2022 (6) TMI 1102 - AT - Income Tax

Delayed deposit of employees contribution towards PF and ESI - Addition invoking the provisions of section 36(1) when the same was paid within the due date of filing the return of income - intimation u/s. 143(1) when adjustment on debatable issue - HELD THAT - In the instant appeal regarding disallowance of employees' contribution towards Provident Fund and ESI belatedly payment without following the provisions of section 2(24)(x) read with section 36(1)(va) of the Act is squarely covered in favour of the assessee by the judgment of the Hon'ble Jurisdictional High Court, Kolkata in the case of Vijay Shree Ltd. 2011 (9) TMI 30 - CALCUTTA HIGH COURT - Decided in favour of assessee.

Summary

Issues:
- Disallowance of delayed deposit of employees' contribution towards PF and ESI
- Adjustment made by AO in the intimation u/s 143(1) on debatable issue
- Disallowance of employees' contribution to PF & ESI

Analysis:

Issue 1: Disallowance of delayed deposit of employees' contribution towards PF and ESI
The appeal was made against the order disallowing Rs. 1,79,53,513/- on account of failure to deposit employees' contribution to PF/ESI within the due date. The AO disallowed the amount based on various case laws, which was upheld by the Ld. CIT(A). However, the assessee contended that the issue was covered in their favor by a judgment of the Hon'ble Jurisdictional High Court and a recent order of the tribunal. The tribunal found that the issue was indeed covered in favor of the assessee by the latest tribunal order, which clarified the applicability of Section 43B regarding belated payment of employees' contribution. The tribunal held that the disallowance made by the AO and confirmed by the Ld. CIT(A) should be deleted, and the appeal of the assessee was allowed.

Issue 2: Adjustment made by AO in the intimation u/s 143(1) on debatable issue
The assessee raised concerns about the adjustments made by the AO in the intimation u/s 143(1) on debatable issues related to the payment of ESI and PF. However, this issue was not specifically adjudicated upon by the tribunal as it was deemed identical to the first ground of appeal, which was already discussed and resolved in favor of the assessee.

Issue 3: Disallowance of employees' contribution to PF & ESI
The action of disallowing the amount of employees' contribution to PF & ESI was challenged by the assessee as not in accordance with the law. The tribunal, after considering the arguments presented by both parties, found in favor of the assessee based on the previous tribunal order and the judgment of the Hon'ble Jurisdictional High Court. The disallowance made by the AO and confirmed by the Ld. CIT(A) was deleted, and the appeal of the assessee was allowed.