Salvation Outsourcing Solution Private Limited, New Delhi V. DCIT, CPC, Bengaluru

ITA 881/DEL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0043 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 19-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 143(1); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.881/Del/2021 [Assessment Year : 2018-19] Salvation Outsourcing Solution Pvt.Ltd., 204, Triveni Complex, E-10/11/12, Jawahar Park, Laxmi Nagar, Near Heera Sweets, New Delhi-110045. PAN-AAPCS7922R vs DCIT, CPC, Bengaluru. APPELLANT RESPONDENT Appellant by None Respondent by Sh. Om Parkash, Sr.DR Date of Hearing 10.01.2022 Date of Pronouncement 18.01.2022 ORDER PER KUL BHARAT, JM : This appeal filed by the assessee for the assessment year 2018-19 is directed against the order of National Faceless Appeal Centre (“NFAC”), Delhi dated 18.05.2021. The assessee has raised following grounds of appeal:- 1. “That having regard to the facts and circumstances of the case, The impugned order passed by The Learned CIT (Appeal)-NFAC is completely bad in law and wrong in facts. The learned Assessing officer-CPC has erred both on facts and in law in disallowing the contribution of employees towards the provident fund/ ESI amounting to Rs.25,22,258/- without considering the response vide dated 19.09.2019. The delayed payment in respect to contribution of employees towards the provident fund/ ESI is deductible under section 36(1)(va) or not, is debatable, and such a debatable claim cannot be disallowed by way of an intimation under section 143(1)(a) of The Income Tax Act, 1961. The Intimation under section Page | 2 143 (1) (a) of the Act, 1961 has been passed without considering the Jurisdiction high court decision. 2. That having regard to the facts and circumstances of the case, The impugned order passed by The Learned CIT (Appeal)-NFAC is completely bad in law and wrong in facts. The delayed payment in respect to contribution of employees towards the provident fund/ ESI docs not have to be covered as adjustment in respect of disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return in clause (iv) of Section 143 (1) (a) of The Income Tax Act, 1961, when tax auditors has not proposed the disallowance in the tax audit report during the previous year. The learned Assessing officer has not verified the transaction claimed as deduction or not, The learned Assessing officer has presumed this amount is expenditure for adjustment covered in section 143 (1) (a) (iv) of The Act, 1961. 3. Plat having regard to the facts and circumstances of the case, The Learned CIT (Appeal)-NFAC has erred in law and on facts in confirming the action of Ld. AO in making adjustments u/s 143(1)(a) of the Income Tax Act, 1961 by disallowing the contribution received from employees towards ESI and EPF amounting to Rs. 25,22,258/- with complete disregards to the Decision of Jurisdictional Honorable Delhi High Court In the case of CIT Vs AIMIL Ltd. (321 ITR 508) and the decision of Jurisdictional Honorable ITAT in the case of Planman HR Ltd. (ITA 5053/Del/2015 -Order Dated 13.09.2017) as the payments have been made before due date specified u/s 139( 1) and as such are fully a towable. 4. That the appellant craves leave to itself the right to add, alter amend, vary, modify and/or withdraw & ground(s) of appeal at or before the time of hearing.” 2. No one appeared on behalf of the assessee at the time of hearing. The notice sent through speed post was returned with remark “left”. The assessee Page | 3 has not provided any new address to the Registry. Therefore, the appeal was taken up for hearing in the absence of assessee. 3. Facts giving rise to the present appeal are that the appeal was instituted on 04.01.2020 against the intimation u/s 143(1) of the Income Tax Act, 1961 (“the Act”) issued by DCIT, Centralized Processing Centre, Bangalore raising a demand of Rs.2,33,313/- for Assessment Year 2018-19. According to the assessee, the said intimation was received on 07.12.2019. Subsequently, the appeal was migrated to NFAC in terms of Notification No.76 of 2020 in S.O.3296(E) dated 25.09.2020 issued by CBDT, New Delhi. The assessee filed income tax return on 31.10.2018 for Assessment Year 2018-19 u/s 139(1) of the Act in which taxable income has been shown amounting to Rs.22,58,010/- and tax paid on such income is Rs.5,81,438/- during the Assessment Year. Subsequently, the CPC has processed the income tax return dated 12.11.2019 in which DCIT-CPC has revised the taxable income of Rs.22,58,010/- without any opportunity in connection with addition of Rs.25,22,258/- under head business income during the previous year and raised the tax demand of Rs.2,33,310/- in the relevant Assessment Year. The Assessing Officer-CPC has erred both on facts and in law in disallowing the contribution of employees towards the Provident fund/ESI amounting to Rs.25,22,258/-. 4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), confirmed the addition. 5. Now, the assessee is in appeal before this Tribunal. Page | 4 6. Ld. Sr. DR vehemently submitted that law is clear in this respect and he relied upon the decision of Ld.CIT(A). He further relied upon the decision of Hon’ble Delhi High Court in the case of CIT vs Bharat Hotels Ltd. [2019] 103 Taxmann.com 295 (Delhi) wherein the Hon’ble High Court has decided the issue in favour of the Revenue by observing as under:- 8. “Having regard to the specific provisions of the Employees‟ Provident Funds Act and ESI Act as well as the concerned notifications which granted a grace period of 5 days (which appears to have been late withdrawn recently on 08.01.2016), we are of the opinion that the ITAT‟s decision in this case was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace period in terms of the extent notification). As far as the amounts constituting deductions from employees‟ salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns.” 7. I have heard the Ld.Sr.DR and perused the material available on record and gone through the orders of the authorities below. Ld.CIT(A) has decided the issue by observing as under:- 6. “In view of the facts of the case and the legal position as discussed above, it is held that the disallowance made u/s 143(1) by DCIT, CPC, Bangalore denying the claim of deduction u/s 36(1)(va) on account of appellant’s failure to pay the employee’s contribution of PF/ESI within the prescribed due dates as per section 36(1)(va) is strictly in accordance with law and clearly comes under the prima facie adjustments as envisaged u/s 143(1)(a)(iv). Therefore, the adjustment made to this effect by CPC vide intimation u/s 143(1) is confirmed fully. Appellant’s Grounds No.1 to 7 on this issue fails.” Page | 5 8. I find that the issue is covered by the judgement of Hon’ble Delhi High Court rendered in the case of AIMIL Ltd. (supra) wherein it has been held:- 17. “We may only add that if the employees’ contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement (supra).” 9. Further, Hon’ble Delhi High Court in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd. in ITA No.983/2018 [Del.] order dated 10.09.2018 held as under:- “In view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, (2010) 321 ITR 508 (Del.) the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee’s Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act.” Therefore, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court in the above-mentioned binding precedents, I hereby Page | 6 direct the Assessing Officer to delete the disallowance. Thus, grounds raised by the assessee are allowed. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 18 th January, 2022. Sd/- (KUL BHARAT) JUDICIAL MEMBER *Amit Kumar* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI