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2023 (5) TMI 1370 - AT - Income TaxDelayed employee s contribution for PF ESIC - HELD THAT - As in view of the law laid down in case of Checkmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT which is law of the land from the date of inception of the Act, the issue raised by the assessee that it is a debatable issue is misconceived contention as the debate on the issue has already been set at rest. So since the assessee has failed to comply with the condition precedent for depositing the employees' contribution on account of PF ESIC before the due date prescribed under the Act the same has been rightly disallowed by the CIT(A). Following the decision rendered in case of Checkmate Services P. ltd 2022 (10) TMI 617 - SUPREME COURT this issue has rightly been decided against the assessee by the ld CIT(A) to the extent that the actual amount deposited by the assessee on account of employees contribution on account of PF ESI late as prescribed under the Act is to be disallowed. Difference in the amount disallowed by the CPC/AO and the actual amount deposited late - As perused the Form 3CD which shows an error in the amount mentioned in Form 3CD and actual disallowance made by the AO. The AO is directed to verify this fact and disallow the amount which was actually deposited on account of PF ESIC late as prescribed in the Act. Last date of depositing the employee s contribution of PF ESIC fell on Sunday - Perusal of the Circular No. 676 (supra) goes to show that when in case last day for payment of any installment of advance tax is day on which receiving bank is closed, assessee can make payment on next immediately following working day, and in such cases mandatory interest leviable under sections 234B and 234C would not be charged. Though this proposition is not directly applies to the issues at hand but when it is examined in the interest of justice it certainly favors the assessee. Applying the provisions contained u/s 10 of the General Clauses to the facts and circumstances of the case, we are of the considered view that payment made by the assessee on 16.07.2018 qua year under consideration is to be taken within time as there was no unjust enrichment of the assessee nor there was any malafide on its part to misappropriate the employee s contribution of PF ESI rather deposited the same on the very next day of opening the banks, the 15.07.2018 being Sunday.
Issues Involved:
1. Disallowance of employees' contribution to PF and ESIC under Section 36(1)(va) of the Income Tax Act. 2. Scope of adjustments permissible under Section 143(1) of the Act. 3. Timeliness of payments made towards employees' contribution for PF and ESIC. 4. Discrepancy in the amount disallowed by the CPC/AO and the actual amount deposited late. Detailed Analysis: Issue 1: Disallowance of employees' contribution to PF and ESIC under Section 36(1)(va) The primary issue revolves around the disallowance of the employees' contribution to PF and ESIC under Section 36(1)(va) of the Income Tax Act. The appellant argued that disallowing these contributions while processing the return under Section 143(1) is against the provisions of the Act. The appellant relied on various High Court judgments, including those from the Hon'ble High Court of Gujarat and the Hon'ble High Court of Madras, which favored the assessee. However, the Revenue countered this by relying on the Supreme Court's decision in Checkmate Services P. Ltd. vs. CIT, which upheld the disallowance if the contributions were not deposited by the due date prescribed under the Act. Issue 2: Scope of adjustments permissible under Section 143(1) The appellant contended that the disallowance made under Section 36(1)(va) was beyond the scope of adjustments allowed under Section 143(1) of the Act. The Tribunal, however, noted that the Supreme Court in Checkmate Services P. Ltd. vs. CIT had settled this issue, ruling that such disallowances are permissible if the contributions are not deposited within the prescribed time frame. Issue 3: Timeliness of payments made towards employees' contribution for PF and ESIC The appellant argued that the disallowed payments were made within the period specified under relevant laws. Specifically, the appellant highlighted a payment made on 16.07.2018, which was one day late because the due date (15.07.2018) fell on a Sunday. The Tribunal examined Circular No. 676 dated 14.01.1994 and Section 10 of the General Clauses Act, 1897, which allow for payments to be considered timely if made on the next working day when the due date falls on a holiday. The Tribunal accepted this argument, stating that the payment made on 16.07.2018 should be considered within time. Issue 4: Discrepancy in the amount disallowed by the CPC/AO and the actual amount deposited late The appellant pointed out a discrepancy in the disallowed amount. While the CPC/AO disallowed Rs. 13,21,554/-, the actual amount deposited late was Rs. 12,47,865/-. The Tribunal directed the AO to verify this discrepancy and disallow only the actual amount deposited late. Conclusion: The Tribunal partly allowed the appeal, subject to the verification of the payment made on 16.07.2018. The Tribunal upheld the disallowance of contributions not deposited by the due date as per the Supreme Court's ruling in Checkmate Services P. Ltd. vs. CIT. However, it accepted the appellant's argument regarding the payment made on 16.07.2018, considering it timely due to the due date falling on a Sunday. The Tribunal also directed the AO to correct the discrepancy in the disallowed amount. Order Pronounced: The order was pronounced in the open court on 25.05.2023.
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