Shreeomsingh Bhagwansingh Rawat, Vadodara V. The Dy.CIT, CPC, Bengaluru Present Juridiction The Dy.CIT Circle-1(1)(1), Vadodara

ITA 319/AHD/2023

AI Insights

The case involves two appeals by the assessee, Shreeomsingh Bhagwansingh Rawat, against the orders of the CIT(A) for the Assessment Years 2018-19 and 2019-20. The primary contention was the disallowance of employees' contributions to PF and ESI amounting to Rs.15,07,863, which was adjusted by the Centralized Processing Centre (CPC) under Section 143(1) of the Income Tax Act, 1961. The assessee argued that the issue was debatable and thus outside the scope of adjustment under Section 143(1). However, the tribunal referenced the decision of the Hon'ble Apex Court in Checkmate Services Pvt. Ltd., which had already decided the issue against the assessee, leading to the dismissal of both appeals.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129749 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 05-09-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 01-05-2023
• Other Referred Cases: CIT vs. Gujarat State Road Transport Corporation, 366 ITR 170, Checkmate India Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 43B; 143(1)

Judgement Text

ITA Nos.319 & 320/Ahd/2023 Assessment Years: 2018-19 & 2019-20 Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA Nos.319 & 320/Ahd/2023 Assessment Years: 2018-19 & 2019-20 Shreeomsingh Bhagwansingh Rawat, 905/6, G.I.D.C., Makarpura, Vadodara, Gujarat – 390 010. [PAN – AAMPR 5475 L] Vs. Deputy Commissioner of Income Tax, Centralised Processing Centre, Bangalore. Present Jurisdiction: Deputy Commissioner of Income Tax, Circle – 1(1)(1), Vadodara. (Appellant) (Respondent) Assessee by Shri Tushar Hemani, Sr. Advocate & Parimalsinh B. Parmar, AR Revenue by Ms. Saumya Pandey Jain, Sr. DR Da te o f He a r in g 06.09.2023 Da te o f P ro n o u n ce m e n t 15.09.2023 O R D E R These two appeals are filed by the Assessee against two different orders, dated 09.03.2023 & 20.04.2023, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Years 2018-19 & 2019-20 respectively. 2. The assessee has raised identical grounds in both the appeals and hence grounds raised in ITA No.319/Ahd/2023 for A.Y. 2018-19 are being reproduced hereunder: “1. The learned CIT(A) has erred in law and on the facts in confirming action of the ld. DCIT, CPC in disallowing employees’ contribution to PF and ESI amounting to Rs.15,07,863/- while processing the return u/s.143(1) of the Act. The issue being debatable, falls outside the purview of adjustments prescribed u/s.143(1) of the Act. 2. Alternatively, and without prejudice, the lower authorities have erred in law and on the facts of the case in making a disallowance of payments made within the grace period. 3. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. ITA Nos.319 & 320/Ahd/2023 Assessment Years: 2018-19 & 2019-20 Page 2 of 4 The action of the lower authorities is in clear breach of law and Principles of natural Justice and therefore deserves to be quashed. 4. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in levying interest u/s.234B/C of the Act.” 3. The assessee is a proprietor of M/s. Star Security Services engaged in providing security services. The assessee filed return of income for the Assessment Year 2018-19 on 15.10.2018. The assessee received notice under Section 143(1)(a) of the Income Tax Act, 1961 dated 19.01.2019 proposing adjustment in business income in respect of Employees Contribution to Provident Fund and ESI to the extent not credited to the employees account on or before the due date under Section 36(1)(va) of the Act amounting to Rs.15,07,863/- as reported in Form Annexure 3CD but not disallowed in return of income. The assessee filed his response objecting to the proposed adjustment vide reply dated 18.02.2019. The reply of the assessee was not accepted and adjustment of Rs.15,07,863/- under Section 36(1)(va) of the Act was made thereby increasing business income in the intimation under Section 143(1) of the Act. 4. Being aggrieved by the Assessment Order/ Intimation under Section 143(1) of the Act, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The Ld. AR submitted that as regards to ground nos.1 & 3, the disallowance under section 36(1)(va) being a debatable and controversial issue is beyond the scope of adjudicating under Section 143(1) of the Act. When the intimation under Section 143(1) of the Act was passed in assessee’s case making an adjustment in respect of deduction under Section 36(1)(va) of the Act, the Hon’ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation, 366 ITR 170, decided the issue against the assessee. The said view of the Jurisdictional High Court was accepted by the Hon’ble Apex Court and in view of conflicting decisions in relation to the issue on hand at the relevant point in time, it is amply clear beyond any scope of doubt that the issue on hand is a debatable & controversial issue. It is a settled law that addition by way of adjustment in relation to a debatable and controversial issue is beyond the scope ITA Nos.319 & 320/Ahd/2023 Assessment Years: 2018-19 & 2019-20 Page 3 of 4 of adjustment under Section 143(1) of the Act. Even if the decision of jurisdictional High Court is against the assessee, then also it is not sufficient for making prima facie adjustment under Section 143(1) of the Act in relation to debatable and controversial issues. The Ld. AR further smutted that the CIT(A) while confirming the impugned disallowance, relied upon the following amendments brought in by Finance Act, 2021 w.e.f. 01.04.2021:- a) Insertion of Explanation 2 to Section 36(1)(va) b) Insertion of Explanation 5 to Section 43B 6. However, amendments to Section 36(1)(va) & Section 43B of the Act are prospective in nature and will be applicable only w.e.f. 01.04.2021. Clause 20(b) of the Tax Audit Report merely provides certain details; Auditor has not at all qualified the Tax Audit Report to the effect that disallowance under Section 36(1)(va) of the Act is called for. The CPC has made the impugned adjustment by taking recourse to Section 143(1)(iv) of the Act which provides for disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return. The Ld. AR submitted that clause 20(b) merely calls upon an auditor to provide certain details with respect to contribution to prescribed funds (i.e. PF & ESI) alongwith details of due date for payment and actual date of payment. The Auditor has merely provided such details, as are required to be furnished mandatorily. Auditor has not at all qualified Tax Audit Report to even remotely suggest that any disallowance u/s. 36(1)(va) is called for. Thus, in this case there is no indication in the tax audit report on the basis of which disallowance under section 36(1)(va) of the Act can be made. The Ld. AR further submitted that in case due date for payment of employees contribution to PF/ESI has to be reckoned from the month of actual payment of salary and not from the month of salary in which salary becomes payable. In this particular case, since the underlying salary has been paid in May 2017 and while paying such salary, the assessee has deducted contribution of respective employees towards PF & ESI, it can be said that the assessee received such contribution from employees in the month of May 2017 and accordingly correct due date for depositing such PF & ESI to respective fund shall be 15.06.2017 which is within the prescribed time limit. Hence, no disallowance is ITA Nos.319 & 320/Ahd/2023 Assessment Years: 2018-19 & 2019-20 Page 4 of 4 called for. The Ld. AR, therefore, prayed that the disallowance under Section 36(1)(va) of the Act is not justifiable. 7. The Ld. DR relied upon the decision of the Hon’ble Apex Court in case of Checkmate India limited wherein the issue is already covered against the assessee. 8. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the issue contested in the present appeal is already decided against the assessee by the Hon’ble Apex Court in case of Checkmate Services Pvt. Ltd (Supra). Therefore, the contentions of the Ld. AR that the CPC cannot disallow employees contribution to PF & ESI while processing the return under Section 143(1) of the Act being a debatable issue does not sustain. Hence, appeal of the assessee being ITA No.319/Ahd/2023 for A.Y. 2018-19 is dismissed. 9. ITA No.320/Ahd/2023 for A.Y. 2019-20 is identical to ITA No. 319/Ahd/2023 for A.Y. 2018-19. Hence, ITA No.320/Ahd/2023 is also dismissed 10. In the result, both the appeals of the assessee are dismissed. Order pronounced in the open Court on this 15 th September, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 15 th September, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad