Dinesh Industrial Corporation , Gautam Buddha Nagar V. ITO,Ward-5(1)(1), Gautam Buddha Nagar

ITA 45/DEL/2023

AI Insights

The case involves Dinesh Industrial Corporation appealing against the order of the Commissioner of Income Tax (Appeals), which upheld the addition of Rs. 21,94,886 to the assessee's income for the Assessment Year 2018-19. This addition was due to the late deposit of employees' contributions to Provident Fund/ESIC, which the Central Processing Centre (CPC) processed under Section 154 of the Income Tax Act, 1961. The assessee contested that the disallowance was unjustified as the contributions were made before the filing of the return, albeit late. The Income Tax Appellate Tribunal (ITAT) noted the legal precedent set by the Supreme Court in Checkmate Services (P.) Ltd. vs CIT, which supported the Revenue's position. However, the ITAT restored the matter to the AO to re-examine the calculation methodology of the default.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121536 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 15 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: 2018-2019
• Appeal Filed On: 04-01-2023
• 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
• Assessee Lawyers: RAMANAND ROY
• Section: 37; 154; 43B; 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.45/DEL/2023 Assessment Year 2018-19 Dinesh Industrial Corporation, C-33, Sector 9, Gautam Buddha Nagar, Uttar Pradesh. Vs. DCIT, CPC-Banglore, Income Tax Officer, Ward 5(1)(1), Gautam Buddha Nagar, Uttar Pradesh. TAN/PAN: AAFFC9282M (Appellant) (Respondent) Appellant by: Shri Ramanand Roy, 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 14/11/2022 arising from intimation dated 17/12/2019 passed u/s 154 of the Income Tax Act, 1961 (“the Act”) concerning Assessment Year 2018-19. The grounds of appeal raised by the Assessee read as under: ” 1. The Ld. Assessing Officer Circle 5(1) (1), has erred in law and on facts to disposed the application U/s 154 of the Income Tax Act, 1981 and disallow the 45/Del/2023 2 expenses a sum of Rs. 21,94,886/- on account of late deposit of PF, ESI and statutory dues but before filing of return without affording opportunity to the Assessee. 2. The Ld. Assessing Officer Circle 5(1)(1) has further failed to appreciate the submission made in the Application u/s 154 of Income Tax Act for rectification of records the Assessment order processed u/s 143(1) of the Income Tax Act, 1961. As per CPC having filed the application it was will within the jurisdiction of the AO to rectify and inform CPC portal. 3. The Ld. Officer Circle 5(1)(1), erred in law in invoking the provision for disallowing the claim under Section 36(1)(va) of the Income Tax Act 1961 and disallow the claim. Expenses an amount of Rs.21,94,886/- and considering the same for tax. 4. The Ld. Assessing Officer Circle 5(1)(1), has further erred in law on facts to appreciate that as per Settled law by the Hon'ble Supreme Court said amounts were paid after the due dates of payments under relevant Acts but has been paid before filing of the returns. Assessee is entitled to the deduction. The Assessing Officer is required to apply law as per provisions and clarification. 5. That the NFAC also failed to appreciate the facts and grounds and also to grant opportunity to the Assessee thereafter arbitrary upheld the addition in the appeal. 6. The CIT(A) having given directions by way of fresh examination and remand the matter whereas has no power to remand the case to the Assessing authority. 7. that the order passed by the CIT(A) in ex-party order without giving any opportunity to the appellant. 8. The order of the CIT(A) and AO are bad in law and against the facts of the case.” 2. The ld. Counsel for the assessee submitted that the assessee is a partnership Firm doing business in the field of construction as civil construction, supplies and providing services like manpower solutions etc. The deposit towards employees contribution was all made but however slightly late. It was contended that the disallowance of Rs. 21,94,886/- on account of belated deposit of employees contribution to PF / ESIC under S. 36(1)(va) of the Act, is not justifiable under Section 154 of the Act, particularly where the auditor in the Tax Audit Report has 45/Del/2023 3 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. 3. The Ld. Sr. DR for the Revenue on its part, submitted that on the basis of information made available in the Tax Audit Report, the Central Processing Centre (“CPC”) has made additions of Rs. 21,94,886/- to the returned income of the assessee on account of late deposit of employees contribution to Provident Fund/ESIC while processing the return of income. As contended the action of the Revenue in making disallowance towards late deposit of employees contribution to Provident Fund/ESIC is 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 154 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 154 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 45/Del/2023 4 dated 07.02.2023 has also taken a similar view and upheld the action of the Revenue. 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 tu re 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 mand at e o f l aw, t he dedu cti 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 hou t 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 is 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 45/Del/2023 5 di sbur sement wou ld not f ast en obl ig at i on f or d epo sits of empl o yees co nt ri but ion i n t he l ab our Act s per se. as observ 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 sh al l exa mi ne t h is aspect and pass f r esh order in acco rd ance wi t h l aw aft er gi ving proper oppo rtu nit y. 7. 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 45/Del/2023 6 Date 1. Draft dictated on 20.06.2023 2. Draft placed before author 20.06.2023 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.