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2022 (3) TMI 141 - AT - Income TaxRevision u/s 263 by CIT - delay in the depositing of employees contribution towards provident fund and ESIC - HELD THAT - Hon ble Supreme Court in the case of Malabar Industries 2000 (2) TMI 10 - SUPREME COURT held that this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interest of the revenue. When the AO adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. Considering the uncontroverted factual details relating to deposit of employee contributions towards provident fund and ESIC before the due date of filing of return u/s 139(1) for the impugned year and the decision of Hon ble jurisdictional High Court in the case of Vijay Shree Ltd 2011 (9) TMI 30 - CALCUTTA HIGH COURT fortifying the claim of the assessee, at the outset, we find that without going into the legal aspect of assessment order of the Ld. AO being erroneous in so far as it is prejudicial to the interest of the revenue, no prejudice is caused to the interest of the Revenue even if it is assumed that the order is erroneous. Presuming that the impugned order u/s 263 is upheld, the decision of Hon ble jurisdictional High Court in the case of Vijay Shree Ltd (supra) governs the assessment order arising from giving its effect on the treatment of allowability of claim for deposit of employee contributions towards provident fund and ESIC before the due date of filing of return u/s 139(1). We observe that where there is a delay in deposit of employees contribution to PF/ESIC as per the due date prescribed under the provisions of PF/ESIC Acts but the contribution is deposited before the due date of filing of return of income, no disallowance is called for u/s 36(1)(va) - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. 2. Allowability of deduction for Employee’s Contribution to Provident Fund (PF) and Employees' State Insurance Corporation (ESIC) deposited after the due date but before the filing of the return. Issue-wise Detailed Analysis: 1. Jurisdiction of the PCIT under Section 263 of the Income Tax Act, 1961: The appeal challenges the jurisdiction of the PCIT in invoking Section 263 of the Income Tax Act, 1961. The PCIT issued a show cause notice stating that the assessment order dated 14.12.2018 was erroneous and prejudicial to the interests of the revenue because the assessee failed to pay Employee’s Contribution to PF amounting to ?76,61,464/- within the due date, which should have been added back to the total income. The PCIT directed the Assessing Officer (AO) to reconsider the assessment. The Tribunal examined whether the conditions for invoking Section 263 were met. According to the precedent set by the Supreme Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83 (SC), for an order to be revised under Section 263, it must be both erroneous and prejudicial to the interest of the revenue. The Tribunal noted that the AO’s order could be considered erroneous if it was based on incorrect facts, incorrect application of law, violated natural justice, lacked application of mind, or if the AO failed to investigate the issue adequately. 2. Allowability of Deduction for Employee’s Contribution to PF and ESIC: The assessee argued that the contributions, although delayed, were deposited before the due date for filing the return under Section 139(1) of the Act. The Tribunal referenced the decision of the Hon’ble Jurisdictional High Court in CIT v. Vijay Shree Ltd. [2014] 224 Taxman 12 (Cal), which upheld the allowability of such deductions if the contributions were made before the due date of filing the return. The Tribunal observed that most of the contributions were deposited during the financial year itself, and the outstanding liabilities as of 31.03.2016 were deposited before the due date for filing the return. The Tribunal noted that the due date for filing the return for A.Y. 2016-17 was 30.09.2016, extended to 17.10.2016. The Tribunal found that the AO’s order was not erroneous or prejudicial to the interest of the revenue, as the contributions were deposited before the due date for filing the return, aligning with the decision in Vijay Shree Ltd. The Tribunal concluded that no disallowance was warranted under Section 36(1)(va) of the Act. Conclusion: The Tribunal quashed the order of the PCIT passed under Section 263 of the Act and restored the assessment order dated 14.12.2018 passed under Section 143(3) of the Act. The appeal of the assessee was allowed, and the grounds raised by the assessee were upheld. The Tribunal emphasized that the AO’s order was not erroneous or prejudicial to the interest of the revenue, following the precedent set by the Hon’ble Jurisdictional High Court in Vijay Shree Ltd.
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