MEHER SHAFI KAZI, MUMBAI V. ASSTT. DIRECTOR OF INCOME TAX, CPC , MUMBAI

ITA 3139/MUM/2022

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The case involves Meher Shafi Kazi, the appellant, who challenged the order of the Commissioner of Income Tax (Appeals) confirming the disallowance made by the Assistant Director of Income Tax, CPC, regarding the late payment of employee's provident fund contributions. The original disallowance was made under section 143(1) of the Income Tax Act, 1961, and was upheld through subsequent appeals, including a rectification application under section 154 and an appeal to the CIT(A). The Tribunal's decision was influenced by the Supreme Court's ruling in Checkmate Services (P.) Ltd., which clarified the conditions under which deductions for employee's contributions to provident funds are allowable.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125821 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-03-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 12-12-2022
• Other Referred Cases: Checkmate Services (P.) Ltd. vs CIT, P.R. Packaging Service vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; Condonation of delay
• Section: 154; 43B; 143(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI G.S. PANNU, PRESIDENT AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.3139/Mum./2022 (Assessment Year : 2018–19) Meher Shafi Kazi 3, D’Silva Dwell, Pitamber Lane Near Canara Bank, Mahim Mumbai 400 016 PAN – AADPK1400F ................ Appellant v/s Asstt. Commissioner of Income Tax Central Processing Centre Bengaluru 560 100 ................Respondent Assessee by : Shri Haridas Bhat Revenue by : Smt. Mahita Nair Date of Hearing – 02/03/2023 Date of Order – 21/03/2023 O R D E R PER BENCH The present appeal has been filed by the assessee challenging the impugned order dated 17/11/2021, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], which in turn arose from order dated 16/01/2020, passed under section 154 of the Act, for the assessment year 2018-19. 2. In this appeal, the assessee has raised the following grounds: – Meher Shafi Kazi ITA no.3139/Mum./2022 Page | 2 “GROUND I 1. On the facts and circumstances of the case, and in Law, the CITA erred in confirming the addition made by Asst. Director of Income Tax, CPC is bad at law. 2. On the facts and circumstances of the case and in law the CITA failed to appreciate that a. There is no discrepancy either clerical or technical in the return filed. b. All the disallowances made by the tax auditor are already added back to the income of the assessee while filing the return. c. The amount mentioned in tax audit towards the PF amount and date of payment is mere disclosure not disallowance. d. No addition can be made u/s 143(1) unless there is some clerical or technical discrepancies in the return. e. CPC processing return and considering the amount of PF paid after the due date mentioned in the PF Act cannot be termed as discrepancy and cannot be added u/s 143(1) of the Act. f. In this case, the amount added to the income of the assessee is a disallowance in nature and cannot be made without assessment. 3. The appellant, therefore, prays that the disallowance made u/s 154 r.w.s 143(1) of the Act is bad at law and shall be deleted. GROUND II 1. On the facts and circumstances of the case, and in Law, CITA erred in confirming the disallowance made by Asst. Director of Income Tax, CPC of Rs. 10,73,794 /- being Payment of PF dues u/s 36(1)(va) of the Act considering the same as not deposited on time. 2. On the facts and circumstances of the case and in law the CITA failed to appreciate that The payments were deposited in the relevant fund before the due date of filing the return. 3. The appellant, therefore, prays that the disallowance of Rs. 10,73,7947- is respect of Late payment of PF shall be deleted. The appellant craves leave to produce additional evidence if any in support of its claim in the course of appeal hearing. The appellant craves leave to add to, alter, and / or amend the above grounds of appeal.” 3. The present appeal is delayed by 330 days. The assessee has filed an application seeking condonation of delay supported by her affidavit. In the affidavit, it is submitted that the assessee neither received the impugned order by e-mail nor in the physical format, and only upon manually checking the Meher Shafi Kazi ITA no.3139/Mum./2022 Page | 3 pending appeal status, the assessee came to know about the impugned order. Thereafter, the assessee filed the present appeal. On the other hand, the learned Departmental Representative (“learned DR”) by referring to Form No.36 submitted that the assessee has mentioned 18/11/2021 as the date of communication of the impugned order. Thus, the same is contrary to assessee’s submission in the affidavit. Learned DR submitted that in any case the issue on merits has been decided in favour of the Revenue by the Hon’ble Supreme Court in Checkmate Services (P.) Ltd. vs CIT, [2022] 448 ITR 518 (SC), and thus the prayer for condonation of delay is merely academic in the present case. In short rebuttal, the learned Authorised Representative (“learned AR”) submitted that though the assessee did not receive the impugned order, however the same was uploaded on Department’s web portal, about which the assessee had no intimation and the assessee came to know only upon manual checking the appeal status. Further, the date of communication of the order mentioned in Form No.36 is the date that the assessee presumes to be the date on which the same would have been uploaded on the web portal. Further, the learned AR agreed with the submission of the learned DR that if the issue on merits is found to be covered in favour of the Revenue by the decision of the Hon’ble Supreme Court in Checkmate Services (P.) Ltd. (supra) then prayer for condonation of delay would be rendered academic in the present case. Therefore, given the consensus amongst parties on prayer for condonation of delay, the issue raised in the present appeal is taken up first. Meher Shafi Kazi ITA no.3139/Mum./2022 Page | 4 4. In this appeal, the only grievance of the assessee is against disallowance on account of delayed payment of employee’s contribution to provident fund under section 36(1)(va) of the Act. 5. The brief facts of the case as emanating from the record are: The assessee filed its return of income on 30/10/2018 declaring a total income of Rs.67,11,690. The said return was processed under section 143(1) of the Act computing the total income of the assessee at Rs.77,85,480, after making disallowance of Rs.10,73,794, on account of delayed payment towards employee’s contribution to provident fund under section 36(1)(va) of the Act. The rectification application filed by the assessee against the aforesaid intimation issued under section 143(1) of the Act was disposed off vide order dated 16/01/2020, passed under section 154 of the Act without granting any relief to the assessee in respect of the issue involved. In the appeal against the order passed under section 154 of the Act, the learned CIT(A) vide impugned order dismissed the appeal filed by the assessee and upheld the disallowance made under section 36(1)(va) of the Act. Being aggrieved, the assessee is in appeal before us. 6. During the hearing, the learned AR placed reliance upon the decision of the coordinate bench of the Tribunal in P.R. Packaging Service vs ACIT, in ITA No. 2376/Mum/2022, and submitted that even after the decision of Hon’ble Supreme Court in Checkmate Services (P.) Ltd. (supra) no disallowance under section 36(1)(va) can be made vide intimation issued under section 143(1)(a) of the Act. Meher Shafi Kazi ITA no.3139/Mum./2022 Page | 5 7. We have considered the rival submissions and perused the material available on record. We find that the Hon’ble Supreme Court in Checkmate Services (P.) Ltd. (supra) held that payment towards employee’s contribution to provident fund after the due date prescribed under the relevant statute is not allowable as deduction under section 36(1)(va) of the Act. The relevant findings of the Hon’ble Supreme Court, in the aforesaid decision, are as under: “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 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 interpretation were to be adopted, the non- obstante clause under Section 43B or anything contained in that provision Meher Shafi Kazi ITA no.3139/Mum./2022 Page | 6 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.” 8. As is evident from the record, in the present case, the assessee deposited employees’ contribution to provident fund amounting to Rs.10,73,794 after the due date for payment as provided under the relevant statute, and accordingly the same was disallowed under section 36(1)(va) of the Act vide intimation issued under section 143(1) of the Act. Thereafter, against the said intimation issued under section 143(1) the assessee filed an application under section 154 of the Act, which was disposed of vide order dated 16/01/2020, without granting any relief to the assessee in respect of the issue involved. It is only against this order passed under section 154 of the Act the assessee filed the appeal before the learned CIT(A), which was dismissed vide impugned order. Thus, the impugned order under challenge, in the present appeal, arose from the order passed under section 154 and not from the intimation issued under section 143(1) of the Act. The view taken by the ADIT, CPC under section 154 is in consonance with the law laid down by the Hon’ble Supreme Court in Checkmate Services (P.) Ltd. (supra), and therefore the claim of deduction towards employee’s contribution to PF & ESI made by the assessee becomes an incorrect claim under section 143(1) of the Act. Accordingly, we find no infirmity in the impugned order passed by the learned CIT(A). As a result, the appeal filed by the assessee on the impugned issue is dismissed. 9. Since the issue on merits is found to be covered in favour of the Revenue by the decision of the Hon’ble Supreme Court in Checkmate Services Meher Shafi Kazi ITA no.3139/Mum./2022 Page | 7 (P.) Ltd. (supra), in view of the consensus amongst parties, the application for condonation of delay needs no separate adjudication. 10. In the result, the appeal by the assessee is dismissed. Order pronounced in the open Court on 21/03/2023 Sd/- G.S. PANNU PRESIDENT Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 21/03/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai