Aman Thapa, Jodhpur V. Jurisdictional Assessing Officer, Ward1, Gandhinagar

ITA 92/AHD/2022

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Aman Thapa appealed against the order of the NFAC, which upheld the addition of Rs. 10,01,040 to his income for the assessment year 2018-19. This addition was due to the late deposit of employee contributions to PF and ESIC, which the Assessing Officer disallowed under section 36(1)(va) of the Income Tax Act, 1961. The Tribunal noted that the Supreme Court had clarified that for assessment years prior to AY 2021-22, the non obstante clause under section 43B did not apply to amounts held in trust, such as employee contributions deducted from their income and held by the employer. The Tribunal dismissed the appeal, following the Supreme Court's precedent.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131509 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-07-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 11-04-2022
• Other Referred Cases: PCIT v/s Rajasthan State Beverages Corpn. Ltd., CIT v/s Rajasthan State Ganganagar Sugar Mills Ltd., Zuberi Engineering Company v/s Deputy Commissioner of Income-tax, Circle-2, Jaipur, Checkmate Services (P.) Ltd. v. CIT, Harrisons Malayalam Ltd. v. CIT, Ms. Nalina Dyave Gowda v. CIT, Cemetile Industries v. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Period of limitation; Deemed to accrue or arise in india
• Section: 43B; 139; 143(1); 250; 192; 139(1); 72

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Aman Thapa, Jod hpur, PAN: AB YPT9 990P (Appellant) Vs Ju risdiction al As ses sing Officer, Ward-1, Gandhin agar (Resp ondent) Asses see b y : Written Submis sion Revenue by : Shri Atul Pandey , S r. D. R. Date of hearing : 05-07 -2 023 Date of pronouncement : 19-07 -2 023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi, in proceeding u/s. 250 vide order dated 02/08/2021 passed for the assessment year 2018-19. 2. The assessee has taken the following grounds of appeal:- “(1) That the Ld. Assessing Officer (CPC) made an addition of Rs. 10,01,040/ - on processing u/s. 143(1) on account of late deposit of employee contribution towards ESIC/EPF on account of late deposit of employee contribution towards ITA No. 92/Ahd/2022 Assessment Year 2018-19 I.T.A No. 92/Ahd/2022 A.Y. 2018-19 Page No. Aman Thapa vs. Jurisdictional Assessing Officer 2 ESIC/EPF. In view of the provisions of section 2(24)(x) read with section 36(l)(va) & section 43B of the Income Tax Act,1961, being late deposit of employees contribution towards ESIC/EPF which has been duly deposited on or before the due date of filing of return of income as per the provisions under section 139(1) of The Income Tax Act 1961, employee contribution towards ESI and PF paid after due date of respective, statue but before the filling of Income Tax return due date as per section 139 (1) are allowable expenses and cannot be disallowed under section 36(1)(va). But the Ld. Assessing Officer (CPC) without appreciating the legal position and facts of the case made the above mentioned addition and the assessee preferred an appeal before the Hon'ble CIT (A)-1, Jodhpur against said order. And then order has been passed by CIT(A), National Faceless Appeal Centre, Delhi. The Hon'ble CIT (A) NFAC also confirmed the above said addition of Rs. 10,01,040/- and passed the order against the Assessee, on 02.08.2021 with complete disregards to the Decision of Jurisdictional Honorable Rajasthan High Court in the case of PCIT v/s Rajasthan State Beverages Corpn. Ltd. [2017] 84 taxmann.com 173 (Rajasthan), CIT v/s Rajasthan State Ganganagar Sugar Mills Ltd. [2017] 88 taxmann.com 522 (Rajasthan) [2019] 103 taxmann.com 196 & (Jaipur -Trib.)/[2019] 69 ITR(T) 261 (Jaipur - Trib.)/[2019] 175 ITD 557 (Jaipur - Trib.) Zuberi Engineering Company v/s Deputy Commissioner of Income-tax, Circle-2, Jaipur. (2) Assessee crave, leave to add amend, alter, substitute, modify any of the ground of appeal on or before the date of hearing.” 3. At the outset, we observe that there is a delay of 192 days in filing of the present appeal. However, we observe that the date of receipt of the order appealed against is 03-08-2021. In view of the nation-wide lockdown from 24 th March 2020, the Apex Court in Cognizance for Extension of Limitation, In re[2021] 127 taxmann.com 72 (SC), took suo motu cognizance of the situation arising out of the challenge faced by the country on account of COVID-19 Virus and resultant difficulties that could be faced by the litigants across the country. Consequently, it was directed vide order dated 23-3-2020 that the period of limitation in filing petitions/applications/suits/appeals/all other proceedings, irrespective of the period of limitation prescribed under the general or special laws, shall stand extended with effect from 15-3-2020 till further orders. The suo motu I.T.A No. 92/Ahd/2022 A.Y. 2018-19 Page No. Aman Thapa vs. Jurisdictional Assessing Officer 3 proceedings were, disposed of issuing the directions as to in computing the period of limitation for any suit, appeal, application or proceeding, the period from 15-3-2020 till 14-3-2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15-3-2020, if any, shall become available with effect from 15-3-2021. Thereafter, in the case of Cognizance for Extension of Limitation, In re[2022] 134 taxmann.com 307 (SC), held that in view of spread of new variant of COVID-19 and drastic surge in number of COVID cases across the country, period from 15- 3-2020 till 28-2-2022 shall stand excluded for purpose of limitation as may be prescribed under any general or special law in respect of all judicial or quasi-judicial proceedings. in cases where limitation would have expired during period between 15-3-2020 till 28-2-2022, notwithstanding actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 1-3-2022; in event actual balance period of limitation remaining, with effect from 1-3-2022, is greater than 90 days, that longer period shall apply In view of the above, since the delay of 192 days in filing appeal is falling within the Covid pandemic period, the delay is hereby being condoned. 4. The brief facts of the case are that the Ld. Assessing Officer (CPC) made addition of 10,01,040/ - u/s 143(1) on account of late remittance of employee’s contribution to PF and ESIC. In appeal, Ld. CIT(A) dismissed the appeal of the assessee with the following observations: “6.1.13 Thus, the aforesaid Explanations inserted by Finance Act, 2021 have clarified that definition of 'due date' as per Sec 43B is deemed never to have been applied for the purpose of Employee's I.T.A No. 92/Ahd/2022 A.Y. 2018-19 Page No. Aman Thapa vs. Jurisdictional Assessing Officer 4 Contribution. Therefore, the payment of employee's contribution made after the due date, by which the appellant is required as an employer to credit an employee's contribution to the employee's account in the Provident Fund under the Provident Fund Act and in the ESI Fund under the ESI Act is liable to be added to the income of appellant.” 5. Before us, none appeared on behalf of the assessee. At the outset, we observe that the position on this issue has now been unambiguously clarified by the Hon'ble Supreme Court with respect to all assessment years prior to AY 2021-22 in the case of Checkmate Services (P.) Ltd. [2022] 143 taxmann.com 178 (SC) wherein the Supreme Court held that for assessment years prior to AY 2021-22, non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was held in trust by assessee-employer as per section 2(24)(x), thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. The Supreme Court observed that there is a marked difference between nature and character of assessee-employer's contribution and amounts retained by assessee from out of employee's income by way of deduction wherein one is liability to be paid by employer and second is deemed income as per section 2(24)(x) which is held in trust by assessee-employer, thus, said marked difference was to be borne while interpreting obligation of assessee- employer under section 43B of the Act. The Hon'ble Supreme held that the non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was not part of assessee-employer's income, thus, said clause would not absolve assessee-employer from its liability to I.T.A No. 92/Ahd/2022 A.Y. 2018-19 Page No. Aman Thapa vs. Jurisdictional Assessing Officer 5 deposit employee's contribution on or before due date as a condition for deduction. Again the Supreme Court in the case of Harrisons Malayalam Ltd. [2022] 145 taxmann.com 608 (SC), dismissed the SLP of the Department against order of High Court that where assessee-company failed to pay employees’ contribution towards EPF and ESI within due date prescribed in respective Acts, deduction under section 36(1)(va) was not allowable. Recently in the case of Ms. Nalina Dyave Gowda [2023] 146 taxmann.com 420 (Bangalore - Trib.) the assessee during, financial year 2018-19 (assessment year 2019-20) made payment of employees' contribution to ESI and PF beyond due date specified under relevant Act and claimed deduction of same under section 36(1)(va). The Assessing Officer made disallowance of employees' contribution to ESI and PF while electronically processing return of income under section 143(1)(a) of the Act. The ITAT held that disallowance under section 143(1)(a) was valid in view of Supreme Court's decision in case of Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178 and the assessee will not be entitled to deduction of belated payment of ESI and PF of employees' share of contribution as per provisions of section 36(1)(va) of the Act. Again, recently Pune ITAT in the case of Cemetile Industries v. ITO [2022] 145 taxmann.com 209 (Pune - Trib.) held that where assessee-employer deposited amount of employees contribution towards employees' provident fund and employees' state insurance corporation beyond due date stipulated in respective Acts, disallowance made under section 36(1)(va) was justified. The ITAT further held that adjustment under section 143(1)(a) by means of disallowance made for late deposit of employees' share to relevant funds beyond date prescribed under respective Acts was proper. I.T.A No. 92/Ahd/2022 A.Y. 2018-19 Page No. Aman Thapa vs. Jurisdictional Assessing Officer 6 6. In view of the above observations respectfully following the decision of the Honourable Supreme Court in the case of Checkmate Services Private Ltd supra and Harrisons Malayalam Ltd supra and in the light of our observations, we hereby dismiss the assessee’s appeal Order pronounced in the open court on 19-07-2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 19/07/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद