2023 (3) TMI 855 - AT - Income Tax

Delay in deposit of employee s contribution towards provident fund and ESI fund - intimation issued u/s 143(1) - HELD THAT - Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT has held that the contribution by the employees to the relevant funds is the employer s income u/s 2(24)(x) of the Act and the deduction for the same can be allowed only if such amount is deposited in the employee s account in the relevant fund before the date stipulated under the respective Acts. Thus the deduction u/s 36(1)(va) of the Act can be allowed only if the employees share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts. As identical issue of disallowance of delayed deposit of PF/ESI dues in the intimation issued u/s 143(1) in the case of Cemetile Industries vs. ITO 2022 (12) TMI 354 - ITAT PUNE as held CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made in these cases for late deposit of employees share to the relevant funds beyond the date prescribed under the respective Acts. Contrary binding decision on the issue nor has placed on record to demonstrate that the order of Pune Bench of Tribunal in the case of Cemetile Industries (supra) has been set aside, stayed or overruled by higher judicial forum. Decided against assessee.

Summary

Issues Involved:
1. Ex-parte disposal of the appeal without granting a fair opportunity of being heard.
2. Disallowance of Rs. 16,99,358/- made under Section 36(va) read with Section 2(24)(x) of the Income Tax Act for delayed deposit of employees' contribution towards PF and ESI.

Summary:

Issue 1: Ex-parte Disposal of Appeal
The assessee contended that the Commissioner of Income Tax (Appeals) erred in disposing of the appeal ex-parte without granting a fair opportunity of being heard. However, the primary grievance of the assessee was the disallowance made on account of the delay in the deposit of employees' contribution towards provident fund and ESI fund.

Issue 2: Disallowance under Section 36(va)
The assessee argued that the disallowance of Rs. 16,99,358/- was unjust as the contribution was deposited before the due date of filing the return of income under Section 139(1) of the Act. The assessee further contended that the amendments made in Section 36(1) and Section 43B by the Finance Bill 2020-21 are prospective and applicable from 01.04.2021, thus should not affect the current assessment year.

The revenue supported the lower authorities' orders, citing the Supreme Court's decision in the case of Checkmate Services Pvt. Ltd. vs. CIT, which held that the employees' contribution to relevant funds is the employer's income under Section 2(24)(x) and the deduction can only be allowed if deposited before the due date stipulated under the respective Acts.

Tribunal's Findings:
The Tribunal referred to the Supreme Court's judgment in Checkmate Services Pvt. Ltd., which clarified that the deduction under Section 36(1)(va) is permissible only if the employees' share is deposited by the employer before the due date under the respective Acts. The Tribunal also cited the Pune Bench's decision in the case of Cemetile Industries vs. ITO, which supported the disallowance for delayed deposit of employees' share in the relevant funds.

The Tribunal noted that the audit report indicated the due dates and actual dates of payment, showing the deposits were made beyond the due dates but before the filing of the return under Section 139(1). The Tribunal concluded that the disallowance under Section 143(1)(a) was justified as the audit report clearly indicated the delay.

Conclusion:
The Tribunal found no reason to interfere with the order of CIT(A) and dismissed the grounds of the assessee. The appeal of the assessee was dismissed, and the order was pronounced in the open court on 16.03.2023.