2022 (11) TMI 1499 - AT - Income Tax

Delayed employees' contribution towards ESIC and EPF - HELD THAT - Oayment of employees contribution towards the PF has been ruled against the assessee by the Hon ble Supreme Court in the case of Checkmate Services P. Ltd. 2022 (10) TMI 617 - SUPREME COURT . Disallowing the payment without providing an opportunity to establish the claim and the intimation u/s 143(1)(a) - HELD THAT - Disallowance made by the CPC was in accordance with provisions of Section 143(1)(iv). The act mandates, before making an adjustment, an intimation has to be given to the assessee of such adjustment in writing or in electronic mode. The revenue could not produce evidence of sending the intimation to the assessee with regard to the proposed adjustment. Failure to adhere to the mandatory procedure prescribed in statute has domino effect on the order passed u/s 143(1)(a) culminating in treating the order legally unsustainable. Appeal of the assessee is allowed.

Summary

Issues:
1. Disallowance of employees' contribution towards ESIC and EPF.
2. Disallowance of deduction without providing an opportunity to establish the claim under Section 143(1)(a) of the Income Tax Act, 1961.

Analysis:
1. The appellant contested the addition of employees' contribution towards ESIC and EPF to their income, arguing that the amount paid before filing the return of income under section 139(1) should not be added back. However, the Hon'ble Supreme Court's ruling in a similar case was cited, leading to the dismissal of this ground of appeal.

2. The appellant raised concerns about the disallowance of deductions without providing an opportunity to substantiate the claim, citing Section 143(1)(a) of the Income Tax Act, 1961. The provision allows for adjustments to be made after providing intimation to the assessee. The tribunal found that the disallowance made was in accordance with Section 143(1)(iv) but noted the lack of evidence regarding the intimation sent to the assessee about the proposed adjustment.

3. The tribunal emphasized that adherence to the mandatory procedures outlined in the statute is crucial. The failure to provide the required intimation to the assessee regarding the adjustment rendered the order passed under Section 143(1)(a) legally unsustainable. Consequently, the appeal of the assessee was allowed, highlighting the significance of following procedural requirements.

This detailed analysis of the judgment provides insights into the issues raised by the appellant, the legal provisions cited, and the tribunal's reasoning leading to the final decision in favor of the assessee.