MOHAN KUMAR SHARMA,UTTAR PRADESH V. WARD 5 (1) (5), NOIDA, JURISDICTIONAL ASSESSING OFFICER, UTTAR PRADESH

ITA 1967/DEL/2024

AI Insights

The case involves appeals by Mohan Kumar Sharma against the orders of the Commissioner of Income-tax (Appeals) for the Assessment Years 2020-21 and 2021-22. The primary contention revolves around the disallowance of Rs.36,03,499 due to the alleged late payment of employee contributions to ESIC/EPF, which was upheld by the CIT(A). The assessee argued that the contributions were made within the due dates as per the Employee Provident Fund Scheme 1952, which the CIT(A) did not recognize. The Tribunal considered the precedents and arguments presented, particularly focusing on whether the adjustments made under section 143(1) were within the permissible scope and whether the contributions were indeed made within the stipulated time.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474624 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2021-2022
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT, Bensons Movers Pvt. Ltd. vs. ACIT, Sentinel Consultants Pvt. Ltd. vs. ACIT, Weather Comfort Engineers Private Limited vs. ACIT-CPC, Kanoi Paper and Industries Ltd. vs. ACIT, B. L. Kashyap & Sons Ltd., VVDN Technologies Pvt. Ltd., Pr.CIT vs. Khyati Realtors (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHIRAJ KUMAR JAIN
• Assessee Lawyers: MOHIT JAIN
• Keywords: Opportunity of being heard; Capital expenditure
• Section: 201; 143(1); 37; 37(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI BEFORE SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER ITA No.3509/DEL/2024 (Assessment Year: 2020-21) ITA No.1967/DEL/2024 (Assessment Year: 2021-22) Mohan Kumar Sharma, vs. ITO, Ward 5(1)(5), L-211, Vivek Vihar, Sector 82, Noida. Noida – 201 303 (Uttar Pradesh). (PAN : ADIPS8267Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Mohit Jain, Advocate REVENUE BY : Shri Dhiraj Kumar Jain, Sr. DR Date of Hearing : 21.01.2025 Date of Order : 21.01.2025 O R D E R PER S. RIFAUR RAHMAN, JM: 1. These appeals are filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals) dated 20.05.2024 for the Assessment Years 2020-21 & 2021-22. 2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. We take ITA No.3509/Del/2024 for AY 2020-21 as the lead case. 2 ITA Nos.3509 & 1967/DEL/2024 3. The assessee has taken the following grounds of appeal :- “1. The Learned CITCA) erred significantly, both factually and legally, in upholding the intimation under section 143(1) issued by the CPC, which processed the appellant's return of income for the assessment year 2020-21 at Rs.64,60,410/-. 2. The Learned CIT(A) made a substantial error, both factually and legally, by misinterpreting the provisions of Section 36(1) (va) read with Section 2(24)(x) and Section 43B, along with various legal precedents relevant to the assessment year 2020-21, thereby upholding the disallowance of Rs.36,03,499/- due to the late payment of employee contributions to ESIC/EPF. 3. The Learned CIT(A) erred significantly, both factually and legally, in making an adjustment of Rs.36,03,499/- under section 143(1) of the Income Tax Act which exceeds the permissible scope of this provision. Section 143(1) allows for prima facie adjustments based on clear errors or discrepancies in the return such as arithmetical mistakes, incorrect claims apparent from the return information, or inconsistencies in audit reports. 4. The Learned CIT(A) erred significantly, both factually and legally, by failing to recognize that the Tax Auditor's report merely noted the clue dates and actual payment dates of employees' contributions towards Provident Fund without recommending any disallowance. The CPC relied on this report to make additions under section 143(1)(a)(iv), which is unjustifiable since the auditor did not indicate any disallowance. Hence, the addition based on this report exceeds the permissible scope of adjustments under section 143(1)(a). 5. Considering the facts and circumstances of the case and the law, the National Faceless Appeal Centre I CIT(A) erred in upholding the action of the Ld. AO(CPC) in disallowing the employee contribution of Rs.36,03,499/- under Section 36(1)(va) with respect to PF/ESI, when the same was deposited by the assessee before the due date of filing the return of income. The action of the Ld. CIT(A) is illegal, unjustified, arbitrary, and contrary to the facts of the case. Relief should be 3 ITA Nos.3509 & 1967/DEL/2024 granted by deleting the entire addition made by Ld. AO(CPC) and confirmed by Ld. CIT(A). 6. The addition by way of adjustment and intimation under section 143(l) of the Income Tax Act, based on a retrospective amendment to the Income Tax Act, is beyond the scope of Section 143(1). 7. The Learned CITCA) erred significantly, both factually and legally, by failing to recognize that according to clause 38 of the Employee Provident Fund Scheme 1952, the employer is required to deposit the PF/ESI contribution of the assessee within 15 days of the close of every month. The term 'every month' refers to the month in which the salary/remuneration is paid to the employee, not the month for which the salary or wages were due. Therefore, if the term 'month' is interpreted as the month of payment of the wages/salary to the employee, all the payments of the employee’s contribution were made within the due date. Consequently, the addition made by the Ld. AO and upheld by the ld. CIT (A) is incorrect and arbitrary.” 4. The only issue involved in this appeal is that the ld. CIT (A) has erred in upholding the disallowances of expenditure of Rs.36,03,499/- made by the Assessing Officer representing delay in remittance of Employee’s Contribution towards ESIC and Provident Fund invoking provisions of section 36(1)(va) of the Income-tax Act, 1961 (for short ‘the Act’). 5. At the time of hearing, ld. counsel for the assessee submitted that the issue involved is relating to confirmation of adjustment of Rs.36,03,499/- u/s.36(1)(va) r.w.s 2(24)(x) on account of delayed deposit of employees contribution to PF and ESI made in the intimation u/s.143(1), without appreciating the fact that employees 4 ITA Nos.3509 & 1967/DEL/2024 contribution to PF and ESI are recovered from the employees on disbursement of salary and wages. Accordingly, due date for deposit of employees contribution to PF and ESI i.e. within 15 days of the following month during which salary and wages was actually disbursed among the employees, thus he submitted that employees contribution to PF and ESI was actually deposited on or before 15th of the following month in which salary and wages actually disbursed. In order to support this contention, reliance is placed on the decision of the Coordinate Bench of the Tribunal in the case of Bensons Movers Pvt. Ltd. vs. ACIT dated 17.11.2023 passed in ITA No. 2710/Del/2022 for assessment year 2019-20. The Ld. Counsel for the assessee submitted that in view of the aforesaid decision, the matter may be restored to the file of AO to ascertain the due date for remittance of the PF/ESI contributions of employees in the present case. 6. On the other hand, ld. DR for the Revenue objected to the submissions made by the ld. AR for the assessee and submitted that the issue is squarely covered by the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT 143 taxmann.com 178. 7. Considered the rival submissions and material placed on record. We observed that the first plea of the assessee that the issue under 5 ITA Nos.3509 & 1967/DEL/2024 consideration is beyond the scope of section 143(1)(a) of the Income-tax Act, 1961 (for short ‘the Act’). In our considered view, this issue is already settled in favour of the Department and ld. AR for the assessee relied on the decision of PR Packaging Services 199 ITD 724 (Mum.) and other similar case laws. These case laws are already distinguished by the coordinate Benches. Accordingly, this plea of the assessee is rejected. 8. Coming to alternative plea of the assessee. Considered the rival submissions and this plea was considered by the coordinate Bench in the case of Benson Movers Pvt. Ltd. (supra) and the relevant decision of the coordinate Bench is as under :- “5. In so far as employees contributions towards PF & ESI it is noticed that the issue as to whether the due date under PF/ESI Acts should be as per the calendar month for which the salary is payable or from the month in which the salary is paid to the employee by the employer came up for adjudication in the case of Sentinel Consultants Pvt. Ltd. Vs. ACIT (supra) and the Tribunal restored the issue to the file of the AO with the following observations:- “9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees’ contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy. 9.1 We notice at the outset that an opportunity was given via electronic platform of the deptt. For the proposed adjustments and in the absence of e- response, the adjustments were carried out the CPC- Bangluru and intimation was issued enhancing the 6 ITA Nos.3509 & 1967/DEL/2024 assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees’ contribution to PF/ESIC in the light of the judgment rendered by the Hon’ble Supreme Court in Checkmate Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC). The contention of the Assessee that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co- ordinate bench in the case of Weather Comfort Engineers Private Limited vs. ACIT-CPC ITA No. 959/Del/2021 order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e- response. 9.2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1)(va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of the assessee. Thus, in view of such mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon’ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. Such view also draws support from the observations made in recent judgment of the Hon’ble Supreme Court in the case of Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit. 9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of 7 ITA Nos.3509 & 1967/DEL/2024 calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal). This aspect has not been found to be examined by the Assessing Officer or CIT (A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.” 6. We find similar view has been taken by the co- ordinate benches in the cases of B. L. Kashyap & Sons Ltd. (supra) and VVDN Technologies Pvt. Ltd. (supra). The ld. Counsel submits that in view of these decisions the matter may be restored to the Assessing Officer to ascertain the due date for remittance of the PF/ESI contributions of employees. Considering the decisions of the coordinate benches referred to above we restore this issue to the file of the Assessing Officer to decide in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee and the assessee is at liberty to provide all the necessary information in support of its contention.” 9. Since the above issue is squarely covered by the above decision, we are inclined to remit the issue back to the file of AO to consider the alternative plea of the assessee as per law after giving proper opportunity 8 ITA Nos.3509 & 1967/DEL/2024 of being heard to the assessee. Accordingly, appeal being ITA No.3509/Del/2024 is partly allowed for statistical purposes. 10. With regard to ITA No.1967/Del/2024 for AY 2021-22, since the facts are exactly similar to ITA No.3509/Del/2024 for AY 2020-21 our above findings in ITA No.3509/Del/2024 are applicable mutatis mutandis in ITA No.1967/Del/2024. Accordingly, the appeal being ITA No.1967/Del/2024 filed by the assessee is partly allowed for statistical purposes. 11. In the result, both the appeals of the assessee are partly allowed for statistical purposes. Order pronounced in the open court on this 21st day of January, 2025 after the conclusion of hearing. SD/- SD/- (SATBEER SINGH GODARA) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 21.01.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "