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2018 (6) TMI 1312 - AT - Income TaxRevision u/s 263 - Omission to consider by AO the disallowance on belated payments of employees contribution of EPF and ESI as envisaged u/s. 2(24)(x) r.w.s. 36(1)(va) - Held that - Admittedly, the issue of disallowance of payment of employees contribution to EPF and ESI after the specified date prescribed under the respective Act, was held in favour of the assessee in assessee s own case for the assessment years 2003-04 and 2004-05 The payment of employees contributions to EPF and ESI after the due date prescribed under the respective Act but before the due date of filing of the return u/s. 139(1) of the Act is to be allowed. Hence, this ground of appeal of the assessee is allowed. Dormant scheme of spraying on coconut trees - Held that - CIT was of the opinion that there is no proper enquiry by the Assessing Officer and he accepted the claims of the assessee without making any enquiry with regard to the claims of the assessee. The Assessing Officer has not gathered any information and evidence to suggest that the claims of the assessee were right. Assessing Officer is required to cause enquiries with regard to the claims of the assessee. As such, the CIT is justified in remitting this issue to the file of the Assessing Officer for de novo consideration by invoking the provisions of sec. 263 of the Act. Accordingly, this ground of appeal of the assessee is dismissed.
Issues Involved:
1. Disallowance of employees' contribution to EPF and ESI after the due date. 2. Dormant scheme of spraying on coconut trees against eriophyid mite attack. Detailed Analysis: 1. Disallowance of Employees' Contribution to EPF and ESI: The assessee contended that the Commissioner of Income Tax (CIT) erred in setting aside the proceedings under Section 143(3) of the Income Tax Act, arguing that there was no error prejudicial to the interest of the revenue. The CIT had directed the disallowance of payments made after the due date prescribed under the respective Act but before the due date for filing the return of income. The assessee cited a judgment of the Jurisdictional High Court in their favor for the assessment years 2003-04 and 2004-05. The tribunal reviewed the rival submissions and the record, noting that the issue had been previously held in favor of the assessee by the Jurisdictional High Court. The tribunal referenced a prior decision where it was established that the CIT could only revise assessment orders if they were erroneous and prejudicial to the revenue. The tribunal found that the Assessing Officer (AO) had taken a possible view supported by the Jurisdictional High Court's earlier decision, and thus the order was not erroneous or prejudicial to the revenue. Consequently, the tribunal allowed the assessee's appeal on this ground, affirming that payments made before the due date of filing the return should be allowed. 2. Dormant Scheme of Spraying on Coconut Trees: The CIT had also set aside the assessment order due to the AO's omission to consider the issue related to a dormant scheme for spraying coconut trees against eriophyid mite attack, amounting to ?22.5 lakhs. The tribunal noted that the AO had not made any mention of this issue in the assessment order and emphasized the AO's duty to make necessary inquiries while passing the assessment order under Section 143 of the Act. The tribunal highlighted that the CIT is empowered to initiate suo moto proceedings when the AO fails to make necessary inquiries or examine the genuineness of claims. The tribunal supported this view with references to Supreme Court decisions, asserting that an order becomes erroneous and prejudicial to the revenue if the AO fails to make requisite inquiries or verify the claims' genuineness. Consequently, the tribunal upheld the CIT's decision to remit this issue for de novo consideration, dismissing the assessee's ground of appeal on this matter. Revenue's Appeal on Deletion of Disallowance: The Revenue's appeal concerned the deletion of disallowance of employees' contribution to EPF and ESI by the CIT(A). The tribunal referenced a Jurisdictional High Court judgment in the case of CIT vs. Merchem Ltd., which clarified that employees' contributions must be credited to the respective fund on or before the due date to qualify for deduction. Since the assessee had not paid the contributions within the prescribed dates, the tribunal directed the AO to disallow the payments made after the due date, allowing the Revenue's appeal for statistical purposes. Conclusion: In summary, the tribunal allowed the assessee's appeal regarding the disallowance of employees' contributions to EPF and ESI, affirming that payments made before the due date of filing the return are allowable. However, it upheld the CIT's decision to remit the issue of the dormant scheme for further inquiry and directed the AO to disallow employees' contributions made after the due date, thereby partly allowing both the assessee's and Revenue's appeals.
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