NEERAJ DADHICH,JAIPUR V. ADIT, CPC, BANGALORE

ITA 1142/JPR/2024

AI Insights

The case involves an appeal by Sh. Neeraj Dadhich against the order of the JCIT(A), Chennai, which confirmed the disallowance made by the AO at the Centralized Processing Centre, Bengaluru. The disallowance pertained to Rs. 22,22,399, which was the amount of delayed payment of employees' contributions to PF and ESI for the assessment year 2018-19. The primary legal contention was whether such disallowance was permissible under section 143(1)(a) of the Income Tax Act, 1961, especially in light of the contributions being a debatable issue at the time. The Tribunal dismissed the appeal, citing the Supreme Court's decision in Checkmate Services (P) Ltd. v. CIT, which mandated the timely deposit of such contributions as a condition for deduction.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 31820 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-10-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 03-09-2024
• Other Referred Cases: Checkmate Services (P) Ltd. Vs. CIT, CIT vs. Rajasthan State Beverages Corp. Ltd., CIT vs. State Bank of Bikaner & Jaipur, Paris Elysees India Pvt. Ltd.; ITAT Jaipur Bench, Roshan Korgaonkar v. Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 143(1); 43; 43B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCHES, “SMC” JAIPUR BEFORE SH. SANDEP GOSAIN, JUDICIAL MEMBER AND DR. M. L. MEENA, ACCOUNTANT MEMBER I.T.A. No. 1142/JPR/2024 Assessment Year: 2018-19 Sh. Neeraj Dadhich 845, Vasudev Temple, Near-Post Office, Sanganer, Rajasthan-302029 [PAN: BORPD 4533F] (Appellant Vs. ADIT, CPC Banglore (Respondent) Appellant by Respondent by : : Sh. Rajendra Sisodia, Adv. Sh. Gautam Singh Choudhary,JCIT-DR Date of Hearing Date of Pronouncement : : 01.10.2024 10.10.2024 ORDER Per Dr. M. L. Meena, AM: The captioned appeal has been filed by the assessee against the order dated of the ld. CIT, Appeal/ADDL/JCIT(A)-1, Chennai (hereinafter referred to as “the JCIT(A)” dated 08.01.2024 which is arising out of the Order dated 13.01.2020 passed u/s 143(1) of the Income Tax Act, 1961 (in 2 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC short “the Act”) by the ADIT, Centralized Processing Centre, Bengaluru (in short “The AO, CPC”) in respect of Assessment Year: 2018-19. 2. The assessee has raised the following grounds of appeal: “1. Ld. CIT(A) erred in confirming the disallowance made by the A.O without appreciating the fact that the adjustment made by AO/CPC is not permissible u/s 143(1). 2. Ld. CIT(A) erred in confirming disallowance of Rs.22,22,399/- made by the A.O invoking Sec.36(1)(va), on account of delayed payment of employees contribution to Provident Fund & ESIC. The disallowance made by the A.O and sustained by the Ld. CIT(A) is arbitrary, baseless and not justified. 3. The appellant reserves the right to amend, modify or add any of the ground/s of appeal.” 3. The appellant-assessee has also filed an additional ground of appeal dated 29.09.2024 which reads as under: “Whether prior to the judgment of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd. Vs. CIT (supra), the assessee's claim for deduction of delayed deposit of employees share of contributions towards ESI/PF, an issue which was debatable at the relevant point of time, could have been disallowed by the A.O u/s. 143(1)(a) of the Act.” 4. There is a delay of 172 days in filing the appeal. The AR for the appellant explained that the assesse met with an accident on 15.02.2024 and fractured his jaw with dislocation of hip bone. Consequently, he was confined to bed rest for the period of four months and could not 3 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC communicate with the Authorized Representative. The ld. AR explained that owing to such medical exigency, the filing of appeal was slipped out of the appellant mind and even the earlier AR failed to remind filing of the appeal. Consequently, the assessee has engaged the present counsel Sh. Rajendra Sisodia Advocate to file the appeal before the Tribunal. In support, he filed an affidavit stating therein the facts illustrating the reasons for the delay in filing the appeal with a request to condone the delay in filing the appeal. The Ld. DR has no objection to the request of the Appellant in view of the medical exigencies. Accordingly, the delay is hereby condoned and appeal is admitted on merits. 5. The sole issue challenged by the appellant, in the grounds and the additional ground of appeal pertains to the disallowance of Rs.22,22,399/- made by the A.O. u/s Sec.36(1)(va) of the Act, on account of delayed payment of employees contribution to Provident Fund & ESI, a debatable issue at the relevant point of time, which could not be disallowed by the A.O u/s. 143(1)(a) of the Act. 6. At the outset, the ld. counsel for the assessee has challenged the decision of the ld. JCIT(A) in confirming the disallowance made by the AO u/s 143(1) by invoking section 36(1)(va) on account of delayed payment of 4 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC employees contribution to PF & ESI contributions. The ld. AR has contended that the said disallowance has been made by the AO and sustained by the ld. JCIT(A) in arbitrary manner which is not justified. He contended that the prima facie adjustment made by the CPC by way of disallowance on account of late deposit of employee’s contribution of PF and ESI amounting to Rs.22,22,399/- was not permissible within the ambit of 143(1) and such adjustment is illegal and unsustainable. In support he placed reliance on the following judgement: 1. CIT vs. Rajasthan State Beverages Corp. Ltd. (2017) 392 ITR 2 2. CIT vs. State Bank of Bikaner & Jaipur (2014) 43 taxmann.com 411 (HC). 3. Paris Elysees India Pvt. Ltd.; ITAT Jaipur Bench. 7. Per contra, the Ld. DR supported the impugned order, he contended that the appellant’s case is squarely covered in favour of revenue by the decision rendered by the Hon’ble Apex court in the case of Checkmate Services (P.) Ltd. v. Commissioner of Income Tax [2022] 448 ITR 518 (SC) as rightly relied by the ld. JCIT(A). He pleaded that JCIT(A)’s order may be sustained. 5 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC 8. We have heard the rival contention, perused the material on record impugned order, the written submission and case law cited before us. Admittedly, the assessee failed to deposit the employees contributions to PF and ESI to the employee’s account for the relevant assessment year before the due date under the PF and ESI. In the present case, the order passed by the AO and the Ld. JCIT(A), disallowing by way of an adjustment under section 143(1) r.w.s. 36(1)(va) of the IT act, in respect of delayed remittance of employees contribution to Provident fund (PF) and Employee’s State Insurance(ESI) for the assessment year 2018 -19. The Ld. JCIT(A) relying upon the decision of the honourable Supreme Court in the case of “Checkmate Services (P.) Ltd. v. Commissioner of Income Tax”, [2022] 448 ITR 518 (SC) held that such delayed deposit, no adjustment or deduction could be claimed. The relevant para of the judgement reads as under: \"54. In the opinion of this court, the reasoning in the impugned judgment that the non- obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the 6 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that sucht amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction.” 9. On identical facts, recently, the honourable Bombay High Court in the case of Roshan Korgaonkar v. Deputy Commissioner of Income Tax [2024] 159 taxmann.com 321 (Bombay), following the has followed the decision of honourable Apex Court delivered in the case of Checkmate Services (P) Ltd. (supra), dealt with the issue of disallowance of late payment of PF and ESI contributions in processing of Income Tax Return under section 143(1)(a) by the AO/CPC. The relevant para of the judgement are reproduced here under: 7 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC 7. Though the decision cited was that of the ITAT, we have considered the same. In our judgment, however, the fact that the assessment order in Checkmate Services (P) Ltd. (Supra) was incidentally under section 143(3) and assessment order in the present case is under section 143(1)(a) The IT act, makes no difference to the principle involved in this matter. The ITAT decision does not discuss why this circumstance constitute a distinguishing feature based on which the ratio of Checkmate Services (P) Ltd. (supra) would be departed from 8. Checkmate Services (P) Ltd. (supra) holds that the deductions can be claimed or adjustments can be made under section 141(1)(a)(iv) read with section 36(1)(va) only when the employer deposits the contributions in the employees accounts on or before the due date prescribed under the employees Provident fund/employees state Insurance Act. In this case, admittedly, the contributions were deposited in the employee’s accounts beyond the due date. The circumstance that the assessment order was made under section 143(1)(a) of the act can make no difference.” 8 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC 10. In the present case, admittedly, the PF and ESI contributions were deposited in the employee’s accounts beyond the due date. The Ld. AR failed to rebut the contention of the Ld. DR or furnish contrary judgement to the latest judgment of Apex Court delivered in the case of Checkmate Services (P) Ltd. (supra) and Bombay High Court in case of Roshan Korgaonkar (supra) on the issue. In view of that matter, we find no infirmity or perversity in the order of the ld. JCIT(A) to the facts on record. According, we find no merit in the contention of the Ld. AR with regards to the grounds and additional grounds of appeal and same would be liable to be rejected. 11. Respectfully, following honourable Apex Court and Bombay High Court (supra), the disallowance of Rs. of Rs.22,22,399/- by way of an adjustment under section 143(1) r.w.s. 36(1)(va) of the IT act, confirmed by the Ld. JCIT(A) is sustained. 12. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on 10.10.2024 Sd/- Sd/- (Sandeep Gosain) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: 9 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC (1) The Appellant: (2) The Respondent: (3) The ld. CIT (4) The ld. CIT(A) (5) The DR, I.T.A.T., Jaipur (6) Guard File By Order, Asstt. Registrar Date Initial 1. Draft dictated on 01.10.24 Sr.PS/PS 2. Draft placed before author 01.10.24 Sr.PS/PS 3. Draft proposed & placed before the Second Member JM/AM 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr. P.S./P.S. Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order "