED TO SECTION 2(24)(X) OF THE ACT IS TO THE TUNE OFRS.13,409/- WHICH CANNOT BE ALLOWED, AS THE HON`BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION, [2014] 41 TAXMANN.COM 100 (GUJARAT) (SUPRA), HELD THAT WHERE ASSESSEE DID NOT DEPOSIT EMPLOYEES' CONTRIBUTION TO EMPLOYEES' ACCOUNT IN RELEVANT FUND BEFORE DUE DATE PRESCRIBED IN EXPLANATION TO SECTION 36(1)(VA) OF THE ACT, NO DEDUCTION WOULD BE ADMISSIBLE EVEN THOUGH HE DEPOSITS SAME BEFORE DUE DATE UNDER SECTION 43B OF THE ACT. WE NOTE THAT SLP IS PENDING BEFORE THE HON`BLE SUPREME COURT OF INDIA WITH REGARD TO DELAY PAYMENT OF EMPLOYEE`S CONTRIBUTION TO PF AND ESIC. IN THIS SCENARIO, WE THINK IT FIT AND APPROPRIATE TO REMIT THIS ISSUE ( BALANCE EMPLOYEE CONTRIBUTION TO ESI, RS.5,93,385/- AND EMPLOYEE CONTRIBUTION TO PROVIDENT FUND RS.13,409/- ), BACK TO THE FILE OF THE LD CIT(A), WITH THE DIRECTION TO ADJUDICATE THE ISSUE IN ACCORDANCE WITH THE OUTCOME OF THE JUDGMENT OF THE HON`BLE SUPREME COURT. 11.IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES, IN ABOVE TERMS. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27/09/2021 BY PLACING THE RESULT ON THE NOTICE BOARD AS PER RULE 34(5) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE 1963. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER LWJR /SURAT / DATE: 27 /09/2021 ** SAMANTA ** PAGE | 6 ITA NO.238/SRT/2017 ASSESSMENT YEAR.2013- 14 PANKAJ FASHION PVT. LTD. COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR. CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT