AI Insights
The case involves Sinhal Shreeomsingh Rawat, the proprietor of M/s. Star Labour Services, who appealed against the order of the Commissioner of Income Tax (Appeals), which confirmed the disallowances made under sections 36(1)(va) and 40(a)(ia) during the processing of the return under section 143(1) for the Assessment Year 2018-19. The primary contention was regarding the late payment of employees' contributions to PF and ESI, and the non-deduction of tax at source on certain payments. The Tribunal considered various precedents and the amendments in the Finance Act, 2021, and ultimately dismissed the appeal, except for the issue related to the disallowance under section 40(a)(ia), which was set aside for further verification.
Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 114098 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-10-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
08-08-2023
Assessment Year
2018-2019
Appeal Filed On
07-09-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Sinhal Shreeomsingh Rawat, 905/6/3, GIDC Estate, Makarpura, Vadodara-390010, Gujarat, PAN: AGXPR9528B (Appellant) Vs Assistant Director of Income Tax, Centralized Processing Centre, Bengaluru-560500 (Respondent) Assessee Represented: Shri Parimalsinh B. Parmar, A.R. Revenue Represented: Shri Sanjay Kumar, Sr.D.R. Date of hearing : 09-08-2023 Date of pronouncement : 20-10-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the order dated 01.08.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), arising out of the Intimation passed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2018-19. ITA No. 346/Ahd/2022 Assessment Year 2018-19 I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 2 2. The brief facts of the case is that the assessee is proprietor of M/s. Star Labour Services engaged in providing Manpower supply services. For the Assessment Year 2018-19, the assessee filed its Return of Income on 27.09.2018 declaring total income of Rs.1,38,08,014/-. The Return of Income was processed u/s. 143(1), while doing so a communication was issued to the assessee, as to why not make a disallowance u/s. 36(1)(va) of Rs.1,75,24,856/- being the late payment of PF and ESIC and disallowance u/s. 40(a)(ia) of Rs.4,96,610/- for non-deduction of tax. 2.1. In response, the assessee filed its explanation as follows: Incorrect claim u/s. 143(1)(a)(ii) Sr. No. Schedule Error Description Amount to Income Tax Return Amount as computed Response 1 Schedule BP In Schedule BP, SL. No. 14. Amounts debited to the profit and loss account, to the extent disallowable under section 36 (6r of Part A-Ol) is not consistent with amount shown in Sl.No.6.r. Total amount disallowable under section 36 (total of 6a to 6q) of Schedule Ol 0 1,75,24,856 856 No amount is reported under Sl. No. 6r Part A Ol since no amount is disallowable u/s 36. The sum referred to in section 36(1)(va) of the Income Tax Act, is paid on or before the due date of furnishing the return of income and hence following judgment of Honble Supreme Court in the case of Commissioner of Income Tax vs. Vinay Cement Ltd. (2007) 213 CTR 268 (SC) no amount is disallowable u/s 36(1)(va). 2 Schedule 01 In Schedule Part A-OI, SI.No.6.r.Totalamount disallowable under section 36 (total of 6a to 6q) and sum of Sl.no.6a to Sl.No.6q are inconsistent. 0 1,75,24,856 524856 No amount is reported under Sl. No. 6r Part A Ol since no amount is disallowable u/s 36. The sum referred to in section 36(1)(va) of the Income Tax: Act, is paid on or before the due date of furnishing the return of income and hence following judgment of Honble Supreme Court in the case of Commissioner of Income Tax vs. Vinay I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 3 Cement Ltd. (2007) 213 CTR 268 (SC) no amount is disallowable u/s 36(1)(va). 3 Any sum received from employees as contribution to any provident fund or superannuation fund or any fund set up under ESI Act or any other fund for the welfare of employees to the extent not credited to the employees account on or before the due date [36(1)(va)] Sec36(1)va 0 1,75,24,856 The sum received from employees as contribution to any provident fund or any fund set up under ESI Act is allowable u/s 36(1)(va) if the same is paid before the due date of furnishing the return of income (.e. 31.10.2018), following the judgment of 56 Honble Supreme Court in the case of Commissioner of Income Tax vs. Vinay Cement Ltd. (2007) 213 CTR 268 (SC). In the case of the assessee the employees contribution is paid before the due date of furnishing the return of income and hence no disallowance u/s 36(1)(va) is called for. 4 Inconsistency in Amount disallowable under section 40 (a)(ia) on account of non- compliance with the provisions of Chapter XVII-B Sec 40. 0 4,96,610 6610 Amount of Rs. 6,05,866/- being salary paid to Mr. Nisar Amhed, amount of Rs. 4,62.500/- being salary paid to Rajkumar Rawat and amount of Rs. 1.87,000/- being rent paid to Mrs. Dimple Oza are covered under second proviso to section 40(a)(ia) read with first proviso to section 201 (1) of the Income Tax Act, the deductees has shown the relevant income in their respective tax returns, paid tax on it and other conditions stated in the said sections are also satisfied. Accordingly, no disallowance of Rs. 3,76,610/- (being 30 percentage of Rs. 12,55,366/- on which tax is not deducted) is required. In case of Rs. 4,00,000/- salary paid to Mr. Raju Pawa, no tax is deductible considering exemption u/s 10(13A) and deductions u/s 80C. Accordingly, no disallowance of Rs. 1,20,000/- (being 30 percentage of Rs. 4,00,000/- on which tax is not deducted) is required. I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 4 2.2. After considering the above response, the CPC passed the intimation u/s. 143(1) dated 09-01-2020 disallowance of Rs. 1,75,24,856/- on late payment of Employees’ Contribution to Provident Fund and ESI and disallowing u/s. 40(a)(ia) of Rs. 4,96,610/- for non-deduction of tax thereby determining taxable income as Rs. 3,18,29,479/- and demanded tax thereon. 3. Aggrieved against the same, the assessee filed an appeal before National Faceless Appeal Centre, Delhi (NFAC). The assessee moved an application under Rule 46A for additional evidences being Form 26A namely Chartered Accountant Certificate certifying the furnishing of Return of Income and payment of tax by the payees in the case of Rajkumar Rawat , Dimple Oza and Nisar Ahmed. The Ld. NFAC by a very detailed order confirmed the disallowance made u/s. 36(1)(va) and thereby dismissed Ground no. 1 filed by the assessee. 3.1. So far as second ground, the Ld. NFAC directed the Assessing Officer to verify the payment made to Shri Raju Pawa whether liable for TDS or not in the light of CBDT Circular No. 1/2017. However the Ld. NFAC has not admitted/adjudicated the additional documents filed by the assessee and thereby partly allowed the assessee appeal. 4. Aggrieve against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The learned CIT(A) has erred in law and on facts of the case in confirming the disallowances pertaining to employees contribution of PF and ESI, amounting to Rs. 1,75,24,856/- u/s. 2(24)(x) r.w.s. 36(1)(va) of the Act. I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 5 2. The learned CIT(A) has erred in law and on facts of the case confirming the disallowances of Rs. 3,76,610/- pertaining to payment of Rs.12.55,366/- (aggregate of Rs.6,05,866/- + Rs.4,62,500/- + Rs. 1,87,000/-) u/s. 40(a)(ia) of the Act. 3. 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. 4. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in charging interest u/s.234A/B/C/D of the Act. 5. The learned CIT(A) has erred in not considering various facts and in not appreciating the facts and law in their proper perspective. 6. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 5. Ld. Counsel Shri Parimalsinh B. Parmar appearing for the assessee filed before us a Paper Book as well as a Synopsis and submitted the disallowance u/s. 36(1)(va) is a highly “debatable and controversial issue” could not have been made while processing the return u/s. 143(1) of the Act. Further there are “conflicting decisions” on this issue and CPC should not have decided this disallowance in 143(1) proceedings. The Ld. NFAC taken note of the amendments in the Finance Act, 2021 by Insertion of Explanation 2 to section 36(1)(va) and Insertion of Explanation 5 to Section 43B, which are prospective in nature with effect only from 01-04-2021 and will not be applicable to the present Assessment Year 2018-19 and relied upon various case laws in support of his arguments. 5.1. Ld. Counsel further submitted his second limb of argument that “due–date” for payment of employees’ contribution to PF/ESI I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 6 has to be reckoned from the “month of actual payment of salary” and not from the “month of salary in which becomes payable” and demonstrated as follows: • To illustrate,- > "Salary" of "April 2017" is actually "paid” in “May 2017”. > In Tax Audit Report, - ✓ "due date" for payment to respective fund is reckoned by taking "April" as the month in which contribution is received. ✓Accordingly, for "salary of April 2017", "due date" as per Tax Audit Report is "15.05.2017"; > Since "actual date of payment of contribution to PF / ESI" is "30.05.2017", it is belated payment as per Tax Audit Report. > However, since the underlying salary has been paid in "May 2017" and while paying such salary, assessee has deducted contribution of respective employees towards PF & ESI, it can be said that "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". Since the sum has been deposited on "30.05.2017", it is within the prescribed time limit. Hence, no disallowance is called for. • Details of "month of actual payment of salary" as well as "due-date based on such month" are as per Annexure "A". • Since the amount of "employees' contribution to PF & ESI" has been deposited prior to the "due-date as per Annexure A", the impugned disallowance u/s 36(1)(va) r.w.s. 2(24) of the Act is unwarranted. • In view of the above, the impugned disallowance is not justified and hence, the same deserves to be deleted in the larger interest of justice. 6. Per contra, Ld. Sr. D.R. Shri Sanjay Kumar appearing for the Revenue brought to our notice, recent decision of this Tribunal in assessee’s own case for the subsequent Assessment Year 2019-20 in ITA No. 25/Ahd/2022 dated 10.05.2023, wherein following Supreme Court judgment in the case of Checkmate Services (P.) Ltd., the disallowance made by the CPC was upheld. Therefore I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 7 following the same ratio, the present Ground no. 1 raised by the assessee is liable to dismissed. 7. We have given our thoughtful consideration and perused the materials available on record including the Paper Book and Synopsis filed by the assessee. We note that identical issue was dealt by us and decided against the assessee by the very same Bench of this Tribunal in ITA No. 25/Ahd/2022 after taking into account the latest judgment of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. held as follows: “....7. We have given our thoughtful consideration and perused the materials available on record. We note that identical issue is dealt by us recently and decided against the assessee by the Co-ordinate Bench of the Tribunal in ITA No. 342/IND/2022 after taking into account the latest judgment of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd., the legal provisions of section 143(1)(a) of the Act and held as follows: “... 5. The assessee is in appeal before us against the order passed by Ld. CIT(Appeals). Before us, the counsel for the assessee submitted that firstly, in the audit report, the auditor has not made any specific observation regarding inadmissibility of the claim u/s 36(1)(va) of the Act which was required to be made by the auditors in the Tax Audit Report and the Auditors have only mentioned the “actual dates” and “due dates” of remittance. Accordingly, in view of the Mumbai ITAT decisions in the case of PR Packaging in ITA number 2376/Mum/2022 and Kalpesh Synthetics 137 Taxmann.com 475 (Mumbai), this claim of deduction u/s 36(1)(va) of the Act cannot be disallowed u/s 143(1) of the Act (more specifically under sub-clause (d) to 143(1) of the Act). Secondly, the counsel argued that the issue at the time when the disallowance was made, issue was debatable and accordingly could not be the subject matter of disallowance under section 143(1) of the Act. In response, DR relied upon the observations made by the Ld. CIT(Appeals) in the appellate order. 6. We have heard the rival contentions and perused the material on record. Regarding the argument that the auditors did not specifically mention in the audit report regarding inadmissibility of claim with respect to contributions received from the employees I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 8 for various funds as referred to in section 36(1)(va) of the Act, it would be useful to reproduce section 143(1) of the Act, which reads as under: Assessment. 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) 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; (v) disallowance of deduction claimed under 69[section 10AA or under any of the provisions of Chapter VI-A under the heading "C.— Deductions in respect of certain incomes", if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: A perusal of section 143(1) of the Act shows that the words used are “(iv) disallowance of expenditure ...indicated in the audit report” 6.1 Therefore, there is no specific requirement under section 143(1) of the Act that the auditor has to make a specific observation regarding “ admissibility/inadmissibility” with regard to any claim of expenditure and all that is required under section 143(1) of the Act is that disallowance of such expenditure should be “indicated in the audit report”. Now, on going through the specific clauses of the Tax Auditors Report in Form Number 3CD issued under section 44AB of the Act, we observe that serial number 20(b) of Form Number 3CD, which is specific to allowability of claim of deduction u/s 36(1)(va) of the Act, I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 9 does not require the auditor to make any specific observation regarding admissibility of the amount under section 36(1)(va) of the Act. At the same time, when we observe several other parts of the tax audit report viz. serial number 21(b)-amounts inadmissible under section 40(a), serial number 21(c)-amounts inadmissible under section 40(b)/40(a)(ia) of the Act (ba), serial number 21(e)- the provision for payment of gratuity not allowable under section 40A(7), serial number 21(f)- any sum paid by the assessee as an employer not allowable under section 40A(9), serial number 21(h) amount of deduction inadmissible in terms of section 14A etc, there is a specific requirement that the auditor has to mention whether the expenditure is admissible/allowable or not. However, so far as section 36(1)(va) of the Act, the audit report does not require the auditor to make a specific observation regarding “admissibility/inadmissibility” of the above expenditure. 6.2 Therefore, once the auditor has mentioned the “actual” dates of ESI/PF remittance and the “due” dates of ESI/PF remittance by the assessee u/s 36(1)(va) of the Act at serial number 20(b) of the audit report, then, in our considered view, the requirement of section 143(1) of the Act viz. “disallowance of expenditure ....indicated in the tax audit report” stands satisfied and the Department is permitted to make disallowance in terms of section 143(1) of the Act. 6.3 With regards to the second argument of the counsel for the assessee that at the time when the disallowance was made, the issue was debatable, we observe that the position on this issue has now been unambiguously clarified by the Hon'ble Supreme Court with respect to all assessment years prior to AY 2021-22 in the case of Checkmate Services (P.) Ltd. [2022] 143 taxmann.com 178 (SC) wherein the Supreme Court held that for assessment years prior to AY 2021-22, non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was held in trust by assessee-employer as per section 2(24)(x), thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. The Supreme Court observed that there is a marked difference between nature and character of assessee- employer's contribution and amounts retained by assessee from out of employee's income by way of deduction wherein one is liability to be paid by employer and second is deemed income as per section 2(24)(x) which is held in trust by assessee-employer, thus, said marked difference was to be borne while interpreting obligation of assessee-employer under section 43B of the Act. The Hon'ble Supreme held that the non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was not part of assessee-employer's income, thus, said clause I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 10 would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. Again the Supreme Court in the case of Harrisons Malayalam Ltd. [2022] 145 taxmann.com 608 (SC), dismissed the SLP of the Assessee against order of High Court that where assessee-company failed to pay employees’ contribution towards EPF and ESI within due date prescribed in respective Acts, deduction under section 36(1)(va) was not allowable. Recently in the case of Ms. Nalina Dyave Gowda [2023] 146 taxmann.com 420 (Bangalore - Trib.) the assessee during, financial year 2018-19 (assessment year 2019-20) made payment of employees' contribution to ESI and PF beyond due date specified under relevant Act and claimed deduction of same under section 36(1)(va). The Assessing Officer made disallowance of employees' contribution to ESI and PF while electronically processing return of income under section 143(1)(a) of the Act. The ITAT held that disallowance under section 143(1)(a) was valid in view of Supreme Court's decision in case of Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178 and the assessee will not be entitled to deduction of belated payment of ESI and PF of employees' share of contribution as per provisions of section 36(1)(va) of the Act. Again, recently Pune ITAT in the case of Cemetile Industries v. ITO [2022] 145 taxmann.com 209 (Pune-Trib.) held that where assessee-employer deposited amount of employees contribution towards employees' provident fund and employees' state insurance corporation beyond due date stipulated in respective Acts, disallowance made under section 36(1)(va) was justified. The ITAT further held that adjustment under section 143(1)(a) by means of disallowance made for late deposit of employees' share to relevant funds beyond date prescribed under respective Acts was proper. 6.4 In view of the above observations respectfully following the decision of the Honourable Supreme Court in the case of Checkmate Services Private Ltd supra and Harrisons Malayalam Ltd supra and in the light of our observations, we hereby dismiss the assessee’s appeal. 7. In the result, the appeal of the assessee is dismissed.” 7.1. Further the Hon’ble Supreme Court judgment is being followed by the Apex Court in the case of PCIT vs. Strides Arcolab Ltd. reported in [2023] 147 taxmann.com 202 (SC) and Harrisons Malayalam Ltd. Vs. CIT reported in [2022] 145 taxmann.com 608 following Checkmate Services (P.) Ltd. held that non obstante clause under section 43B could not apply in case of employee's contribution which were deducted from their income and was not part of assessee-employer's income and, thus, said clause would I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 11 not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. 8. The next contention of the assessee CPC should not have made the disallowance u/s. 36(1)(va) in 143(1) proceedings which is a debatable and controversial issue by different High Courts. In this connection, the provisions of Section 143(1)(a) deals with the total income or loss shall be computed after making the following adjustments namely “(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return”. Thus we are of the considered opinion as per the first proviso to section 143(1)(a), CPC had given a communication dated 19.02.2019 to the assessee, why not to make a disallowance 36(1)(va) of Rs. 1,79,96,570/- being the late payment of PF and ESIC. However the assessee has not responded to the communication issued by the CPC. It is, thereafter as per section 143(1)(a)(ii), being an incorrect claim made by the assessee, which is apparent from the information filed in the Return of Income, thus the CPC rightly made the disallowance, which is well within the provisions of law. 8.1 Further the Co-ordinate Bench of the Delhi Tribunal in the case of Savleen Kaur vs. ITO in ITA No. 2249/DEL/2022 dated 09- 01-2023 considered the Checkmate Services (P.) Ltd. Supreme Court Judgment and the provisions of Section 143(1)(a) held as follows: “.... 12. A perusal of the afore-stated provisions show that at every stage in sub-section (1) of the Act, the return submitted by the assessee forms the foundation, with respect to which, if any of the inconsistencies referred to in various sub-clauses are found, appropriate adjustments are to be made. It is an open secret that hardly 3 to 5% of the returns are selected for scrutiny assessment, out of which, more than 50% are because of AIR Information under CASS and the Assessing Officer cannot go beyond the reasons for scrutiny selection and such cases are called Limited Scrutiny cases and only the remaining returns are taken up for complete scrutiny u/s 143(3) of the Act. 13. Meaning thereby, that exercise of power under sub-section (2) of section 143 of the Act leading to the passing of an order under subsection (3) thereof, is to be undertaken where it is considered necessary or expedient to ensure that the assessee has not understated income or has not computed excessive loss, or has not under paid the tax in any manner, 14. If any narrow interpretation is given to the decisions of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd [supra], it would not only defeat the very purpose of the enactment I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 12 of the provisions of section 143(1) of the Act but also defeat the very purpose of the Legislators and the decision of the Hon'ble Supreme Court would be made redundant because there would be discrimination and chaos, in as much as, those returns which are processed by the CPC would go free even if the employees’ contribution is deposited after the due date and in some cases the employer may not even deposit the employees’ contribution and those whose returns have been scrutinized and assessed u/s 143(3) of the Act would have to face the disallowance. 15. This can neither be the intention of the Legislators nor the decision of the Hon'ble Supreme Court has to be interpreted in such a way so as to create such discrimination amongst the tax payers. Such interpretation amounts to creation of class [tax payer] within the class [tax payer] meaning thereby that those tax payers who are assessed u/s 143(3) of the Act would have to face disallowance because of the delay in deposit of contribution and those tax payers who have been processed and intimated u/s 143(1) of the Act would go scot- free even if there is delay in deposit of contribution and even if they do not deposit the contribution. 16. We are of the considered view that the ratio decidendi of the Hon'ble Supreme Court is equally applicable to the intimation u/s 143(1) of the Act and, therefore, the decision of the co-ordinate bench relied upon by the assessee is distinguishable. Therefore, respectfully following the binding decision of the Hon'ble Supreme Court [supra], all the three appeals of the assessee are dismissed and that of the revenue is allowed.” 9. Respectfully following the above decisions of the Hon’ble Supreme Court and other Co-ordinate Benches of the Tribunal, we are of the considered view, the disallowance of late payment of PF & ESIC made u/s. 143(1) is valid in law. Thus the grounds of appeal raised by the assessee are devoid of merits. The case laws relied by the assessee are prior to the judgment passed by the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. Thus the ground raised by the assessee are hereby dismissed.” 7.1. Respectfully following the above decisions of ours in assessee’s own case for the Assessment Year 2019-20, the ground raised by the assessee is devoid of merits and the same is here by dismissed. 7.2. The second fold of the argument of the assessee namely “due– date” for payment of employees’ contribution to PF/ESI has to be reckoned from the “month of actual payment of salary” and not I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 13 from the “month of salary in which becomes payable”. This issue is also considered by the Hon’ble High Court of Gujarat in Tax Appeal No. 1256/of 2018 in the case of M/s. Checkmate Facility And Electronic Solutions Pvt. Ltd. Vs. DCIT and held as follows: “...3. Learned counsel for the appellant would not dispute that the issue of disallowance of late deposited employees' contributions of PF and ESIC stands covered by the Division Bench judgment of this Court in case of Commissioner of Income-Tax Gujarat State Road Transport Corporation reported in [2014] 366 ITR 170 (Guj). He however raised a slightly different contention which did not arise for consideration before this Court in case of Gujarat State Road Transport Corporation (supra). He submitted that that in terms of section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, reference to the time limit for depositing the contributions within 15 days of close of the month must be to the month in which the salary payment is made. For example, therefore if the salary payment for the month of June is made on 5 th July, the employer would have time upto 15 th of August for depositing the employee's contribution of provident fund. Looking from this angle, there was no delay or default on the part of the present assessee. 4. In terms of section 36(1) (va) of the Act, any sum received by the assessee from any of his employees to which the provisions of section 2(24)(x) applies, would be deducted as long as such sum is credited by the assessee to the employee's account in the relevant funds on or before due date. Explanation to the said sub- section provides that for the purpose of the said clause, "due date" means a date by which the assessee is required as an employer to credit an employee's contribution to the account in which relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, Section award, contract of service or otherwise. Section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, becomes relevant. Sub-section (1) thereof reads as under: "(1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee, as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the fund "electronic through internet banking of the State Bank of India or any other Nationalized Bank authorized for collection" on account of contributions administrative charge]: "Provided that the Central Provident Fund Commissioner may for reasons to be recorded in writing, allow any employer or class of employer to deposit the contributions by any other mode other than internet banking". 5. This provision thus requires an employer before paying the employee his wages to deduct employee's contribution along with the employer's own contribution as I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 14 fixed by the Government. It is further required that he shall within fifteen days of the close of every month pay the same to the fund such contribution and administrative charges. In terms of this provision thus, after deducting the employee's contribution towards the funds, the same has to be deposited with the Government within fifteen days of the close of every month. Reference to fifteen days of the close of the month must be in relation to the month during which the payment of wages is to be made and corresponding liability to deduct employee's contribution to the fund arises. The expression "within fifteen days of the close of every month" therefore must be interpreted as having reference to the close of the month, for which, the wages are required to be paid with corresponding duty to deduct employee's contribution and to deposit the same in the fund. 6. Learned counsel for the appellant is therefore not correct in contending that if such wages are paid in the following month, the liability to deposit the employee's contribution to the fund gets differed by another month.” 7.3. Respectfully following the above Jurisdictional High Court Judgment, this argument of the assessee is hereby rejected. Thus Ground No. 1 raised by the assessee is hereby dismissed. 8. Regarding Ground No. 2, it is seen from the objection filed by the assesse before CPC, the assessee is being contending that the payees have shown the corresponding income and paid the taxes, filed their respective Return of Income. However the assessee could not file Form 26A namely furnishing Chartered Accountant Certificate as per Section 201(1) of the Act r.w. Rule 31ACB of the Income Tax Rules. Though the assessee filed the above Form 26A in the case of Rajkumar Rawat, Dimple Oza and Nisar Ahmed by way of additional documents invoking Rule 46A, the same were not entertained and adjudicated by Ld. NFAC. Therefore in the Interest of Principle of Natural Justice, we deem it fit to set aside this issue to the file of Jurisdiction Assessing Officer (JAO) with a direction to verify the Form 26A and allow the same in accordance with law. Thus the Grounds raised by the Assessee is partly allowed. I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 15 9. We observe in this proceeding, the CPC has sent a communication to the assessee of various proposed disallowances to be made by it before processing the intimation u/s. 143(1) of the Act. The assessee also filed its response/objection, but the same were not at all considered by the CPC and made disallowances in the intimation u/s. 143(1)(a) of the Act. Thus calling from the objection from the assessee as per 1 st proviso of section 143(1)(a) of the Act and without considering the objection by CPC makes the above proviso an empty formality. It is highly expected the CPC on receipt of the objection filed by the assessee, consider the same in accordance with law and then proceed with as per the provisions u/s. 143(1) of the Act or to proceed with regular scrutiny assessment u/s. 143(3) by issuing notice u/s. 143(2) of the Act. Further it is noted that the assessee filed additional documents invoking Rule 46A of the I.T. Rules, by filing Form 26A before NFAC, the same was also not adjudicated by any NFAC in its order. In our considered view, Ld. NFAC ought to have considered the above additional documents and adjudicated the case in accordance with law. Since it is only a proceeding u/s. 143(1) of the Act and not a scrutiny assessment where assessee is expected to file all necessary documents alongwith the Return of Income. Thus in our considered opinion, Ld. NFAC failed to entertain the additional documents filed by the assessee, we therefore set aside the issue to file of JAO and the Ground No.2 raised by the assessee is partly allowed. I.T.A No. 346/Ahd/2022 A.Y. 2018-19 Page No Sinhal Shreeomsingh Rawat. vs. ADIT 16 10. Ground No. 3 is connected with Ground No. 1 raised by the assessee, the same is already disposed of vide Para No. 7 to 7.3 of this order. Therefore this Ground No. 3 is dismissed. 11. Ground Nos. 4, 5 & 6 are consequential grounds, the same does not require any adjudication. 12. In the result, the appeal filed by the Assessee is allowed for statistical purposes. Order pronounced in the open court on 20 -10-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 20/10/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद
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