2020 (8) TMI 34 - AT - Income Tax

Disallowance on account of late deposit of ESI arbitrarily - whether disallowance so made deserves to be deleted - HELD THAT - Department has not disputed the fact that the payment on account of ESI contribution was made by the assessee before the end of the financial year relevant to the assessment year under consideration and therefore, the payment was made much before the due date of filing of return of income U/s 139(1) of the Act. As decided in M/S K.S. AUTOMOBILES PVT. LTD. 2019 (3) TMI 1648 - ITAT JAIPUR in view of a series of decisions of the Hon ble Jurisdictional High Court in favour of the assessee and further Hon ble Supreme Court in case of PCIT vs. Rajasthan State Beverages Corporation Ltd. 2017 (7) TMI 1087 - SC ORDER has dismissed the SLP filed by the Department this issue is decided in favour of the assessee and against the Revenue.

Summary

Issues:
Disallowance of ESI contribution on account of late deposit.

Analysis:
The appeal was against the order confirming the disallowance of ?1,34,632 on account of late deposit of ESI. The assessee argued that despite a minor delay, the payment was made before the end of the financial year and before the due date of filing the return. The Department did not dispute this fact. The Tribunal noted that similar issues had been decided in favor of the assessee by the High Court and Tribunal in previous cases. The Tribunal cited the case of M/s K.S. Automobiles Ltd. vs. DCIT where it was held that such payments made before the due date of filing the return were allowable. The Tribunal also referred to the decision in the case of PCIT vs. Rajasthan Renewable Energy Corporation Limited where the High Court ruled in favor of the assessee regarding similar issues.

The Tribunal emphasized that the High Court had followed previous decisions favoring the assessee, despite a typographical error in the conclusion of one case. The Tribunal clarified that the decisions were indeed in favor of the assessee, and the issue was decided in favor of the assessee and against the Revenue. The disallowances and additions made by the Assessing Officer on account of employees' contributions to PF & ESI were deleted. The Tribunal also noted that the penalty appeal was dismissed by the CIT(A) without considering the outcome of the quantum appeal, which was a mistake. Therefore, the matter was remanded back to the CIT(A) for fresh consideration after giving the assessee an opportunity to be heard and considering the Tribunal's order in the quantum proceedings.

Based on the decisions of the Tribunal and the High Court, as well as the dismissal of the SLP filed by the Department, the Tribunal decided the issue in favor of the assessee and against the Revenue. Consequently, the disallowance/addition made by the Assessing Officer was deleted, and the appeal of the assessee was allowed.