2023 (7) TMI 1439 - AT - Income Tax

Late remittance of the employee s contribution under PF and ESI - HELD THAT - This issue is settled in the case of Checkmate Services Pvt. Ltd 2022 (10) TMI 617 - SUPREME COURT against the assessee. - With regard to the Ld. AR s argument that it is not the expenditure claimed by the assessee it is income and hence disallowance of expenditure suo motto made by the Ld. DCIT, CPC is not valid. CPC power to make any adjustment u/s 143(1) intimation - This Bench of the ITAT, Visakhapatnam (Single Member Bench) on identical circumstances discussed the issue ie., whether the CPC can make adjustments based on the information available before them U/s. 143(1) of the Act or not at length in the case of Eastern Warehouse Corporation vs. ITO and Others 2023 (3) TMI 1508 - ITAT VISAKHAPATNAM and took a view in consonance with the decision of the Hon ble Madras High Court in the case of AA520 Veerappalayam Primary Agricultural Cooperative Credit Society Ltd 2021 (4) TMI 1169 - MADRAS HIGH COURT and held that the adjustments made by the CPC U/s. 143(1) are valid. Thus, no hesitation to come to a conclusion that the adjustments made by the CPC U/s. 143(1) are valid and therefore we set-aside the order of the Ld. CIT(A) and allow the grounds raised by the Revenue.

Summary

Issues Involved:
1. Delay in filing appeals by the Revenue.
2. Deletion of additions under Section 36(1)(va) of the Income Tax Act.
3. Validity of adjustments made under Section 143(1) of the Income Tax Act.
4. Remittance of employee contributions to PF and ESI.
5. Applicability of the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT.

Detailed Analysis:

1. Delay in Filing Appeals by the Revenue:
The appeals filed by the Revenue for AY 2018-19 and 2019-20 were delayed by 11 days. The Assistant Commissioner of Income Tax (ACIT) submitted an affidavit explaining the delay due to the receipt of authorization on 3/11/2022, followed by departmental duties. The Tribunal found the reasons sufficient and reasonable, thus condoning the delay and proceeding to adjudicate the appeals on merits.

2. Deletion of Additions under Section 36(1)(va) of the Income Tax Act:
The Revenue appealed against the deletion of additions made under Section 36(1)(va) by the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre (CIT(A)-NFAC). The CIT(A)-NFAC had deleted the additions, observing that payments made before the due date of filing the return under Section 139(1) are allowable as deductions. The CIT(A)-NFAC relied on various Tribunal decisions and noted that amendments to Sections 36(1)(va) and 43B are effective prospectively from 01/04/2021.

3. Validity of Adjustments Made Under Section 143(1) of the Income Tax Act:
The assessee contended that the adjustments made under Section 143(1) for disallowance under Section 36(1)(va) were invalid. The Tribunal, however, noted that the scope of adjustments under Section 143(1) had been expanded by amendments effective from 01/04/2008, allowing for adjustments based on incorrect claims apparent from any information in the return. The Tribunal referred to the Memorandum of Finance Bill, 2008 & 2016, and the decisions of the Hon'ble Madras High Court and ITAT Chennai, concluding that the adjustments made by the CPC were valid.

4. Remittance of Employee Contributions to PF and ESI:
The Tribunal referred to the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT, which held that employee contributions to PF and ESI must be deposited on or before the due date prescribed under the respective Acts. The Tribunal found that the CIT(A)-NFAC's deletion of additions was contrary to this decision, as the contributions were made beyond the due dates specified in the respective Acts.

5. Applicability of the Supreme Court's Decision in Checkmate Services Pvt. Ltd. vs. CIT:
The Tribunal emphasized the Supreme Court's ruling that employee contributions to PF and ESI must be deposited within the due dates specified under the respective Acts, and not merely by the due date for filing the return under Section 139(1). The Tribunal upheld the adjustments made by the CPC, aligning with the Supreme Court's interpretation.

Conclusion:
The Tribunal allowed the Revenue's appeals for AY 2018-19 and 2019-20, setting aside the CIT(A)-NFAC's orders and confirming the adjustments made by the CPC under Section 143(1). The assessee's cross objections and appeal for AY 2020-21 were dismissed, affirming the validity of the CPC's adjustments and the applicability of the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT. The Tribunal concluded that the CIT(A)-NFAC's decisions were in line with the Supreme Court's ruling and the expanded scope of Section 143(1) adjustments.