Sri Peddanna Suresh, Shivamoga V. The Income Tax Officer, Ward-1 & TPS, Shivamogga

MA 67/BANG/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2982 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 31-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-08-2022
• Assessment Year: 2018-2019
• Appeal Filed On: 19-07-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MISS SUNAINA BHATIA
• Section: 254(2)

Judgement Text

MP No.67/Bang/2022 (in ITA No.627/Bang/2021) Sri Peddanna Suresh, Shivamogga IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” “B’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER M.P. No.67/Bang/2022 (Arising out of ITA No.627/Bang/2021) Assessment Year: 2018-19 Sri Peddanna Suresh New Bridge Main Road Opp. Ruchi Complex Bhadravathi Shivamogga 577 301 PAN NO : BARPS8630Q Vs. ITO Ward-1 & TPS Shivamogga APPELLANT RESPONDENT Appellant by : Miss Sunaina Bhatia, A.R. Respondent by : Sri Ganesh R. Ghale, Standing counsel for Dept. Date of Hearing : 12.08.2022 Date of Pronouncement : 01.09.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This miscellaneous application filed by the assessee u/s 254(2) of the Income-tax Act,1961 ['the Act' for short] praying for rectification of mistake apparent in the order of the Tribunal dated 12.5.2022. 2. The Ld. A.R. submitted that the assessee came in appeal before this Tribunal with regard to disallowance of Rs.15,96,888/- being Employees’ contribution to Provident Fund made u/s 36 read with Rule 87 of Income Tax Rules, 1963. The Tribunal while allowing the MP No.67/Bang/2022 (in ITA No.627/Bang/2021) Sri Peddanna Suresh, Shivamogga Page 2 of 5 appeal of the assessee wrongly discussed the issue relating to allowability of the belated remittance of employee’s share of PF & ESI without noticing the actual grounds of appeal of the assessee. Hence, there is a mistake apparent on record, which require to be corrected. 3. Further, it was submitted that the issue before the Tribunal in the appeal preferred by the assessee was with regard to the disallowance of Rs.15,96,888/- made u/s 36 read with Rule 87 of the I.T. Rules and it was the case of the assessee that Rule 87 was inapplicable to the present case as the assessee was merely remitting the PF on behalf of the Municipal Commissioner, Bhadravati and the same was neither a receipt nor an expense of the assessee in order to invoke the provisions of section 36 of the Act. Thus, the disposal of the appeal on different grounds results in the failure to adjudicate the grounds raised by the assessee in this appeal and the same constitutes a mistake apparent on record warranting rectification. In view of the above, Ld. A.R. prayed that the order of the Tribunal may be rectified by considering and disposing of the above grounds accordingly for the advancement of substantial cause of justice. 4. The Ld. D.R. squarely submitted that the Tribunal committed error while disposing the appeal of the assessee, which may be corrected as argued by the Ld. A.R. 5. I have heard the rival submissions and perused the materials available on record. The assessee herein came in appeal before this Tribunal with regard to disallowance of Rs.15,96,888/- made u/s 36 read with Rule 87 of I.T. Rules. However, the Tribunal wrongly discussed the issue with regard to belated remittance of employees’ share of PF & ESI without noticing the correct grounds of appeal MP No.67/Bang/2022 (in ITA No.627/Bang/2021) Sri Peddanna Suresh, Shivamogga Page 3 of 5 raised by the assessee. Hence, there is a mistake apparent on record, which require to be corrected. 6. On merit, the contention of the assessee’s counsel is that the addition was made on account of wrong understanding of the facts by AO. The Ld. AO failed to observe that labour works receipts of Rs.48,06,398/- credited in the P&L account includes an amount of Rs.21,96,288/- issued from the Municipal Commissioner, Bhadravati towards the contribution to PF. In fact, the Municipality will pay salary directly to employees’ bank account through Escrow account based on the tri-party agreement entered between Municipal Commissioner, Bhadravati, assessee and bank. The amount of PF contribution (both employees & employer contribution) will be released to the assessee’s bank account towards the PF remittance and service charges for filing formalities under PF Act. According to the Ld. A.R., the AO considered the total receipts credited in the profit & loss account by Rs.48,06,398/- and restricted the contribution to PF at 27% of salary of Rs.22.2 lakhs i.e. Rs.5,99,400/- and disallowed the excess contribution of Rs.15,96,888/-. By invoking the provisions of section 36 of the Act read with Rule 87 of the IT Rules. According to the Ld. A.R., what has debited by the assessee in P&L account is the contribution to PF received from the Municipal Commissioner, Bhadravati for outward remittance to PF authorities. The amount credited to P&L account is the receipt of PF contribution from the Municipal Corporation and service charges towards further correspondence, filing of necessary forms, etc. with PF requirement According to the Ld. A.R., there was no question of receipt of labour charges from the Municipal Commissioner for the respective work or payment of the same to the labourers as it was directly paid by the MP No.67/Bang/2022 (in ITA No.627/Bang/2021) Sri Peddanna Suresh, Shivamogga Page 4 of 5 Municipal Commissioner, Bhadravati to the respective employees through their bank account. 7. The Ld. D.R. submitted that this issue may be remitted on merit to the file of AO for further examination of the claim of the assessee. In my opinion, as argued by the Ld. A.R., there is a total misunderstanding of facts by the Tribunal while disposing of the above appeal vide order dated 12.5.2022. Accordingly, I recall the entire order and thereafter, I adjudicate the appeal by substituting the same with the following paragraphs, which are to be read as follows:- “1. The assessee has filed this appeal challenging the order passed by Ld. CIT(A), NFAC, Delhi and relate to the assessment year 2018-19. The only issue with regard to the disallowance of Rs.15,96,888/- being made u/s 36 read with Rule 87 of the I.T. Rules. 2. In the present case, the AO disallowed the amount of Rs.15,96,888/- out of Rs.21,96,288/- charged to the P&L account by invoking the provisions of section 36 read with Rule 87 of the I.T. Rules. It was the contention of the revenue authorities that the assessee has credited an amount of Rs.22.2 lakhs to the P&L account, hence, the assessee could make payment to PF to the extent of 27% of the said amount works out at Rs.5,99,400/-. Now the contention of the Ld. A.R. is that the salary to the workers has been directly paid by the Municipal Commissioner, Bhadravati through Escrow account and the assessee received the PF contribution of both employees and employer contribution and also service charges at Rs.22.2 lakhs and the AO cannot invoke the Rule 87 on this amount so as to disallow an amount of Rs.5,96,888/-. In my opinion, these facts require to be examined by the AO that whether Municipal Commissioner, Bhadravati has directly paid the labour charge to the workers’ bank account and remitted only PF of both employees’ and employer’s contribution to the assessee to make outward remittance to PF disbursement. Accordingly, the issue in dispute is remitted back to the file of AO for fresh consideration in the light of above observations. 3. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.” MP No.67/Bang/2022 (in ITA No.627/Bang/2021) Sri Peddanna Suresh, Shivamogga Page 5 of 5 8. In the result, the miscellaneous petition of the assessee is allowed. Order pronounced in the open court on 1 st Sept, 2022 Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 1 st Sept, 2022. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.