Cargo Motors Gujrat Pvt Ltd, New Delhi V. ACIT Circle 5(2), New Delhi

ITA 239/DEL/2023

AI Insights

The case involves Cargo Motors Gujarat Pvt. Ltd., the appellant, contesting an order from the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre, which arose from an intimation order passed by the Assessing Officer under Section 143(1) of the Income Tax Act, 1961. The dispute centered on the disallowance of expenditure towards employees' contributions to ESIC/PF under Section 36(1)(va) of the Act for the Assessment Year 2019-20. The Revenue contended that the late deposits of employees' contributions to PF/ESIC were rightly added to the returned income of the assessee. The Tribunal, referencing the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT, and other precedents, found merit in restoring the matter to the Assessing Officer for factual verification and re-determination of the issue.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121527 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-07-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 31-01-2023
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT, Weather Comfort Engineers Pvt. Ltd. vs. ACIT-CPC Bengaluru, Sentinel Consultants Pvt. Ltd. vs. ACIT, Kanoi Paper and Industries Ltd. vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 54; 154; 43B; 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.239/DEL/2023 Assessment Year 2019-20 Cargo Motors Gujarat Pvt. Ltd. A-406, Somdutt Chamber-15 Bhikaji Cama Place New Delhi Vs. ACIT Circle-5(2) New Delhi TAN/PAN: AAACC1203G (Appellant) (Respondent) Appellant by: None Respondent by: Shri Vivek Kumar Upadhyay, Sr.DR Date of hearing: 25 07 2023 Date of pronouncement: 25 07 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he capt ione d a ppeal has bee n file d by t he assess ee a gainst the order of the ld. C ommissi on er of Inco me T ax (A ppea ls)- N ati ona l Fac ele ss A ppeal Centre ( N FA C), D elhi ( ‘CIT(A )’ in shor t) dat ed 07. 12 . 2022 aris ing fr om t he inti mat i on orde r da te d 07. 07.2020 passed b y t he Assess ing Office r (A O ) under Se ct ion 143(1) of the Inc ome T ax A ct, 1961 (t he A ct ) c on cerni ng AY 2019-20. 2. T he ca ptioned appeal relat es t o Assess ment Y ear s 2019- 20 invol vi ng issue of dis allow a nce of ex penditu re t ow ards empl oye es cont ri but io n to ESIC/PF unde r Secti on 36( 1)( va) of the A ct. 3. When th e matter w as cal le d for hearing, none appea re d for I.T.A. No.239/Del/2023 2 the ass esse e. U nder the circu mst ance s, w e procee d ex-part e in the absence of t he assessee. 4. L d. Sr. D R for the R evenue, on its part, con tended t ha t CPC has ri ghtl y ma de additi ons of R s.94, 13, 25 1/- to the re tu rne d inco me of the a ssessee on ac co unt of la te dep osi ts o f e mpl oyees ’ cont ri but io n t o P F/ESIC while pro cessi ng t he ret urn of income under Sect ion 143(3) of the A ct. The rect ificat io n app licati on under Sec tion 1 54 b y the assess e e the reon has been ri ght l y rejec te d and c onf ir me d by the C IT (A ) in the l i ght of the judgment re ndered in the c ase of Che ckm ate Serv ice s P vt. Lt d. vs. CIT (20 22) 143 t axm ann. com 178 (SC ). T he l d. Sr.D R for t he R eve nu e submit ted t ha t even for t he A sses sment Y ea r 2019 -20 i n quest ion, belat ed de pos i t of empl o yees ’ cont ribut ion he ld in tr ust b y the empl oye r ass essee ar e to be reckoned as ta xa ble income unde r Sect ion 2( 24) (X ) r. w. Section 43B and deduc ti on under Se ct i on 36( 1)(va) of the A ct w ou ld not be permi ssi ble. T he ld. Sr. DR on behal f of the Re venue furt her conten ded t hat the dela yed dep osits of emplo yees ’ c ont ri but ion indic a ted in t he audit report is suff ic ient for adj ust ment under Sect ion 143 (1) of the A ct as held in We athe r C om fort En gi neers P vt. Ltd. vs. A C IT-C PC Ban gal uru ITA N o. 959/D el / 2021 or der d ated 1 5. 02. 202 3. 5. T he iss ue tow ar ds taxab il i ty of be lated e mpl oyees ’ cont ri but io n to PF / ESIC is no longe r res i nt egr a in the l ight of the judgment of H on’ ble Sup reme Court i n t he c ase of Che ckm ate Services (s upra). The H on ’bl e Supreme C ourt in this cas e obs erve d tha t In come Ta x A ct di ffe re nt ia tes bet w een the empl oye es ’ contr ibut ion and e mplo ye r c ont ribu tion to the PF/E SIC A ct w hi l e i n res pec t e mp lo yer ’s cont ributi on, Sect ion I.T.A. No.239/Del/2023 3 43B is applicab le but how ever w ith res pect o f e mpl oyees ’ cont ri but io n th e condit io ns s pec i fi ed in Se ct ion 36(1)(va) is appl icable and Sect ion 43B (b) does not cover e mpl oyees ’ cont ri but io n de duc ted by e mp lo yer fr om sa lar y of t he empl oye es. The C o-o rdi na te Ben ch of T ribunal in Weathe r Com fort (s upr a) has hel d that such adj ust ment/ dis al l ow anc e is pe rmiss ible i n the proceed ings car ri ed ou t under Sect io n 143( 1) of the A ct. I n parit y w ith t he view ta ken by Co -or dinate Ben che s, on fi rst pr inc iples, w e do not see any me ri t i n the case of the as sessee f or impe rmissi bilit y of such adjus tment under Sect i on 143(1) o f the A ct. 6. T he C o-or dinate B enc h of T ri bunal in the ca se of Se nt inel Consu lt ants Pvt. Ltd. vs. A CIT IT A N o. 7 & 8/D el /2023 orde r dated 12. 06. 2 023 obs erve d in pa ra n o. 9. 3 of that o rde r tha t mont h dur in g wh ic h t he d isbu rse me nt o f sal ar y i s ac tu al ly ma de w ou ld be re le vant for t he purpos es of deter mi na ti on of due dat e. The re le vant ope ra ti ve para of t he order of the C o-or dina te Bench of Trib una l is reprod uced he re in unde r for rea dy re fe rence: “9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal). This aspect has not been found to be examined by the Assessing Officer or CIT(A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.” I.T.A. No.239/Del/2023 4 7. T he o bser vat i ons ma de i n Sen tine l Cons ulta nts Pvt. Ltd. sha ll appl y muta tis mut andis. Conse que ntl y, w e conside r it exped ie nt to restore t he issue ba ck to the file of A O for fac tual ve ri fica tion and r ede ter mi na ti on in the iss ue o n t he li gh t of dete rminat i on ma de b y the C o-ordina te B enc h in the cas e of Kanoi Paper a nd Ind us tri es Lt d. (s upra). T he A O shall thus rec omp ute the amount o f dis a ll ow ance unde r Se cti on 36(i )( va) of the A ct, i f an y, on the above basis, in accorda nce w i th law . T he assess ee sha ll be e nt it led to ap prop riate rel ev ant under Sectio n 36(i )(va ) of the A ct w he re i t is fo und that de posits hav e bee n ma de tow a rds PF/E SIC wit hin th e due d ate f rom t he c los e of month of ac tual dis burse ment of salar y/wa ges in the l ight of int er pret at ion re ndered i n th e cas e of K an oi Pape r and Indus t ri es L td. (s upra ). 8. H ence, in te rms of such o bser vati ons, the int i mation for A ssess me nt Year 2 019-20 is s et asi de and th e issu e tow ards c la i m of deduction unde r Sect i on 36(1)(va) is res tored back t o the file of the A O for f res h dete rminatio n in ac corda nce w i th law. 9. In t he res ult, the appeal of the assessee is al low ed e x-par te for statis tical p urposes. Order dictated and pronounced in the open Court on 25/07/2023 Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /07/2023 Prabhat