R K SWAMY LIMITED,CHENNAI V. DCIT, CHENNAI

ITA 1427/CHNY/2024

AI Insights

The case involves M/s. R.K. Swamy Ltd., an advertising company, which appealed against the order of the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, Delhi. The appeal was related to the disallowance of employees' contributions to PF and ESI amounting to Rs. 1,77,85,122, which was initially disallowed by the Central Processing Centre (CPC), Bengaluru, in an intimation under section 143(1) of the Income Tax Act, 1961. The CIT(A) upheld this disallowance, referencing a Supreme Court decision that clarified the legal position on such contributions. The Tribunal dismissed the appeal, agreeing with the lower authorities and the Supreme Court's interpretation of the law.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107055 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PHANIDHARAN
• Assessee Lawyers: L.SHIBI; C.A
• Keywords: Principle of natural justice
• Section: 143(3); 143(1); 139; 6

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ \u0011ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0019ी मनु क ुमा र िग र, \u0011ा ियक सद! एवं \u0019ी जगदीश, लेखा सद! क े सम' BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1427/Chny/2024 िनधा 8रण वष8 /Assessment Year: 2018-19 M/s. R.K. Swamy Ltd., No.19, Wheat Crofts Road, Nungambakkam, Chennai – 600 034. Vs. The Dy. Commissioner of Income Tax, Non Corporate Circle-10(1), Chennai. [PAN: AACCR 2213F] (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) अपीलाथF की ओर से/ Appellant by : Shri L.Shibi, C.A HIथF की ओर से /Respondent by : Shri Phanidharan, JCIT सुनवाई की तारीख/Date of Hearing : 22.10.2024 घोषणा की तारीख /Date of Pronouncement : 08.01.2025 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2018-19 arises out of the order of Learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi [hereinafter “CIT(A)”] dated 17.08.2023 vide intimation u/s. 143(1) of the Income-tax Act, 1961 (hereinafter “the Act”) issued by CPC, Bengaluru dated 21.02.2020. ITA No.1427/Chny/2024 :- 2 -: 2. There is a delay of 211 days in filing the appeal by the assessee. The assessee has filed condonation petition stating the reasons for delay in filing the appeal. We have considered the petition of delay in filing the appeal and satisfied that there was sufficient cause for not filing the appeal within the prescribed time limit. Hence, the delay is condoned accordingly. 3. The grounds of appeal raised by the assessee are as under: “1. The Appellant challenges the order of the Commissioner of Income Tax (Appeals) (\"CIT(A)\") on the following grounds amongst others each without prejudice to the other or others. 2. The order of the CIT(A) is arbitrary, and contrary to law, without application of mind disregarding the computation of income by the Appellant. 3. The Assessing officer (CPC) in the 143(1) Intimation dated 21.02.2020 had made a disallowance of Employees Contribution to PF and ESI u/s 36(1) (va) of the Act amounting to Rs.1,77,85,122/- on the ground that there has been an inconsistency of the claim in the return of income and the tax audit report. The Assessing Officer (CPC) has failed to note that this aspect as on the date of issuing the intimation was a debatable issue and the same cannot be the subject matter of adjustment under section 143(1) of the Income Tax Act 1961 and the Hon'ble CIT(A) upholding the additions made under section 143(1) thus warranting the interference of this Hon'ble Tribunal. 4. The learned CIT(A) has failed to consider that the disallowance of Employees Contribution to PF and ESI u/s 36(1) (va) amounting to Rs.1,77,85,122/- made the Assessing Officer under section 143(1) of the Act is ultra vires the provisions of the Income Tax Act 1961 as the Assessing Officer does not have a power to make an adjustment of an issue which is of debatable in nature. Under these circumstances the order passed by the Assessing Officer dated 21.02.2020 making the additions of Rs. 1,77,85,122/- is beyond the powers vested under section 143(1) of the Income Tax Act 1961 and suffers from illegality and ought to be deleted. ITA No.1427/Chny/2024 :- 3 -: 5. The tax audit report has only disclosed the fact that there has been a delay in remittance of ESI and PF under the relevant statute however paid before the due date of the filing of return of income. There was no indication as to any disallowance of expenditure or increase in income in the tax audit report as the said subject matter was not a settled law and in fact was in favour of the Appellant in preceding years. Under these circumstances, the additions by the Respondent under section 143(1) is illegal and liable to be deleted. 6. The Appellant craves leave of this Hon'ble Tribunal to file additional ground at the time of hearing.” 4. The effective ground of appeal in this appeal of assessee is against disallowing employees’ contribution to PF and ESI u/s. 36(1)(va) of the Act amounting to Rs. 1,77,85,122/- in the intimation u/s. 143(1) of the Act. 5. The assessee is a company engaged in the business of advertising. The assessee-company has filed its return of income on 30.11.2018 declaring total income of Rs.5,40,43,730/-. The CPC, Bengaluru has processed the return of income u/s. 143(1) of the Act disallowing employees contribution to PF and ESI of Rs.1,77,85,122/- u/s. 36(1)(va) of the Act as the contribution was not paid before due date of specified in the respective Acts and reported by the Auditor in Form 3CD. The assessee has not filed appeal against the intimation u/s. 143(1) of the Act. The case was selected for scrutiny and the A.O has passed order u/s. 143(3) of the Act assessing total income of Rs.8,82,78,160/- starting computation at income determined in the ITA No.1427/Chny/2024 :- 4 -: intimation u/s. 143(1) of the Act. The assessee in the appeal filed against the order u/s. 143(3) of the Act has challenged disallowance of employees contribution of PF and ESI u/s. 36(1)(va) of the Act before Ld. CIT(A). The Ld. CIT(A) has observed that the disallowances u/s. 36(1)(va) of the Act has been made by CPC in the intimation u/s. 143(1) of the Act and not by the AO in order u/s. 143(3) of the Act and therefore, the assessee should have filed an appeal against the intimation u/s. 143(1) of the Act, but in view of natural justice he has adjudicated the issue. The Ld. CIT(A) relying on the order of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT in Civil Appeal No.2833 of 2016 dated 12.10.2020 (SC), wherein it has been held that employees contribution of PF and ESI can be allowed as deduction only if it had been paid within the prescribed due date under the relevant Acts has confirmed the disallowance made u/s. 36(1)(va) of the Act. 6. The Ld. Authorized Representative (A.R) of the assessee before us has submitted that the assessee has paid the employees’ contribution to PF & ESI before due date of filing of return of income u/s. 139 of the Act and the various Courts including the Hon’ble Jurisdictional High Court has held that if the assessee had deposited employees contribution towards PF and ESI after due date as ITA No.1427/Chny/2024 :- 5 -: prescribed under the relevant act, but before the due date of filing of return of income under Income-tax Act, no disallowance could be made. The Ld. AR, therefore argued that the Ho’ble Supreme Court decision was not available at the time of processing of the return, therefore, CPC was not justified to make disallowance while processing return u/s. 143(1) of the Act. 7. The Ld. Departmental Representative (DR) has relied on the orders of lower authorities. 8. We have heard the rival submissions, and perused the materials available on record. The CPC while processing return u/s. 143(1) of the Act has made the disallowance of employees’ contribution to PF and ESI, which has not been deposited before due date prescribed in the relevant Act, as per report of the Auditor in the audit report. The assessee has not filed appeal against intimation u/s. 143(1) of the Act. However, as the A.O in the order u/s. 143(3) of the Act has started the computation from income determined in intimation u/s. 143(1) of the Act, the Ld. CIT(A) has adjudicated the issue on merit. The Ld. CIT(A) has relied upon the order of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT, supra, wherein the Hon’ble Supreme Court after interpreting section 36(1)(va) of the Act and ITA No.1427/Chny/2024 :- 6 -: section 2(24)(x) of the Act has held that employees contribution of PF/ESI can be allowed as deduction only, if it had been paid within the prescribed due dates under the relevant Acts. The Ld CIT(A) has held that this is the position of law and it has always been so. The Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT, supra, where some courts have held that such deduction is allowed if paid before due date of filling return under Income Tax Act, has held as under: “55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.” 9. As the Hon’ble Supreme Court has clarified that the decision of Hon’ble High Courts holding to the contrary view that the employee contribution made after the prescribed due date under the relevant Acts, but paid before due date of filing return of income is to be allowed do not lay down correct law,the assessee’s arguments that the assessee’s case was covered by the Hon’ble Jurisdictional High Court is not tenable. In view of the above, we do not find any infirmity in the ITA No.1427/Chny/2024 :- 7 -: order of Ld. CIT(A). Thus, the appeal filed by the assessee is dismissed accordingly. 10. In the result, the appeal filed by the assessee is dismissed. Order pronounced on 08th January, 2025. Sd/- Sd/- (मनु क ुमार िग र) (Manu Kumar Giri) \u0011ाियक सद! / Judicial Member (जगदीश) (Jagadish) लेखा लेखा लेखा लेखा सद\u0011य सद\u0011य सद\u0011य सद\u0011य /Accountant Member चे\u0013नई/Chennai, \u0016दनांक/Dated: 08th January, 2025. EDN/- आदेश क\u0019 \bितिल प अ े षत/Copy to: 1. अपीलाथ\u0007/Appellant 2. \b थ\u0007/Respondent 3. आयकर आयु\u000f/CIT, Chennai 4. िवभागीय \bितिनिध/DR 5. गाड\u0018 फाईल/GF "