Chanakya Enterprises, Shivamogga V. Income-Tax Officer, Ward-1 & TPS, Shimoga

ITA 617/BANG/2023

AI Insights

The case involves M/s. Chanakya Enterprises, a partnership firm, which appealed against the order of the CIT(A) confirming an addition of Rs. 39,41,590 to its income for the Assessment Year 2018-19. This addition was initially made by the CPC under section 143(1) of the Income Tax Act, 1961, due to the late payment of employees' contributions to ESI and PF accounts. The CIT(A) upheld this addition, referencing the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT, which ruled that such late payments are not deductible. The Tribunal, after hearing the Standing Counsel for the Revenue and without any representation from the assessee, dismissed the appeal, agreeing with the lower authorities and citing similar precedents.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299819 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-09-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 20-08-2023
• Other Referred Cases: Checkmate Services Pvt. Ltd. Vs. CIT-1, MTR Maiya's Vs. ITO, Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(1); 250; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC - A” BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT ITA No.617/Bang/2023 Assessment Year : 2017-18 M/s. Chanakya Enterprises, Pearlite Complex, NT Road, Shivamogga – 577 201. PAN : AAEFC 7133 Q Vs.ITO, Ward – 1 and TPS, Shimoga. APPELLANTRESPONDENT Assessee by:None Revenue by :Shri. Ganesh R Ghale, Advocate, Standing Counsel for Revenue. Date of hearing:21.09.2023 Date of Pronouncement:22.09.2023 O R D E R Per George George K, Vice President: This appeal at the instance of the assessee is directed against CIT(A)’s order dated 22.06.2023, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19. 2. The grounds raised read as follows: 1.The entire Appeal order passed by Learned CIT in so far it is against the Appellant is opposed to principle of equity and justice. 2.The Learned CIT (Appeals) is erred in confirming the addition of Rs. 39,41,590/- which is made by adjustment U/s.143(1a) of the Act. ITA No.617/Bang/2023 Page 2 of 5 3.The learned CIT, Appels erred in considering fact that, disallowance of belated payment ESI, EPS payments are outside scope of adjustment under Section 143(1a) of the Act. 4.The PF and ESI being the deemed income of the assessee as the same is collected from the employee salary and therefore, the same is not under the permissible adjustments U/s.143(1a) of the Act. 5.The learned CIT, Appeals, failed to consider the Judgements of Jaipur ITAT in case of Paris Elysees India Private Limited [TS-77-ITAT-2023(JPR)] and Delhi ITAT ruling in Garg Heart Center & Nursing Home which have been latest rulings post check mate Services Pvt Ltd., ruling of Hon Supreme court. 6.the learned CIT, Appeals erred in considering the plea of the appellant, to consider the issue on technical ground. 7.The Appellant reserves the right to add, amend, substitute and withdrawal the grounds of appeal. 3. Brief facts of the case are as follows: Assessee is a partnership firm. For the Assessment Year 2018-19, the return of income was filed on 30.10.2018 declaring total income of Rs.2,81,320/-. The return of income was processed by the CPC vide intimation dated 29.01.2020 under section 143(1) of the Act. In the said intimation, addition was made amounting to Rs.39,41,590/- on account of late payment of employees’ contribution to the ESI and PF account. 4. Aggrieved, the assessee filed an appeal before the First Appellate Authority. The CIT(A), following the judgment of the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd., Vs. CIT-1 (in Civil Appeal No. 2833/2016 vide its judgment dated 12 October 2022) reported in [2022] 143 taxmann.com 178 (SC), decided the issue against the assessee. ITA No.617/Bang/2023 Page 3 of 5 5. Aggrieved by the order of the CIT(A), assessee has filed the present appeal before the Tribunal. None was present on behalf of the assessee nor any adjournment letter was filed. However, I proceed to dispose off the matter on merits, after hearing the learned Standing Counsel. The learned Standing Counsel submitted that the issue in question is squarely covered by the judgment of the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd., Vs. CIT (supra). 6. I have heard the learned Standing Counsel and perused the material on record. The solitary issue for adjudication is whether the employees’ contribution to ESI and PF account paid by the assessee belatedly (i.e., the beyond the period prescribed under the respective Acts, however paid within the due date of filing the return of income under section 139(1) of the Act is to be allowed as a deduction. The said issue is no long res integra in light of the judgment of the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd., wherein it was categorically held that employees’ contribution to ESI/PF beyond the period prescribed under the respective Acts is not entitled for any adjudication. 7. In the grounds of appeal, assessee has raised a ground regarding adjustment made in the intimation under section 143(1) of the Act by making a disallowance of Rs.39,41,590/-. This contention of the assessee raised in the ground is not tenable in view of the Co-ordinate Bench’s order of the Tribunal in the case of MTR Maiya’s Vs. ITO reported in 152 taxmann.com 89 (Bangalore Trib.) wherein it was held that disallowance under section 143(1) of the Act towards employees’ contribution to ESI and PF is justified. The Bangalore Bench of the Tribunal had followed the judgment of the Hon’ble Madras High Court in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd., Vs. DCIT reported in [2022] reported in 138 taxmann.com 517. The relevant finding of the Bangalore Bench of the Tribunal reads as follows: ITA No.617/Bang/2023 Page 4 of 5 “11. Heard both the sides, perused the entire material on record and the orders of the lower authorities. As far as the contention of the assessee that no disallowance can be made u/s. 143(1)(a) of the Act towards employees contribution to EPF and ESI is concerned, we find that this issue is settled by the Hon'ble Madras High Court in the case of M520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. v. Dy. C1T [2022] 138 taxmann.com 571 wherein it was held as under:— "7. The scope of an 'intimation' under section 143(1)(a) of the Act, extends to the making of adjustments based upon errors apparent from the return of income and patent from the record, Thus to say that the. scope of 'incorrect claim' should be circumscribed and restricted by the Explanation which employs the term 'entry' would, in my view, not be correct and the provision must be given full and unfettered play. The explanation cannot curtail or restrict the main thrust or scope of the provision and due weightage as well as meaning has to be attributed to the purposes of section 143(1)(a) of the Act." 12. In view of the above judgment, the contention of the assessee that no disallowance could be made u/s. 143(1)(a) of the Act towards employees contribution to EPF and ESI is rejected.” 8. In light of the aforesaid reasoning and the judicial pronouncements cited supra, the appeal filed by the assessee is rejected. It is ordered accordingly. 9. In the result, appeal filed by the assessee is dismissed. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- (LAXMI PRASAD SAHU) (GEORGE GEORGE K) Accountant Member Vice President Bangalore. Dated: 22.09.2023. /NS/* ITA No.617/Bang/2023 Page 5 of 5 Copy to: 1.Appellants2.Respondent 3.DRP4.CIT 5.CIT(A)6.DR, ITAT, Bangalore. 7. Guard file By order Assistant Registrar, ITAT, Bangalore.