2023 (5) TMI 1360 - AT - Income Tax

Disallowance for late deposit of contribution to PF/ESI u/s 36(1)(va) - HELD THAT - As per decision taken by the Hon ble Supreme Court in the case of Checkmate Services (P) Ltd 2022 (10) TMI 617 - SUPREME COURT PCIT vs Strides Arcolab Ltd. 2023 (1) TMI 729 - SC ORDER and also the decision of ITAT Delhi Bench in the case of Savleen Kaur 2023 (2) TMI 51 - ITAT DELHI the Bench sustains the addition confirmed by the ld. CIT(A) and Ground No 1 2 of appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Adjustment in intimation under Section 143(1) of the Income Tax Act.
2. Disallowance of expenditure on account of late payment of ESI/PF under Section 36(1)(va) of the Income Tax Act.

Detailed Analysis:

1. Adjustment in Intimation under Section 143(1):

The assessee challenged the adjustment made by the Assessing Officer (AO) in the intimation under Section 143(1) of the Income Tax Act, claiming it was beyond the purview of Section 143(1)(a). The AO had disallowed Rs. 53,538/- for late deposit of contributions to PF/ESI. The CIT(A) upheld this adjustment, stating that the information regarding the delay was clearly indicated in the audit report, making it mandatory for the AO to make such an adjustment. The Tribunal agreed with the CIT(A), emphasizing that the adjustment was justified as the audit report explicitly mentioned the delay, and the AO was bound to act upon this information.

2. Disallowance of Expenditure on Account of Late Payment of ESI/PF:

The primary issue was whether the disallowance of Rs. 53,538/- for late deposit of employees' contributions to ESI/PF was correct under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act. The assessee argued that the payment was made before the due date for filing the return under Section 139(1), and hence, should be allowed. However, the CIT(A) and the Tribunal relied on the Supreme Court's decision in the case of Checkmate Services Pvt. Ltd., which clarified that the non-obstante clause in Section 43B does not override the specific requirement under Section 36(1)(va) for timely deposit of employees' contributions. The Supreme Court held that employees' contributions are deemed income and must be deposited within the due date specified in the relevant legislation, failing which the deduction is not allowed. The Tribunal, following this precedent, confirmed the disallowance made by the AO and upheld by the CIT(A).

Conclusion:

The Tribunal dismissed the appeal, affirming the adjustments and disallowances made by the AO and upheld by the CIT(A). The decision was based on the binding precedent set by the Supreme Court, which mandated strict compliance with the due dates for depositing employees' contributions to ESI/PF as specified under Section 36(1)(va) of the Income Tax Act. The Tribunal also clarified that the AO's adjustment under Section 143(1) was within the scope of the law, given the clear indication of delay in the audit report.