MORPHEUS SECURITY PVT LTD,SAIDULAJAB EXT., SAKET, V. DCIT CIRCLE 16(1) DELHI, DELHI

ITA 1044/DEL/2024

AI Insights

Morpheus Security Pvt. Ltd. appealed against the orders of the Additional/Joint Commissioner of Income Tax (Appeals)-1, Jaipur, for the Assessment Years 2018-19, 2019-20, and 2020-21. The appeals were consolidated due to common facts and grounds. The main issues revolved around the disallowances made under section 36(1)(va) for late deposit of employees' contributions to ESI & EPF, and under section 43B for non-payment of GST before filing ITRs. The tribunal, after considering the submissions and relevant legal provisions, upheld the disallowances, citing the decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. and other relevant cases.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126222 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2020-2021
• Other Referred Cases: Checkmate Services Pvt. Ltd. 448 ITR 518, Husna Parveen 142 taxmann.com 2, TCG Lifesciences Pvt. Ltd. in the I.T.A. No.126/KOL/2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: WAY OF TAX; DUTY; CESS OR
• Keywords: Grounds of appeal; Checkmate Services; Dismissed; Business or profession; Judgment; Section 139(1); HRA; Commissioner; Commissioner of Income Tax; Purchases; Balance sheets; Section 143(1) of the Act; Checkmate Services Pvt. Ltd.; Due date of filing; Department; Section 36(1)(va); Services
• Section: 143(1); 139(1); 145; 43B

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA Nos. 1040, 1041 & 1044/Del/2024 Assessment Years: 2018-19, 2019-20 & 2020-21 Morpheus Security Pvt. Ltd., A-1, First Floor, Anupama Enclave, Phase-1, Saidulajab Ext., Saket, New Delhi. PAN: AAFCM0767J Vs. Deputy Commissioner of Income Tax, Circle-16(1), New Delhi. (Appellant) (Respondent) Appellant by None Respondent by Shri Amit Katoch, Sr. DR Date of Hearing 08/04/2025 Date of Pronouncement 23/04/2025 ORDER PER AVDHESH KUMAR MISHRA, AM The above captioned appeals of the assessee for Assessment Years (hereinafter, the ‘AY’) 2018-19, 2019-20 and 2020-21 are directed against orders dated 02/11/2023 for the AY 2018-19; 05/01/2024 for the AY 2019-20 and 08/01/2024 for the AY 2020-21 of the Additional/Joint Commissioner of Income Tax (Appeals)-1, Jaipur. Since these appeals contained common facts and grounds of appeals; therefore, these were heard together and are being disposed of by this common order. ITA Nos.1040, 1041 & 1044/Del/2024 Morpheus Security Pvt. Ltd. 2 2. We are tasked to decide following issues raised vide three grounds in these appeals: ITA No.1040/Del/2024 (AY 2018-19): i. Dismissal of appeal due to non-maintainability of belated appeal (Delay was not condoned.) ii. Disallowance of Rs.73,51,882/- under section 36(1)(va) of the Income Tax Act, 1961 (hereinafter, the ‘Act’) on account of late deposit of employees’ contribution to ESI & EPF ITA No. 1041/Del/2024 (AY 2019-20): i. Disallowance of Rs.22,55,384/- under section 36(1)(va) of the Act on account of late deposit of employees’ contribution to ESI & EPF ii. Disallowance of Rs.27,94,638/- under section 43B of the Act on account of non-payment of GST before filing ITR. ITA No.1044/Del/2024 (AY 2020-21): i. Disallowance of Rs.56,00,025/- under section 36(1)(va) of the Act on account of late deposit of employees’ contribution to ESI & EPF ii. Disallowance of Rs.75,11,676/- under section 43B of the Act on account of non-payment of GST before filing ITR. 3. The relevant facts giving rise to these appeals are that the assessee, engaged in the business of providing security services, housekeeping services and man power supply to various Government Departments and ITA Nos.1040, 1041 & 1044/Del/2024 Morpheus Security Pvt. Ltd. 3 Private Organizations, has filed its Income Tax Returns (hereinafter, the ‘ITR’) of these years within the statutory time period provided under the Act. These ITRs were processed under section 143(1) of the Act by the Assessing Officer (CPC), Bengaluru. While processing of the above mentioned ITRs, the Assessing Officer (CPC), following due procedure, made certain disallowances under section 36(1)(va) and 43B of the Act on account of late deposit of employees’ contribution to ESI & EPF and non- payment of GST before filing ITRs. Aggrieved, the assessee filed appeals before the first appellate authority, but did not succeed. Hence, these appeals are before us. 4. These cases were scheduled 5 times for hearing. However, none from the respondent/assessee side attended in last three hearings. Initially, the assessee’s Representative sought adjournment twice. We therefore, took a call to proceed with these cases. Therefore, we heard the Senior Departmental Representative (hereinafter, the ‘Sr. DR’). 5. The Ld. Sr. DR submitted that the impugned orders were well reasoned; therefore, these appeals deserved dismissal. It was contended that the disallowances under section 36(1)(va) of the Act on account of late deposit of employees’ contribution to ESI & EPF made in each AY were squarely covered by the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. 448 ITR 518. Further, it was also ITA Nos.1040, 1041 & 1044/Del/2024 Morpheus Security Pvt. Ltd. 4 submitted that the Ld. Addl./Jt. CIT(A) had given categorical finding that the disallowances made under section 36(1)(va) of the Act on account of late deposit of employees’ contribution to ESI & EPF in each year were in respect of employees’ contribution to ESI & EPF which had not been deposited within the statutory time period provided under the respective ESI & EPF Act. He further contended that the assessee had not brought any material on the record to contradict the finding of the Ld. Addl./Jt. CIT(A); therefore, these disallowances required to be upheld. 6. As far as disallowances made under section 43B of the Act on account of non-payment of GST within the due date for filing ITR under section 139(1) of the Act are concerned, the Ld. Sr. DR, placing emphasis on the finding of the Ld. Addl./Jt. CIT(A) in this regard, submitted that the GST payable by the assessee duly disclosed in the Balance Sheets annexed with ITRs of AYs 2019-20 and 2020-21 were not even paid within the due date for filing ITR under section 139(1) of the Act. Therefore, the Ld. Addl./Jt. CIT(A) was justified in upholding disallowances made under section 43B of the Act on account of non-payment of GST in AYs 2019-20 and 2020-21 following the decision of ITAT, Varanasi in the case of Husna Parveen 142 taxmann.com 2. Further, the Ld. Sr. DR, placing reliance on the decision of the ITAT, Kolkata in the case of TCG Lifesciences Pvt. Ltd. in the I.T.A. No.126/KOL/2024 (order dated 14.08.2024), prayed for upholding of disallowances made under section 43B of the Act on account ITA Nos.1040, 1041 & 1044/Del/2024 Morpheus Security Pvt. Ltd. 5 of non-payment of GST within the due date for filing ITR under section 139(1) of the Act. The relevant part of the decision of the ITAT, Kolkata in the case of TCG Lifesciences Pvt. Ltd. reads as under: “5. We have given our thoughtful consideration to the details filed by the assessee as well as the findings of the Ld. CIT(A). Admittedly, there is a liability of IGST payable at the end and the same has not been paid up to the due date in filing the return of income. The tax audit report is dated 30.11.2019 and also the due date of fling of return is also 30.11.2019 and in the tax audit report at column 26(i)(B)(b) at Sl. No. 29 states that IGST on import of goods at Rs.1,25,65,813/- has not been paid before the date of audit and since the date of audit and filing return of income is same the said liability has not been paid. The thrust of the Ld. Counsel for the assessee is only on the plea that the assessee has not routed the IGST through its P&L Account and since it is not claimed any deduction in the P&L Account, section 43B of the Act cannot be invoked. Now, section 43B(a) refers to the sum payable by the assessee by way of tax, duty, cess or fee by whatever name called, under any law for the time being in force for the same and if such amount not paid before the due date of filing return of income, it needs to be added to the income of the assessee. Section 43B of the Act states notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of – 6. Assessee being a Private Limited Company is required to maintain its accounts on mercantile system and for the income tax purpose has to compute the income as per the provisions of the Income Tax Act. Section 145(1) provides the method of accounting but section 145A provides for the method of accounting in certain cases and the said provision is for the purpose of determining of income chargeable under the head profits and gains or business or profession. For better understanding, we would like to go through the provisions of section 145A of the Act, which reads as under: ………… ITA Nos.1040, 1041 & 1044/Del/2024 Morpheus Security Pvt. Ltd. 6 7. From going through the above provision we note that clause (ii) provides that the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation. For the purpose of accounting this clause provides that in the P&L Account where there is element of opening stock, purchase, sales and closing stock the value of all these items should include the tax, duty, cess or fee levied thereon. In other words, the gross turnover includes the VAT/IGST/any other service tax liability etc. charged and similarly on the debit side i.e. the purchases, taxes paid should be added. So far as the closing stock is concerned, the same also includes the element of tax paid for bringing such goods to the place or location. 8. Now provisions of section 145A are very clear and unambiguous and leave no room for any doubt or even a second thought. Before us, ld. Counsel for the assessee has referred to plethora of decisions and judgments but we do not find it necessary to deal with the same as it may be merely an academic exercise since the provisions of the Act are very clear and there can be no second opinion. Once the Act mandates that for the purpose of calculating profit and gains of business or profession accounting system has to be followed as per sec. 145 and 145A of the Act, there remains no option available with the assessee for not routing the tax liabilities through its P&L Account. Assessee may maintain its account in other manner either by including the tax or not but for the purpose of arriving at the profits and gains for business and profession for the income tax purpose it has to route the taxes through its Trading & P&L Account., and once the tax liabilities are routed through P&L Account, section 43B of the Act would automatically come into operation. 9. In case, if liberty is given to the assessee then they would never route the taxes through their Trading and P&L Account and would always escape from the addition and rigors of section 43B of the Act and applicability of sec. 43B of the Act to the alleged situation would become redundant. Though the assessee has filed a calculation that even after routing the GST through P&L Account there is no impact but then such calculation itself placed before us becomes questionable as ITA Nos.1040, 1041 & 1044/Del/2024 Morpheus Security Pvt. Ltd. 7 to how can that is a GST liability outstanding at the yearend in the Balance Sheet. 10. We have gone through the details filed by the assessee and do not find them in order because the total of GST component in the opening stock and purchase of raw material is exactly same i.e. Rs.7,53,20,110/- to that of the GST component in consumption of raw material and closing stock. There has been no impact on the P&L Account because assessee has not mentioned the details of GST component in the sales figure and has merely added the opening stock and purchase and whatever goods was consumed has shown the GST on that amount and the remaining amount is only closing stock. So by following this method of depicting the GST component there will never be any impact on P&L Account. Had the assessee mentioned the details about the GST component included in the sales figure then the real impact would have come and the same would have matched the outstanding liability at the year end. 11. We, therefore, under the given facts and circumstances of the case are of the considered view that it is not on the discretion of the assessee to route the tax, duties or cess through its P&L Account but it is mandatory as per sec. 145 and sec. 145A of the Act which provides has that for the purpose of computing the income under the Income Tax Act, tax duty, cess etc. has to be routed through the P&L Account and the provisions of section 43B of the Act would be invoked if necessary conditions are not fulfilled. We accordingly, fail to find any infirmity in the finding of the Ld. CIT(A) confirming the alleged disallowance made u/s. 43B of the Act. The grounds of appeal raised by assessee are hereby dismissed.” 7. We have heard the Ld. Sr. DR and have perused the material available on record. We find merit in the argument/contention/submission of the Ld. Sr. DR. As far as the appeal of the AY 2018-19 (ITA No. 1040/Del/2024 is concerned, the Ld. Addl./Jt. CIT(A) had dismissed the appeal not only on the merit but has also held that the appeal is not ITA Nos.1040, 1041 & 1044/Del/2024 Morpheus Security Pvt. Ltd. 8 maintainable on the reasoning that the delay in filing the appeal is not satisfactorily explained. We have perused the impugned order and are of the considered view that the Ld. Addl./Jt. CIT(A) is justified in deciding the appeal on merit after holding the appeal as non-maintainable and vice- versa. Keeping in view the facts in entirety, it is hereby held that the justification offered by the assessee for filing belated appeal before the Ld. Addl./Jt. CIT(A) is satisfactory and thus, the finding of the Ld. Addl./Jt. CIT(A) that the appeal of the AY 2018-19 (ITA No. 1040/Del/2024) non- maintainable is reversed. 8. We have heard the Ld. Sr. DR at length and have perused the material available on record. We are of the considered view that the issue of disallowances under section 36(1)(va) of the Act on account of late deposit of employees’ contribution to ESI & EPF made in each AY is squarely covered by the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra). We therefore, following the reasoning given by the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra), decline to interfere with the finding of the Ld. Addl./Jt. CIT(A) on the issue of disallowances made under section 36(1)(va) of the Act on account of late deposit of employees’ contribution to ESI & EPF. Thus, we uphold the disallowances made under section 36(1)(va) of the Act on account of late deposit of employees’ contribution to ESI & EPF made in each AY. ITA Nos.1040, 1041 & 1044/Del/2024 Morpheus Security Pvt. Ltd. 9 9. The next issue, in AYs 2019-20 and 2020-21, is in respect of disallowances made under section 43B of the Act on account of non- payment of GST within the due date for filing ITR under section 139(1) of the Act. We have heard the Ld. Sr. DR at length and have perused the material available on record. We are of the considered view that the issue of disallowances made under section 43B of the Act on account of non- payment of GST within the due date for filing ITR under section 139(1) of the Act in AYs 2019-20 and 2020-21, is squarely covered by the decision of the ITAT, Kolkata in the case of TCG Lifesciences Pvt. Ltd. (supra). We therefore, following the reasoning given by the ITAT, Kolkata in the case of TCG Lifesciences Pvt. Ltd. (supra), decline to interfere with the finding of the Ld. Addl./Jt. CIT(A) on the issue of disallowances made under section 43B of the Act in AYs 2019-20 and 2020-21. Thus, we uphold the disallowances made under section 43B of the Act in AYs 2019-20 and 2020-21. 10. In the result, all these appeals of the assessee stand dismissed as above. Order pronounced in open Court on 23rd April, 2025. Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:23/04/2025 *Kavita Arora, Sr. PS ITA Nos.1040, 1041 & 1044/Del/2024 Morpheus Security Pvt. Ltd. 10 Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. Sr. DR-ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "