2022 (6) TMI 560 - AT - Income Tax

Delayed Employees' share towards contribution to ESI and PF - amount which the assessee had deposited beyond the due date as prescribed under the relevant acts but admittedly before the due date of filing of returns under the Income Tax Act for AY 2018-19 - HELD THAT - The issue involved in these files is duly covered in favour of the assessee by the order S.K. Shoes and Boots Private Limited 2022 (3) TMI 476 - ITAT LUCKNOW and in the case of Sangrila Nutri Food Products 2022 (3) TMI 473 - ITAT LUCKNOW - Decided in favour of assessee.

Issues Involved:
1. Disallowance of employees' share towards contribution to ESI and PF deposited beyond the due date.
2. Dismissal of appeal due to delay in filing.
3. Condonation of delay due to COVID-19 and delay in the decision on the application under section 154.
4. Non-decision on merits by CIT(A).
5. Applicability of judicial precedents and amendments to the relevant sections.

Detailed Analysis:

1. Disallowance of Employees' Share Towards Contribution to ESI and PF Deposited Beyond the Due Date:
The primary issue in these appeals is the disallowance of employees' share towards contribution to ESI and PF, which were deposited by the assessee beyond the due date as prescribed under the relevant acts but before the due date of filing of returns under the Income Tax Act. The CPC had disallowed these claims, and the rectification application under section 154 filed by the assessee was dismissed. This issue is covered in favor of the assessee by the order of the SMC Bench of Lucknow Tribunal in the cases of S.K. Shoes and Boots Private Limited and Sangrila Nutri Food Products, which held that deposits made before the filing of the return of income should be allowed.

2. Dismissal of Appeal Due to Delay in Filing:
The appeals were dismissed by CIT(A) on the grounds of delay in filing. The assessee argued that the delay was due to the onset of COVID-19 and the delay in the decision on the application filed under section 154. The Tribunal noted that the delay was beyond the control of the assessee and should have been condoned.

3. Condonation of Delay Due to COVID-19 and Delay in the Decision on the Application Under Section 154:
The Tribunal acknowledged that the period from March 23, 2020, to October 31, 2021, was covered by COVID-19, during which the limitation was extended. Therefore, the delay in filing the appeal should have been condoned, and the appeal should be considered in time.

4. Non-Decision on Merits by CIT(A):
The CIT(A) did not decide the appeal on the merits of the disallowance/addition of Rs. 15,99,983/- for the delayed payment of EPF and ESIC. The Tribunal, citing the judgment of the Hon'ble Madras High Court in Commissioner of Wealth-Tax vs. M.K.S. Vanavarayar, held that the Tribunal could satisfactorily dispose of the appeals on merits based on the materials already available on record without remanding the matter back to CIT(A).

5. Applicability of Judicial Precedents and Amendments to the Relevant Sections:
The Tribunal referred to various judicial precedents, including the judgment of the Hon'ble Allahabad High Court in the case of Sagun Foundry (P.) Ltd. vs. CIT, which dealt with similar issues. The Tribunal also considered the amendments brought by the Finance Act, 2021, which clarified that the provisions of section 43B do not apply to employees' contributions. However, these amendments apply from April 2021 onwards and do not affect the assessment years in question.

Conclusion:
The Tribunal allowed both appeals of the assessee, holding that the disallowance of ESI/PF contributions deposited before the filing of returns should be allowed, the delay in filing the appeals should be condoned due to COVID-19, and the appeals should be decided on merits based on the materials available on record. The Tribunal's decision was influenced by relevant judicial precedents and the interpretation of the amendments to the Income Tax Act.

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