BIMLA THAKUR, DELHI V. DCIT, Circle 43(1), New Delhi

ITA 2963/DEL/2022

AI Insights

The case involves Bimla Thakur, the appellant, who contested the disallowance of deductions related to late deposits of employees' contributions to PF/ESI and employer's contributions under the Income Tax Act, 1961 for the Assessment Year 2020-21. The Central Processing Centre (CPC) had made additions to the returned income due to these late deposits. The Tribunal considered precedents and statutory provisions, ultimately remanding the matter for further factual verification by the Assessing Officer, particularly concerning the timing of the deposits and the applicability of deductions under the relevant sections of the Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121535 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-06-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 18-12-2022
• Other Referred Cases: Checkmate Services (P.) Ltd. vs CIT, Cemetile Industries vs ITO, Savleen Kaur & Others vs ITO, BT Data and Surveying Services India Pvt. Ltd. vs. ITO, Pr. CIT vs. Khyati Realtors (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 37; 2; 43B; 143(1); 139(1); 43

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.2963/DEL/2022 Assessment Year 2020-21 Bimla Thakur, House No. 19C, Gali No. 3, Main Sagar Pur, New Delhi-110046. Vs. DCI|T, Circle-43(1), New Delhi. TAN/PAN: AFKPT3673H (Appellant) (Respondent) Appellant by: Shri P.P. Singh, Adv. Respondent by: Shri N.K. Bansal, Sr. DR Date of hearing: 20 06 2023 Date of pronouncement: 20 06 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (“NFAC”), Delhi dated 20/10/2022 arising from intimation dated 28/10/2021 passed u/s 143(1) of the Income Tax Act, 1961 (“the Act”) concerning Assessment Year 2020-21. The ground of appeal raised by the Assessee reads as under: 1. The order of the learned commissioner of income tax (appeall, National faceless appeal center (herein after referred as "Ld. CIT (A)") erred in law and facts while confirming disallowance by the learned Assistant director of Income Tax, CPC Bengaluru (herein after referred an Assessing 2963/Del/2022 2 officer) u/s 143(1) made while processing the return and consequential addition of Rs. 82,32,430/- to the business income by way of disallowance u/s 36(1)(va) to the extent of Rs. 82,32,430/- on account of employee's contribution to PP/ES expenses for late deposit of PF/ESI, as a result thereof total income increased by Rs 82,32,430/- to the returned income and total tax liability of Rs.33,86,520/- after adjustment of prepaid tax of Rs 12,81,078/- which assessee denies and seek relief by way of deletion of such addition made to the returned income and consequentially deletion of additional tax. 2. The learned Assessing office erred in law and facts while disallowing Rs 8. 16.789/- u/s 43B on account of, employer contribution towards PF and ESI of Rs 8,16,789/- already paid before due date of return u/s 139(1) And CIT appeal faceless erred in law and facts in not deciding the issue of disallowance those it was subject matter of appeal before learned CIT appeal faceless. The aggrieved assess seek relief by way of deletion of disallowance made to the returned income. 3. The assessee craves leave to add or alter or delete any of the ground of appeal on or before the date of hearing.” 2. The Ld. Counsel for the assessee submitted that the assessee is running a proprietorship concern in the name of Jatayu Enterprises Services and is engaged in the business of provide security services. The deposit towards employees contribution was all made but however slightly late. It was contended that the disallowance of Rs. 63,83,313/- on account of belated deposit of employees contribution to PF / ESIC under S. 36(1)(va) of the Act is not justifiable under Section 143(1) of the Act, particularly where the auditor in the Tax Audit Report has never indicated any disallowance to be carried out under Section 36(1)(va) of the Act as required under Section 143(1)(a)(iv) of the Act. 2963/Del/2022 3 3. The Ld. Sr. DR for the Revenue on its part, contended that Central Processing Centre (“CPC”) has made additions of Rs. 63,83,313/- to the returned income of the assessee on account of late deposit of employees contribution to Provident Fund/ESIC deferred while processing the return of income. In this regard, the action of the Revenue in making disallowance towards late deposit of employees contribution to Provident Fund/ESIC was supported by the judgement rendered in the case of Checkmate Services (P.) Ltd. vs CIT (2022) 143 taxmann.com 178 (SC). Ld. Sr. DR for the Revenue thus submitted that belated deposit of employees contribution held in Trust by the employee Assessee are to be reckoned as taxable income of the assessee u/s. 2(24)(x) r.w. Section 43B of the Act and the deduction u/s 36(i)(va) of the Act would not be permissible thereon in case of belated payments. Ld. Sr. DR for the Revenue further contended that the delayed deposit of employees contribution indicated in the Audit Report is sufficient for adjustment under section 143(1) of the Act, as held by the Pune Bench of the Tribunal in the case of Cemetile Industries vs ITO TS-933-ITAT-2022 (Pune). 4. The issue towards taxability of belated employees contribution to Provident Fund/ESIC is no longer res integra in the light of the judgement of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. vs CIT (supra). The co- ordinate Bench of the Tribunal in Cemetile Industries vs ITO (supra) had expressed a view that such adjustment/disallowance is also permissible in the proceedings carried out u/s 143(1) of the Act. Very recently, the Co-ordinate Bench of the Tribunal in Savleen Kaur & Others vs ITO in ITA No.2249/Del/2022 & Others for Assessment Year 2018-19 & Others vide order dated 09.01.2023 and in BT Data and Surveying Services India Pvt. Ltd. vs. ITO in ITA No.1658/Del/2021 for Asy 2018-19 vide order dated 07.02.2023 has also taken a similar view and upheld the action of the Revenue. 2963/Del/2022 4 In parity with the view taken by Co-ordinate Benches, we do not see any merit in this plea of the assessee on first principles. 5. We n ow t ur n t o alter nat e pl ea on b ehal f of th e assessee f or gr ant of deducti on under g ener al pr ovi si on s for deduct ion o f expendi tu re und er S. 37 of t he Act . We do not see an y mer i t i n such pl ea t hat the bel at ed deposit o f e mpl o yees co nt r i buti on s to PF/ ESI C go verned und er Secti on 36 (1)( va) i s al so si mul t an eou sl y a menabl e t o deduction un der Sect io n 37 (1) o f t h e Act . I n t er ms o f t h e pr ov i si on , Sect i on 37 (1) per mit s deducti on of expendit ur e wh i ch i s not i n the n at ur e of exp end i ture pr escri b ed in Sect i on s 30 t o 36 o f t he Act and al so n ot being in t h e nat ur e of capi t al expendi tu re or personal exp en ses of the assesse e. Thus, i n vi ew of such man dat e o f l aw, t he ded ucti on o f expendit ur e u nder t h e gener al cl ause of Sect io n 37( 1) wou l d not ext end t o exp endi t ur e speci al l y covered wi t h i n the ambi t of Sect i on 36( 1)(va) o f t he Act . Th e Hon’bl e Supr eme Cou rt in th e case of Checkmat e Pvt . Lt d. (su pra ) i t sel f ex pl ain s t hi s positi on in Par a 32 of the Ju dg ment . Such vi ew al so d raws suppo r t f ro m t he o bser vati on s made i n r ecent j udg ment o f t he Hon ’b l e Sup re me Cour t i n t he case of Pr. CI T vs. Khyati Real to rs (P) Lt d. (20 22) 14 1 taxman n. co m 4 61 (SC ). The al t er nat e pl ea i s t hu s wi t hout an y mer i t . 6. We al so t ake n ot e of ye t ano t her p l ea made out on behal f t h e assesse e t owar ds met h odolo g y of cal cul at i on o f def aul t und er th e r el evan t PF/ES IC Act . The Ld. Counsel cont ends th at the mont h du r in g whi ch t h e di sbur sement of sal ar y i s act ual l y mad e woul d be r el ev ant f or t he pur po ses of d eter mi nat i on of due dat e of deposit under t he r espect iv e st at ut e. The accru al of l i abi li t y t owar ds pa yment of sal ar y wi t hou t act u al di sbur sement wou ld not f ast en obl ig at i on f or d epo sits of empl o yees 2963/Del/2022 5 co nt ri but ion i n t he l ab our Act s per se. as ob serv ed by t he co- or dinat e bench i n Kanoi Pa per and I ndu st ri es Lt d. vs. ACI T (2 0 02) 75 TTJ 44 8 (Cal ). Th is aspect has not been f ound t o be exami ned b y t he Assessin g Off i cer o r CI T(A) . Hence wi t hou t expr essi ng an y opinio n on meri t s o n t hi s aspect, we deem i t expedi ent to r est or e t h e mat t er t o th e f il e of desi g nat ed AO. It shal l be op en t o the assessee t o pl ace f act ual mat r i x bef or e t he AO an d t ake su ch p l ea f o r eval u at ion and consi derat ion o f t h e AO. The AO shal l ex ami ne t hi s aspect and f resh order i n accordance wi t h l aw af t er giving p roper op port unit y. 7. The Gro und no. 1 of the assessee’s ap peal i s t hus all o wed f or st at i sti cal pur pose. 8. The Gr o und no. 2 con cer n s t he disal l owance of Rs. 8, 16, 789/ - un der S. 43 B of the Act o n account of emp l o yer co ntr i but ion towar ds PF/ ESI C. It i s the case o f the assessee t h at th e empl o yer cont r i bu t io n t owar ds PF/ ESIC has been d ul y deposi t ed befor e t he due dat e of f i ling of r etur n and ther efo re, ther e was n o war r an t for the Rev enu e Aut hori t i es t o di sal l ow su ch cont ri but i on under S. 43B o f the Act . The i ssue r equir es f act ual veri fi cat ion. The mat t er i s th us al so re manded back t o the f i l e of t he Assessi ng Of ficer . The assessee shal l b e at li b ert y t o adduce such eviden ces, as i t ma y d eem exp edi ent to just i f y i t s p l ea on l aw and f act s. The Assessi ng Of f i cer shal l consi der t he evi dences and al l pl ea r ai sed on t he po i nt an d pass o rd er in accordance wi t h l aw. Needless to say, a reasonable opportunity shall be given to the assessee while determining the issue. The Gro und no. 2 of t he assessee’s appeal i s t hus al l o wed for st at i st ical pu rp oses. 2963/Del/2022 6 9. I n the r esult , t h e app eal of t he assessee i s al lowed f or st at i st i cal pu rposes. Order pronounced in the open Court on 20/06/2023. Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20/06/2023 POOJA Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar Date 1. Draft dictated on 22.06.2023 2. Draft placed before author 26.06.2023 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. File comes back to PS/Sr. PS 8. Uploaded on 9. File sent to the Bench Clerk 10. Date on which file goes to the AR 11. Date on which file goes to the Head Clerk. 12. Date of dispatch of Order. [