2022 (3) TMI 461 - AT - Income Tax

Late payments towards ESI and EPF u/s 36(1)(va) - Payment before furnishing the return of income under section 139(1) - HELD THAT - In the present case, it is not in dispute that the assessee deposited the contribution of PF ESI belatedly in terms of section 36(1)(va) of the Act. However, the said deposits were made prior to filing of return of income u/s. 139(1) of the Act. It is noticed that an identical issue having similar facts has already been adjudicated in RAJA RAM 2021 (11) TMI 370 - ITAT CHANDIGARH wherein addition on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s. 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee. Addition on account of employer share of ESI PF for AY 2017-18 paid during the year which was disallowed in AY 2017-18 and is otherwise allowable in terms of u/s. 43B of the I.T. Act on payment basis - HELD THAT - There is no dispute regarding the facts and we are in complete agreement with the Ld. AR that disallowing the same amount in two assessment years i.e. 2017-18 and 2018-19 has resulted in taxing the impugned amount twice. Since this amount has already been disallowed and taxes paid on the same in assessment year 2017-18, the same should not have been disallowed in the year under consideration in the present appeal. Accordingly, we direct the deletion of this amount also.

Summary

Issues Involved:
1. Adjustment made to the return of income for failure to deposit the employee's contribution to PF/ESI on or before the prescribed due date under section 36(1)(va) of the Income Tax Act.
2. Addition of employer's share of ESI/PF for assessment year 2017-18, which was paid during the year under consideration but had already been disallowed in the previous assessment year.

Detailed Analysis:

1. Adjustment for Employee's Contribution to PF/ESI:
The primary issue revolves around the adjustment made to the assessee's return of income under section 143(1) of the Income Tax Act, due to the late deposit of the employee's contribution to PF/ESI. The amount in question is ?3,06,536/-. The assessee argued that although the contributions were not paid within the due dates prescribed under the respective Acts, they were paid before the due date for filing the return of income under section 139(1) of the Act. The Hon'ble Jurisdictional High Court had previously interpreted section 36(1)(va) to allow such deductions if payments were made before the due date for filing the return. However, the Revenue Authorities based their adjustment on amendments made by the Finance Act, 2021, which clarified that the due date for payment under section 43B does not apply to employee contributions under section 36(1)(va). It was noted that these amendments were applicable from assessment year 2019-20 onwards, whereas the impugned assessment year was prior to this amendment. The Tribunal, referring to earlier decisions, concluded that the disallowance made by the Assessing Officer and sustained by the CIT(A) was not justified since the payments were made before the due date for filing the return of income. Thus, the disallowance was deleted.

2. Addition of Employer's Share of ESI/PF:
The second issue concerned the addition of ?23,128/- for the employer's share of ESI/PF for assessment year 2017-18, which was paid during the year under consideration. The assessee contended that this amount had already been disallowed in the assessment year 2017-18 under section 43B and should not be disallowed again in the current year, as it would result in double taxation. The Tribunal agreed with the assessee's contention, noting that disallowing the same amount in two different assessment years would indeed result in taxing the same amount twice. Therefore, the Tribunal directed the deletion of this amount as well.

Conclusion:
The appeal of the assessee was allowed, with the Tribunal directing the deletion of both the disallowances made by the Assessing Officer and sustained by the CIT(A). The Tribunal's decision was based on the interpretation of relevant provisions and precedents set by earlier judgments, ensuring that the assessee was not unfairly taxed for amounts paid within the permissible timeframes and avoiding double taxation.