2023 (3) TMI 509 - AT - Income Tax

Adjustments u/s 143(1) (a) - Late deposit of PF ESI - HELD THAT - We note that the said issue has been settled in the case of Checkmate Service P. Ltd. 2022 (10) TMI 617 - SUPREME COURT as expounded that the employees contribution in this regard deposited after the due date specified in the relevant Act is not allowable. Disallowance of interest on late payment of TDS - HELD THAT - The issue is debatable and, therefore, is outside the scope of purview of the provisions of section 143 (1) - Accordingly, respectfully following the precedence M/S. HEBE INFRASTRUCTURE PVT. LTD. 2022 (9) TMI 492 - ITAT DELHI we allow this issue in favour of the assessee.

Summary

Issues:
1. Adjustment of impugned prima facie adjustments u/s 143(1) of the Act.
2. Adjustment u/s 36(1)(va) of the Act for late deposit of ESIC & employee contribution.
3. Adjustment u/s 37 of the Act for interest on late deposit of TDS.

Analysis:
1. The appeal concerned the order of the ld. CIT (A) confirming adjustments made by CPC u/s 143(1) of the Act. The appellant challenged the adjustments related to prima facie adjustments. The grounds of appeal highlighted errors in confirming the adjustments made by CPC. The assessment year in question was 2019-20.

2. The first issue involved an adjustment of Rs.12,82,072 u/s 36(1)(va) for late deposit of ESIC & employee contribution. The appellant contended that the amount was deposited before the due date for filing the return u/s 139(1) of the Act. However, the ld. CIT (A) upheld the disallowance citing a newly amended provision, emphasizing the importance of depositing the amount before the date specified in Clause 36(va) of the Act. The disallowance was maintained.

3. The second issue pertained to a disallowance of Rs.26,17,302 u/s 37 of the Act for interest on late deposit of TDS. The ld. CIT (A) upheld the disallowance by referring to a decision of ITAT, Mumbai Bench. The appellant challenged this disallowance in the appeal.

4. The ITAT, Delhi Bench referred to a precedent set by the Hon'ble Supreme Court in the case of Checkmate Service P. Ltd. vs. CIT-1, which clarified the treatment of employees' contributions deposited after the due date specified in the relevant Act. The Court emphasized the distinction between employer's and employee's contributions, highlighting the conditions for deduction under Section 36(1)(va).

5. Considering the precedent established by the Supreme Court, the ITAT upheld the order of the ld. CIT (A) on the issue of late deposit of PF & ESI. The distinction between employer's and employee's contributions was crucial in determining the deductibility of such amounts.

6. Regarding the issue of disallowance of interest on late payment of TDS, the ITAT referred to a decision in the case of M/s. Hebe Infrastructure Pvt. Ltd. vs. AO, Central Circle 13, New Delhi. The ITAT noted divergent views on the issue and concluded that it was debatable, falling outside the scope of provisions of section 143(1) of the Act. Consequently, the disallowance was directed to be deleted.

7. In conclusion, the appeal filed by the assessee was partly allowed based on the analysis and precedents cited, resolving the issues related to adjustments under different sections of the Income Tax Act.