2012 (8) TMI 365 - AT - Income Tax

Employees contribution to PF and ESIC - dis-allowance - delayed payment - Held that - If the employee s share of contribution is paid before the due date of filing of the return u/s 139(1), then no dis-allowance can be made. Omission of second proviso to section 43B is operated retrospectively - Decided in favor of assessee. Addition on account of low G.P. - AY 05-06 - A.O. made the impugned addition following the addition made in the assessment for the A.Y. 2004-05 - Held that - In the absence of any material show that the purchases are vouched and verifiable and considering the fact that in the A.Y. 2004-05, the Tribunal has restricted the addition to 2% of the cash purchases, we are of the view that in the interest of justice it will be fair and reasonable if the addition of 1% of the cash purchases is sustained - Decided partly in favor of Revenue

Summary

Issues:
1. Deletion of addition of Rs. 21,03,062 made on account of low G.P.
2. Deletion of disallowance of Rs. 28,359 made on account of delayed payment of employees' contribution to PF and ESIC.

Issue 1: Deletion of addition of Rs. 21,03,062 made on account of low G.P.:
The case involved the Revenue appealing against the deletion of an addition of Rs. 21,03,062 made on account of low Gross Profit (G.P.). The assessee company had made cash purchases without complete addresses, justifying them as daily cash purchases from small vendors without bank accounts. The Assessing Officer (A.O.) applied a G.P. rate of 3% based on a previous year's decision. However, the Commissioner of Income Tax (Appeals) deleted the addition, citing a similar deletion in the previous year's appeal. The Revenue argued for restoration of the addition based on a Tribunal's decision limiting the addition to 2% of cash purchases. The Tribunal upheld an addition of 1% of cash purchases, considering the lack of verifiable purchase rates. The Tribunal found the addition justified to ensure fairness and sustained the addition of Rs. 7,01,020.

Issue 2: Deletion of disallowance of Rs. 28,359 made on account of delayed payment of employees' contribution to PF and ESIC:
The second issue concerned the disallowance of Rs. 28,359 for delayed payment of employees' contribution to Provident Fund (PF) and Employee State Insurance Corporation (ESIC). The A.O. disallowed the amount, but the Commissioner of Income Tax (Appeals) deleted it based on legal precedents. The Tribunal upheld the deletion, noting that the entire PF and ESIC amounts were deposited before the due date of the return filing. Citing legal decisions, including a Supreme Court ruling and a High Court decision, the Tribunal found the disallowance not sustainable in law. The Tribunal rejected the Revenue's appeal, upholding the Commissioner's decision to delete the disallowance.

In conclusion, the Appellate Tribunal ITAT, Mumbai addressed two key issues involving additions and disallowances in the Revenue's appeal. The Tribunal partly allowed the appeal by upholding a reduced addition related to low G.P. and rejecting the disallowance of delayed employee contributions to PF and ESIC. The Tribunal's decisions were based on legal precedents and considerations of fairness and legal sustainability.