2023 (11) TMI 1294 - AT - Income Tax

Disallowance of employees contribution to ESI PF u/s 36(1)(va) - validity of the adjustment made in an intimation issue to the assessee u/s 143(1)(a) - HELD THAT - It is very clear that a communication was issued to assessee proposing for such disallowances in the hands of the assessee admittedly, which is based on the audit report and Form 3CD. There is no evidence with the assessee to establish that the reply filed by the assessee has not been considered by the ld. AO. The contention of the assessee that no disallowance could be made u/s 143(1)(a) of the Act towards employees contribution to ESI PF stands rejected. Accordingly, additional ground No.1 stands dismissed in all the appeals. Depositing contributions under the provisions of the Provident Fund Act is to be determined from the end of the month in which the salary is disbursed to employee or not? - The above issue is now settled by the decision of Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT which has been followed by the ld. CIT(A) while considering the appeals of the assessees. We do not find any infirmity in the same and the same is upheld. Accordingly, the main grounds raised by the assessees for all the years under consideration also stands dismissed.

Issues Involved:
1. Delay in filing appeals.
2. Disallowance of employees' contribution to ESI & PF under section 36(1)(va) of the Income Tax Act.
3. Validity of adjustment under section 143(1)(a).
4. Due date of payment under the provisions of the Provident Fund Act.
5. Incorrect amount of disallowance.

Issue-wise Detailed Analysis:

1. Delay in Filing Appeals:
The appellant submitted that there was a delay in filing appeals due to the process of identifying a new statutory auditor and seeking appropriate professional advice. The delay was approximately 100 days for Shabari Telecable Network Pvt. Ltd. and 80 days for Manikandan Vazhukkapara Kumaran. The Tribunal, after reviewing the details and affidavits submitted, found no malafide intention and condoned the delay, referencing the Hon'ble Supreme Court's decision in Collector, Land Acquisition Vs. MST. Katiji and Others [1987] 167 ITR 471.

2. Disallowance of Employees' Contribution to ESI & PF under Section 36(1)(va):
The primary issue challenged by the assessee was the disallowance of employees' contribution to ESI & PF under section 36(1)(va). The Tribunal noted that the disallowance was made by the CPC in an intimation issued under section 143(1)(a). The assessee argued that the contributions were made before the due date of filing the return of income under section 139, and thus, the disallowance was incorrect. However, the Tribunal upheld the disallowance, referencing the Hon'ble Supreme Court's decision in Checkmate Services Pvt. Ltd. Vs. CIT, which clarified that any delay in depositing employees' contributions beyond the due date prescribed under the relevant welfare fund laws would result in disallowance under section 36(1)(va).

3. Validity of Adjustment under Section 143(1)(a):
The assessee contended that the adjustment under section 143(1)(a) was not permissible as it was a debatable issue, especially when there was a jurisdictional High Court decision in favor of the assessee. The Tribunal, however, rejected this contention, stating that the scope of an intimation under section 143(1)(a) extends to making adjustments based on errors apparent from the return of income and patent from the record. The Tribunal referenced the decision of the Hon'ble Madras High Court in AA 520 Veerapampalyam Primary Agricultural Cooperative Credit Society Ltd. Vs. DCIT, which supported this view.

4. Due Date of Payment under the Provisions of the Provident Fund Act:
The assessee argued that the due date for depositing contributions should be determined from the end of the month in which the salary was actually paid, not when it was earned. The Tribunal analyzed section 38 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952, which requires the employer to deduct the employees' contribution before paying wages and to deposit the same within 15 days of the close of the month. The Tribunal concluded that the due date for depositing contributions is linked to the month in which the wages are paid, not earned. However, the Tribunal dismissed the assessee's argument, stating that the provisions of section 38 do not support the deferral of the due date for depositing contributions based on the payment date of wages.

5. Incorrect Amount of Disallowance:
The assessee claimed that the audit report was incorrect as it mentioned a single date of remittance, whereas there were multiple dates. The Tribunal found no evidence to support this claim and rejected the argument. The Tribunal emphasized that the audit report is a professional document, and there was no confirmation from the auditor regarding any errors.

Conclusion:
The Tribunal upheld the disallowance of employees' contributions to ESI & PF under section 36(1)(va), rejected the validity of adjustment under section 143(1)(a), and dismissed the arguments regarding the due date of payment under the Provident Fund Act and the incorrect amount of disallowance. All appeals filed by the assessees were dismissed. The order was pronounced in the open court on 29th Nov, 2023.

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