2021 (8) TMI 459 - AT - Income Tax

Expenditure claimed in respect of employee's contribution - disallowance of expenditure claimed on account of the employee's contribution to ESI EPF - HELD THAT - The issue for consideration in this case is with regard to allowability of employee's contribution made towards EPF ESI. Considering the material available on record and submissions of the assessee, the assessee ought to have been given opportunity for furnishing the relevant evidences in the interest of principles of natural justice - we set aside the order of Ld. CIT(A) and restore the grounds to CIT(A) for the decision afresh after considering the evidences furnished by the assessee. Thus, grounds raised by the assessee in this appeal are allowed for statistical purposes.

Summary

Issues:
1. Disallowance of expenditure claimed on employee's contribution to ESI & EPF
2. Compliance with provisions of Section 36(1)(va) of the Income Tax Act 1961

Issue 1: Disallowance of expenditure claimed on employee's contribution to ESI & EPF
The appeal was filed against the order of Ld. CIT(A)-9, New Delhi, which disallowed the expenditure of the assessee amounting to ?31,71,449 claimed in respect of employee's contribution. The Ld. CIT(A) dismissed the appeal citing non-compliance with the provisions of Section 36(1)(va) of the Income Tax Act, 1961. The Ld. CIT(A) observed that the appellant failed to deposit the employees' contribution to ESI and PF before the due dates, leading to a negative decision on the grounds raised by the appellant. The Tribunal considered the submissions and set aside the order of Ld. CIT(A) to allow the assessee an opportunity to furnish relevant evidences for a fresh decision, emphasizing the principles of natural justice. Consequently, the grounds raised by the assessee in this appeal were allowed for statistical purposes, resulting in the appeal being allowed.

Issue 2: Compliance with provisions of Section 36(1)(va) of the Income Tax Act 1961
The primary contention revolved around the compliance of the appellant with the provisions of Section 36(1)(va) of the Income Tax Act, 1961 concerning the employee's contribution to ESI and PF. The Ld. CIT(A) based the decision on factual matrix, judicial precedents, and statutory provisions, concluding that the appellant had failed to comply with the stipulated provisions under the IT Act, 1961. However, the Tribunal, after hearing the rival contentions and perusing the available material, found that the assessee should have been given an opportunity to furnish relevant evidences in line with the principles of natural justice. Consequently, the order of Ld. CIT(A) was set aside, and the grounds were restored for a fresh decision. The Tribunal allowed the appeal for statistical purposes, emphasizing the importance of providing a fair opportunity for the assessee to present evidence.

This detailed analysis of the judgment covers the issues involved comprehensively, outlining the key arguments, decisions, and considerations made by the authorities involved in the legal proceedings.