2023 (5) TMI 1283 - AT - Income Tax

Late payment of PF and ESIC contribution - amount deposited before the due date of filing of the Income Tax Return - disallowance in the intimation passed u/s. 143(1) - HELD THAT - We note that identical issue is dealt by us recently and decided against the assessee by the Co-ordinate Bench of the Tribunal 2023 (4) TMI 1281 - ITAT INDORE after taking into account the latest judgment of Checkmate Services (P.) Ltd. 2022 (10) TMI 617 - SUPREME COURT held that non obstante clause under section 43B could not apply in case of employee's contribution which were deducted from their income and was not part of assessee-employer's income and, thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. Contention of the assessee CPC should not have made the disallowance u/s. 36(1)(va) in 143(1) proceedings which is a debatable and controversial issue by different High Courts - he provisions of Section 143(1)(a) deals with the total income or loss shall be computed after making the following adjustments namely (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return . Thus we are of the considered opinion as per the first proviso to section 143(1)(a), CPC had given a communication dated 19.02.2019 to the assessee, why not to make a disallowance 36(1)(va) being the late payment of PF and ESIC. However the assessee has not responded to the communication issued by the CPC. It is, thereafter as per section 143(1)(a)(ii), being an incorrect claim made by the assessee, which is apparent from the information filed in the Return of Income, thus the CPC rightly made the disallowance, which is well within the provisions of law. Thus we are of the considered view, the disallowance of late payment of PF ESIC made u/s. 143(1) is valid in law. Thus the grounds of appeal raised by the assessee are devoid of merits. The case laws relied by the assessee are prior to the judgment passed by the Hon ble Supreme Court in the case of Checkmate Services (P.) Ltd. supra Thus the grounds raised by the assessee are hereby dismissed.

Summary

Issues Involved:
1. Late payment of PF and ESIC contributions by the assessee.
2. Sufficient opportunity of hearing during COVID-19.
3. Jurisdiction and permissible adjustments under Section 143(1).
4. Applicability of amendments by the Finance Act, 2021.
5. Proper appreciation of facts and submissions by lower authorities.
6. Levying of interest under Section 234A/B/C of the Act.

Summary:

1. Late Payment of PF and ESIC Contributions:
The solitary issue in this appeal is whether the late payment of PF and ESIC contributions by the assessee, deposited before the due date of filing the Income Tax Return, can be disallowed in the intimation dated 14.07.2020 passed u/s. 143(1) of the Act. The assessee, a proprietor of M/s. Star Labour Services, filed its Return of Income for AY 2019-20, which was processed u/s. 143(1). The CPC issued a communication regarding the disallowance u/s. 36(1)(va) due to late payment of PF and ESIC, which the assessee did not respond to, leading to the disallowance.

2. Sufficient Opportunity of Hearing During COVID-19:
The assessee contended that the CIT(A) erred in not granting sufficient opportunity of hearing, especially during the COVID-19 pandemic, violating the principles of natural justice.

3. Jurisdiction and Permissible Adjustments Under Section 143(1):
The assessee argued that the disallowance was without jurisdiction and beyond the permissible adjustments contemplated u/s. 143(1) of the Act. The Tribunal noted that the CPC had given a communication to the assessee, which was not responded to, justifying the disallowance as an incorrect claim apparent from the return information.

4. Applicability of Amendments by the Finance Act, 2021:
The assessee argued that the amendments made by the Finance Act, 2021, are not applicable. However, the Tribunal, following the Hon'ble Supreme Court's judgment in Checkmate Services (P.) Ltd., held that the non-obstante clause under section 43B does not apply to employees' contributions which are deducted from their income and held in trust by the employer.

5. Proper Appreciation of Facts and Submissions by Lower Authorities:
The assessee claimed that the lower authorities did not properly appreciate the facts and submissions, breaching the principles of natural justice. The Tribunal found that the CPC's action was within the provisions of law, given the lack of response from the assessee.

6. Levying of Interest Under Section 234A/B/C:
The assessee also contested the levy of interest under Section 234A/B/C of the Act. The Tribunal upheld the disallowance and the consequential levy of interest.

Conclusion:
The Tribunal dismissed the appeal, upholding the disallowance of late payment of PF and ESIC contributions u/s. 143(1) as valid in law, following the Supreme Court's judgment in Checkmate Services (P.) Ltd. The grounds raised by the assessee were found to be devoid of merits, and the appeal was dismissed.