DCIT, CC-III, Ludhiana V. M/s Jain Amar Clothing Pvt. Ltd., Ludhiana

ITA 637/CHANDI/2022

AI Insights

The case involves an appeal by the Department against the order of the Commissioner of Income Tax (Appeals)-5, Ludhiana, which had deleted a disallowance of Rs.1,77,81,074 made by the Assessing Officer. This disallowance pertained to the delayed payment of employees' contributions to welfare funds like EPF and ESI beyond the prescribed time. The Department challenged the CIT(A)'s decision, while the assessee contested the tax effect calculation and the applicable tax rates. The ITAT dismissed the Department's appeal based on the monetary threshold for appeals and allowed the assessee's Cross Objection, correcting the tax effect and rates applied.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128424 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-03-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 27-09-2022
• Other Referred Cases: Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax, M/s Vedvan Consultants Pvt. Ltd., New Delhi
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Tax effect
• Section: 43B

Judgement Text

आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ,चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, “A”, CHANDIGARH BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकरअपीलसं./ITA No.637/CHD/2022 Ǔनधा[रणवष[ / Assessment Year :2020-21 The DCIT, CC-III, Ludhiana बनाम M/s Jain Amar Clothing Pvt. Ltd., 992/1, Pipal Building, Chawal Bazar, Ludhiana èथायीलेखासं./PAN NO: AABCJ8065G अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent C.O. No. 6/Chd/2022 (In आयकरअपीलसं./ITA No. 637/CHD/2022) Ǔनधा[रणवष[ / Assessment Year :2020-21 M/s Jain Amar Clothing Pvt. Ltd., 992/1, Pipal Building, Chawal Bazar, Ludhiana बनाम The DCIT, CC-III, Ludhiana èथायीलेखासं./PAN NO: AABCJ8065G अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Ǔनधा[रणवष[ / Assessment Year : 2020-21 Ǔनधा[ǐरतीकȧओरसे/Assessee by :None (Adj. Application) राजèवकȧओरसे/ Revenue by : Sh. Pardeep Kumar, JCIT, Sr.DR स ु नवाईकȧतारȣख/Date of Hearing :23.03.2023 उदघोषणाकȧतारȣख/Date of Pronouncement : 06.06.2023 ITA No. 637-Chd-2022& C.O.6-Chd-22 (A.Y. 2020-21) - M/s Jain Amar Clothing Pvt. Ltd., Ludhiana 2 आदेश/Order Per Sudhanshu Srivastava, Judicial Member: 1. ITA No.637/Chd/2022 has been preferred by the Department against the order dated 26.03.2022 passed by the Commissioner of Income Tax (Appeals)-5, Ludhiana [herein referred to as ‘CIT(A)] for Assessment Year 2020-21. 2. C.O. No.06/Chd/2022 has been preferred by the assessee. 3. The sole issue raised by the Department, challenging the order of the ld. CIT(A), is the deletion of disallowance of Rs.1,77,81,074/- made by the Assessing Officer in respect of delayed payment of employees’ contribution to welfare funds like EPF, ESI etc. beyond the prescribed time. As per the Memo of Appeal filed by the Department, the total tax effect comes to Rs.62,13,418/-. 4. The Cross Objection filed by the assessee, challenges the computation of tax with regard to the disallowance and the primary ground of Cross Objection is that the Assessing Officer has calculated the tax effect at Rs.62,13,418/-, whereas, the correct tax effect comes to Rs.49,46,695/-. ITA No. 637-Chd-2022& C.O.6-Chd-22 (A.Y. 2020-21) - M/s Jain Amar Clothing Pvt. Ltd., Ludhiana 3 5. None was present on behalf of the assessee when the appeal was called out for hearing. However, an adjournment application was placed before us seeking adjournment on the ground that the ld. Authorized Representative has to travel to Mumbai and, therefore, the hearing may be adjourned. 6. Having gone through the records and having also gone through the grounds of appeal as well as the grounds raised in the Cross Objection and looking into the facts of the case, we deem it expedient to reject the adjournment application and hear the appeal ex-parte qua the assessee/respondent. 7. The following grounds have been raised by the Department in its Appeal:- 1) “That the Ld. CIT(A) erred in law, in deleting addition/disallowance of Rs. 1,77,81,074/- made by the Assessing Officer in respect of delayed payment of employee's contribution, beyond the prescribed time, to the employee's welfare funds like EPF, ESI etc. 1(a) That the Ld. .CIT(A) erred on facts and law ignoring the distinction between prevision of section 36(1 )(va) r.w.s 43B and provisions of section 36(l)(va) r.w.s 2(24)(x) of the Income Tax Act, 1961 which clearly provide for different treatment. While the delayed payment of employer's contribution is allowable if found before the filing of return wherever employee's contribution is ITA No. 637-Chd-2022& C.O.6-Chd-22 (A.Y. 2020-21) - M/s Jain Amar Clothing Pvt. Ltd., Ludhiana 4 disallowed for once and all if payment is delayed beyond the prescribed time. 1(b) That the Ld. CIT(A) erred in ignoring and falling to take into account the amendment carried out by Finance Act, 2021 by way of inserting Explanation 2 below section 36(1)(va) of the Act which has been interpreted by the Hon'ble’ Appellate Tribunal, Delhi Bench in M/s Vedvan Consultants Pvt. Ltd., New Delhi ITA No. 1312/Del/2020 dated 26.08.2021 which was held that the aforesaid explanation was clarificatory. 2) The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal.” 7.1 The following grounds have been raised by the Assessee in its Cross objection:- 1. “The A.O. has calculated Tax Effect in this case Rs. 62,13,418/- whereas the correct tax effect is Rs. 49,46,695/-, hence the appeal should be dismissed on this ground. 2. The A.O. has calculated Tax @ 30% plus surcharge @ 12% on tax and cess(s) @ 4% on the total tax plus surcharge. The correct tax is @ 25% plus surcharge @ 7% on tax and cess(s) @ 4% on tax and surcharge. As per CBDT circular No. 17/2019, no appeal lies before the ITAT if the tax effect is less than Rs. 50 lacs. The appeal deserves to be dismissed.” ITA No. 637-Chd-2022& C.O.6-Chd-22 (A.Y. 2020-21) - M/s Jain Amar Clothing Pvt. Ltd., Ludhiana 5 8. The ld. Sr. Departmental Representative submitted that in view of the order of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax and Others reported in (2022) 448 ITR 518 (SC), the action of the ld. CIT(A) in deleting the disallowance made by the Assessing Officer on account of late payment of employees’ contribution i.e. beyond the prescribed time to Employees’ Welfare Funds is legally incorrect and, therefore, the impugned order need to be reversed. 9. However, on a query from the Bench, the ld. Sr. D.R. fairly accepted that the calculation submitted by the assessee regarding the tax effect was correct and, therefore, the present Departmental Appeal would not survive in view of the monetary limit prescribed by the CBDT for filing of appeals by the Department before the ITAT, which is presently at Rs.50.00 lacs or more. 10. Having gone through the records and in view of the fact that the tax effect in the captioned Departmental Appeal is less then Rs.50.00 lacs, we are of the considered view that the Departmental Appeal is infructuous and is, therefore, liable to be dismissed. Accordingly, the appeal of the Department stands dismissed. ITA No. 637-Chd-2022& C.O.6-Chd-22 (A.Y. 2020-21) - M/s Jain Amar Clothing Pvt. Ltd., Ludhiana 6 11. As far as the CO of the assessee is concerned, on similar reasoning, accepting the grounds raised by the assessee, the grounds raised in the Cross Objection stand allowed. Hence, the CO filed by the assessee stands allowed. 12. In the final result, the Appeal of the Department stands dismissed, whereas the CO of the assessee stands allowed. (Order pronounced in the open Court on 06/06/2023) Sd/- Sd/- (VIKRAM SINGH YADAV) (SUDHANSHU SRIVASTAVA) Accountant Member Judicial Member Dated : 06.06.2023 Aks/- आदेशकȧĤǓतͧलͪपअĒेͪषत/ Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकरआय ु Èत/ CIT 4. आयकरआय ु Èत (अपील)/ The CIT(A) 5. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयआͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 6. गाड[फाईल/ Guard File आदेशान ु सार/ By order, सहायकपंजीकार/ Assistant Registrar