2022 (9) TMI 1135 - AT - Income Tax

Revision u/s 263 - delayed payments toward employees provident fund - As per CIT, assessee had made payments toward employees provident fund after due date as prescribed in section 36(1)(va) and AO has not disallowed the same while finalising the assessment and the AO has simply accepted the assessee submission on its face value without inquiring into such claim - HELD THAT - The issue whether deduction respect of late deposit of employee s provident fund can be granted has been decided against the assessee in the case of CIT vs. Gujarat State Road Transportation Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT wherein it was held that where assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though he deposits same before due date under section 43B of the Act. Again the Gujarat High Court in the case of Pr. CIT v. Suzlon Energy Ltd. 2020 (2) TMI 792 - GUJARAT HIGH COURT held that where assessee had not deposited employees' contributions towards PF and ESI amounting Rs. 15.20 lakhs within prescribed period in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified. Accordingly, when the issue has been decided by the Gujarat High Court against the assessee, it was on duty of the AO to conduct enquiries in respect of same, and not accept the submission of the assessee on its face value. In the instant facts, no such enquiry was conducted by the AO during the course of assessment proceedings. In view of the above findings, we find no infirmity in the order of the Principal CIT u/s 263 of the Act. - Decided against assessee.

Summary

Issues:
1. Jurisdiction of Principal CIT under section 263 of the Act.
2. Validity of assessment order passed by the Assessing Officer.
3. Allowability of employee's contribution to Provident Fund.
4. Compliance with due dates for Provident Fund payments.
5. Adequacy of inquiries conducted by the Assessing Officer.

1. Jurisdiction of Principal CIT under section 263 of the Act:
The appeal was filed against the order of the Principal Commissioner of Income Tax under section 263 of the Act for the assessment year 2017-18. The Principal CIT set aside the assessment order, deeming it erroneous and prejudicial to the revenue's interest. The grounds of appeal raised by the assessee challenged the assumption of jurisdiction under section 263 by the Principal CIT.

2. Validity of assessment order passed by the Assessing Officer:
The original assessment was completed on 10-12-2019, and the Principal CIT initiated proceedings under section 263 based on discrepancies related to provident fund expenses claimed by the assessee. The Principal CIT observed that the Assessing Officer had not disallowed certain expenses, which were later deemed as not allowable. The Principal CIT found the assessment order erroneous and prejudicial to the revenue's interest, leading to the setting aside of the assessment order.

3. Allowability of employee's contribution to Provident Fund:
The Principal CIT highlighted that the employee's contribution to Provident Fund, deducted from employees' salaries, should not have been claimed as an expense by the assessee. The failure of the Assessing Officer to disallow such expenses rendered the assessment order erroneous and prejudicial to the revenue. The Principal CIT referred to legal provisions and judicial precedents to support the disallowance of employee's contribution to Provident Fund.

4. Compliance with due dates for Provident Fund payments:
The Principal CIT noted that the assessee firm made payments towards employees' contribution to Provident Fund after the due date prescribed by law. The failure of the Assessing Officer to verify and disallow these payments rendered the assessment order erroneous and prejudicial to the revenue. Legal provisions, judicial decisions, and circulars were cited to support the disallowance of late Provident Fund payments.

5. Adequacy of inquiries conducted by the Assessing Officer:
The Principal CIT emphasized that the Assessing Officer's failure to conduct proper inquiries rendered the assessment order erroneous and prejudicial to the revenue. Various judicial decisions were cited to support the proposition that orders passed without adequate inquiries are deemed erroneous. The lack of proper verification and inquiry by the Assessing Officer was a key factor in deeming the assessment order as erroneous.

In the final judgment, the ITAT upheld the order of the Principal CIT under section 263, dismissing the appeal of the assessee. The ITAT found no infirmity in the Principal CIT's decision, considering the legal provisions, judicial precedents, and the lack of proper inquiries by the Assessing Officer.