2023 (6) TMI 1434 - AT - Income Tax

Disallowance u/s 36(1)(va) r.w.s. 2(24)(x) - delayed deposit of employees contribution to PF/ESI i.e. after the due date as provided under the respective welfare enactments - HELD THAT - The issue herein is covered by the Coordinate Kolkata Bench of the Tribunal in the case of Siddhi Vinayaka Graphics Pvt. Ltd 2023 (5) TMI 1322 - ITAT KOLKATA wherein, the decision of case of Checkmate Services Pvt. Ltd 2022 (10) TMI 617 - SUPREME COURT has been duly considered and other contentions relating to the validity of the adjustments made on account of disallowance of delayed deposit of employees contribution to PF/ESI while processing the return u/s 143(1) of the Act, have also been duly discussed - Decided against assessee.

Summary

Issues Involved:
1. Disallowance of employees' contribution to PF/ESI under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act due to delayed deposit.
2. Applicability of Supreme Court judgment in Checkmate Services Pvt. Ltd. vs. CIT.
3. Jurisdiction of Assessing Officer/CPC to make adjustments under Section 143(1) of the Act for delayed deposit of employees' contributions.
4. Interpretation of audit reports in relation to disallowance under Section 36(1)(va).

Detailed Analysis:

1. Disallowance of Employees' Contribution to PF/ESI:
The core issue in these appeals was the disallowance made by the Assessing Officer/CPC under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act on account of delayed deposit of employees' contributions to PF/ESI beyond the due date specified in the respective welfare enactments. The contention was whether such contributions, if deposited after the due date but before the filing of the income tax return, could be claimed as deductions.

2. Applicability of Supreme Court Judgment:
The Tribunal noted that the issue had been conclusively settled by the Supreme Court in Checkmate Services Pvt. Ltd. vs. CIT, where it was held that the deduction under Section 36(1)(va) for delayed deposits of employees' contributions to PF/ESI cannot be claimed, even if deposited before the due date of filing the return, when read with Section 43B of the Act. This decision clarified that the due date for employees' contributions is as prescribed under Section 36(1)(va), distinct from the employer's contributions covered under Section 43B.

3. Jurisdiction of Assessing Officer/CPC:
The Tribunal addressed the argument that the Assessing Officer lacked jurisdiction to make such disallowances under Section 143(1)(a) of the Act, which allows for adjustments only when indicated in the audit report but not accounted for in computing total income. The Tribunal referred to various decisions, including those of the Coordinate Benches, which upheld that adjustments under Section 143(1) could be made for such disallowances, as they are apparent from the information in the audit report.

4. Interpretation of Audit Reports:
The Tribunal examined the role of audit reports in indicating disallowances. It was argued that auditors are required to report factual information, such as due dates and actual payment dates, rather than explicitly disallowing amounts. The Tribunal clarified that the information provided in audit reports, when correlated with statutory provisions, could indicate the need for adjustments. The Tribunal emphasized that the CPC/Assessing Officer could make adjustments based on this information, provided the assessee is given an opportunity to respond.

In conclusion, the Tribunal dismissed the appeals, affirming that the disallowance of employees' contributions to PF/ESI due to delayed deposit was justified under the prevailing interpretation of the law as clarified by the Supreme Court. The Tribunal also upheld the jurisdiction of the Assessing Officer/CPC to make such adjustments under Section 143(1) of the Act, based on the information contained in the audit reports.