AKAR AUTO INDUSTRIES LTD, MUMBAI V. DCIT-6(1)(1), MUMBAI

ITA 502/MUM/2023

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Akar Auto Industries Limited appealed against the order of the Commissioner of Income Tax, which confirmed the addition of Rs. 65,19,310 to the company's income for the assessment year 2018-19. This addition was initially made by the Assessing Officer due to the late deposit of employees' contributions to the provident fund, which was beyond the due date prescribed under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Tribunal considered various legal arguments and precedents, including the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT, which clarified that such contributions are admissible only if deposited within the statutory due dates. The Tribunal found no merit in the assessee's arguments and upheld the addition.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124799 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-04-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 28-02-2023
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT, Cemetile Industries & Ors. Vs. Income Tax Officer & Ors, P. R. Packaging Services vs. ACIT, Kalpesh Synthetics Pvt. Ltd. vs. DCIT, Salasar Balaji Ship Breakers Pvt. Ltd. vs. ACIT, CIT vs. Dilip & Co., CIT vs. Sabri Enterprises
• Laws Referred To: Income Tax Act 1961, Employees' Provident Funds And Miscellaneous Provisions Act, 1952
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india
• Section: 37; 143(1); 195; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN, AM & SHRI N. K. CHOUDHRY, JM I.T.A. No. 502/Mum/2023 Assessment Year: 2018-19) Akar Auto Industries Limited 304, Abhay Steel House, Baroda Street, Carnac Bunder, Masjid, Mumbai-400 009. बनाम/ Vs. DCIT Cir. 6(1)(1) 503, Aayakar Bhavan, M. K. Road, Churchgate, Mumbai-400 020 PAN No. AAACA4261G (Appellant) : Respondent) Appellant by : Shri P. C. Parwal, Ld. AR Respondent by : Shri Manoj Kumar Sinha, Ld. DR Date of Hearing : 01.05.2023 Date of Pronouncement : 30.05.2023 O R D E R Per N. K. Choudhry, Judicial Member: The Assessee/Appellant herein has preferred this appeal against the order dated 28.12.2022 impugned herein passed by Ld. Commissioner of Income Tax {in short ‘Ld. Commissioner’} u/s 250 of the Income Tax Act 1961 (in short ‘the Act’) for AY 2018-19. 2 I.T.A. No. 502/Mum/2023 Akar Auto Industries Limited 2. In the instant case, the CPC/Assessing Officer by processing the return of income vide intimation dated 16.11.2019 u/s 143(1) of the Act, made the addition of Rs. 65,19,310/- on account of late depositing of employee’s contribution in the provident fund account after the due date as prescribed in the Employees’ Provident Funds And Miscellaneous Provisions Act, 1952 (in short ‘EPF Act’). 3. The Appellant being aggrieved challenged the said addition before the Ld. Commissioner by filling first appeal, but could not succeeded as Ld. Commissioner affirmed the addition under consideration, by thoroughly considering the relevant provisions of the Act as applicable to the issue involved and various judgments of the Hon’ble Courts including the latest judgment of Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT (Civil Appeal No. 2833 of 2016) decided on 12.02.2022. 4. The Assessee being aggrieved is in appeal before us and in support of its case raised various issues such as adjustment cannot be made on account of delay in employee’s contribution to PF u/s 143(1)(a)(ii) of the Act. The assessee in support of its contention raised, also referred to the judgment passed by Hon’ble Bench of the 3 I.T.A. No. 502/Mum/2023 Akar Auto Industries Limited Tribunal at Pune in the case of Cemetile Industries & Ors. Vs. Income Tax Officer & Ors (ITA No. 693/Pun/2022 decided on 23.11.2022). 4.1 The assessee further claimed that adjustment as per sub clause (iv) of section 143(1)(a) of the Act can be made in respect of disallowance of expenditure indicated in the audit report, but not taken into account in computing the total income of the Return of income. In the instant case nothing has been indicated by the Auditor, hence addition under consideration is unsustainable. The Hon’ble Mumbai Bench in the case of P. R. Packaging Services vs. ACIT (ITA No. 2376/Mum/2022) distinguished the judgment of Hon’ble Apex court in the case of Checkmate Services Pvt. Ltd. vs. CIT (supra) and deleted the similar additions as involved in the instant case. 4.2 The Ld. AR further claimed “ If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly,’’ as observed by the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT (supra) while relying on the decision of the CIT vs. Dilip & Co. (2018) 9 SCC (1). Ld. AR further claimed that the amendment in 4 I.T.A. No. 502/Mum/2023 Akar Auto Industries Limited section 36(1)(va) of the Act is perspective in nature, therefore judgment of the Hon’ble Apex court in the case of Checkmate Services Pvt. Ltd. vs. CIT (supra) cannot be made applicable retrospectively and therefore as no application to the case in hand. 4.3 The Ld. AR further claimed as per explanation 1 inserted in section 36(1)(va), it has been clarified that for the purpose of its claim due date for the purpose of deposit of employee’s contribution to the respective funds means the date by which the assessee is required as an employer to credit employee’s contribution to the employees account in the relevant fund, under any Act or Rule, Order or notification issued there under or under any standing order, award, contract of services or otherwise, meaning thereby there is no specification of the Act, hence it can be construed that due date can be of the Income Tax Act as well. 4.4 Ld. AR also emphasized that employee’s contribution to ESI/PF is a deemed income and if the same is not allowed then it will amount to enrichment. It is a basic canons of law “as to why the remedy cannot be allowed.” Ld. AR further by relying on the judgment passed by the Hon’ble Karnataka High Court in the case of CIT vs. Sabri Enterprises (2008) 298 ITR 141 (Kar) wherein it has been held that the 5 I.T.A. No. 502/Mum/2023 Akar Auto Industries Limited deemed income should be considered as expenditure and expenditure incurred is allowable u/s 37 of the Act, claimed that the assessee cannot be left remediless. At last, Ld. AR claimed even if it is presumed that payment of employee’s contribution to the respective fund is after the due date as prescribed under the relevant statutes and is incorrect claim and the same is disallowable, but still can be allowed u/s 37 of the Act. 5. On the contrary, Ld. DR refuted the claim of the assessee by submitted that the Mumbai Bench has passed the order in the Kalpesh Synthetics Pvt. Ltd. vs. DCIT reported in 195 ITD 142(Mum)) which is relied upon by the Assessee, infact has been decided by the Hon’ble Tribunal prior to the judgment of the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT (supra). In the case of M/s Salasar Balaji Ship Breakers Pvt. Ltd. vs. ACIT (ITA No. 1947/Mum/2021 decided on 12.04.2023) the Hon’ble Mumbai Bench has taken into consideration identical issues as raised by the assessee in the instant case, hence the appeal of the assessee is liable to be dismissed as the impugned order does not suffers from any perversity, impropriety and/or illegality. 6 I.T.A. No. 502/Mum/2023 Akar Auto Industries Limited 6. Having heard both the parties and perused the material placed on record, we observe that assessee though accepted the judgment of the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT (supra) wherein it has been clearly held that contribution of employees to the relevant funds is the employer income u/s 2(24)(x) of the Act and deduction for the same can be allowed, only if such contribution is deposited in the employee account in the relevant fund before the date stipulated under the respective Acts. 6.1 The assessee raised the issue that aforesaid judgment came in 2020, whereas the case of the Assessee pertains to AY 2018-19, hence the same cannot be made applicable to the instant case. We have given thoughtful consideration to the contention raised by the Ld. AR. The Hon’ble Pune Bench Tribunal in the case of Cemetile Industries & Ors. Vs. Income Tax Officer & Ors (supra) has clearly held as under; There is no quarrel that the enunciation of law by the Hon’ble Supreme Court is always declaratory having the effect and application ab initio, being, the date of insertion of the provision, unless a judgment is categorically made prospectively applicable. The ld. AR candidly admitted that this judgment will equally apply to the disallowance u/s.36(1)(va) anent to all earlier years as well for the assessments completed u/s.143(3) of the Act. 7 I.T.A. No. 502/Mum/2023 Akar Auto Industries Limited We observe that the Hon’ble Apex Court in Checkmate Services Pvt. Ltd. case (supra) decided the Civil Appeal no. 2833 of 2016, therefore it can easily be construed that the assessment year involved pertains to prior to 2016. The Hon’ble coordinate bench at Pune has also held clearly “that enunciation of law by the Hon’ble Supreme Court is always declaratory having the effect and application ab initio, being, the date of insertion of the provision, unless a judgment is categorically made prospectively applicable”. The Hon’ble Bench of the Tribunal at Mumbai in the case of M/s Salasar Balaji Ship Breakers Pvt. Ltd.(supra) has also dealt with issue qua disallowance on account of daily payment of employees contribution to PF and ESI beyond the due date as prescribed in the relevant statute and by relying on the judgment of Hon’ble Apex Court in Checkmate Services Pvt. Ltd. case (supra) affirmed the sustenance of the disallowance by the Ld. Commissioner. Therefore on the aforesaid considerations this contention raised by the assessee is untenable. 6.2 Next issue raised by the assessee pertains to the non- applicability of the provisions of clause (ii) of section 143(1) of the Act. We observe that that the Hon’ble Apex Court in the Case of Checkmate Services Pvt. Ltd. vs. CIT (supra) clearly held that if the amount due in respect of employee’s 8 I.T.A. No. 502/Mum/2023 Akar Auto Industries Limited contribution has not been deposited in the respective funds before the due date as prescribed under the relevant statute, then it is un-admissible claim. Hence this contention is also not tenable as section 143(1)(a)(ii) has clearly covered the disallowance on account of incorrect claim. 6.3 The Assessee also raised the issue that the assessee cannot be left remediless and alternatively can be allowed to claim the deduction as expenditure u/s 37 of the Act. It is settled law that the claim which is not allowable directly, cannot be allowed indirectly. Hence this contention of the assessee is also not tenable. 6.4 In our considered view once the controversy on a particular issue has been settled directly by the Hon’ble Apex Court, as settled in Checkmate case (Supra) then nothing left to be agitated, until and unless the case falls outside of the facts and issues considered or dictum laid down by the Hon’ble Apex Court, which is not the case here. 6.5 In view of the above considerations and observations, the other issues/controversies raised by the assessee are academic in nature, hence do not require any adjudication as the same would prove futile exercise. 9 I.T.A. No. 502/Mum/2023 Akar Auto Industries Limited 6.6 Resultantly we are inclined not to interfere in the impugned order, as the same does not suffers from any perversity, impropriatory or illegally. 7. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on 30 th May, 2023. Sd/- Sd/- (B. R. Baskaran) (N. K. Choudhry) Accountant Member Judicial Member Sr.PS. Dhananjay आदेशकीŮितिलिपअŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. िवभागीयŮितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 4. गाडŊफाईल / Guard File आदेशानुसार/ BY ORDER, .उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई/ ITAT, Mumbai