2024 (8) TMI 357 - AT - Income Tax

Disallowance on account of payment of employees' contribution to National Pension Scheme - As argued entire payment is made before due date of filing return of Income - HELD THAT - On perusal of the Tax audit report, it is seen that the contribution is made under NPS before due date of filing Return of Income. NPS is regulated by Pension Fund Regulatory and Development Authority and PFRDA Act, 2013. There is no due date prescribed by the PFRDA as to when the payment is required to be made to the NPS account. Further section 12 3 iii of the PFRDA Act, 2013 clearly prohibits the provisions of this Act shall not apply to the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Thus the impugned adjustment made on the payment under NPS by CPC is not justified as there is no due date prescribed in the respective PFRDA Act, 2013 and all the payment has been duly made before filing of the Return of Income as per section 139 1 . Therefore the amount as treated to be allowable u/s.43B b of the Act and therefore the addition made by CPC is liable to be deleted. CPC is not correct in ignoring the reply and making the disallowance in the 143 1 proceedings. - Decided in favour of assessee.

Issues:
Disallowance of employees' contribution to National Pension Scheme under section 36(1)(va) of the Income Tax Act, 1961.
Disallowance of Rs. 1,452 under section 36 of the Act.
Validity of adjustment made by CPC regarding payment under NPS.
Correctness of the order passed by the Lower Authorities.

Analysis:

1. Disallowance of employees' contribution to National Pension Scheme under section 36(1)(va) of the Income Tax Act, 1961:
The appellant, a Company engaged in Port activities, filed its Return of Income for the Assessment Year 2019-20. The CPC made a prima facie adjustment to disallow Rs. 8,19,544/- for belated payment of Employees' contribution to the PF Fund. The appellant contended that the payment was made before the due date of filing the Return of Income under section 139(1) of the Act, as there is no prescribed due date under the National Pension Scheme (NPS). Despite the appellant's explanation, the CPC added the amount as income and demanded tax. The appellant appealed to the NFAC, citing a similar disallowance in the previous assessment year, which was deleted. However, the NFAC dismissed the appeal, relying on a Supreme Court judgment. The ITAT observed that the contribution to NPS was made before the due date of filing the Return of Income, as per section 139(1) of the Act. As there was no due date prescribed by the PFRDA Act, 2013 for NPS payments, the adjustment made by the CPC was deemed unjustified. Consequently, the ITAT allowed the appeal, directing the deletion of the addition made by the CPC.

2. Disallowance of Rs. 1,452 under section 36 of the Act:
The appellant raised a ground of appeal regarding the disallowance of Rs. 1,452 under section 36 of the Act during the processing of the return of income under section 143(1). The ITAT directed the Ld. CIT(A) to delete such adjustment, emphasizing that no such disallowance was tenable under section 143(1) of the Act.

3. Validity of adjustment made by CPC regarding payment under NPS:
The ITAT analyzed the details of the contribution made by the appellant under the NPS, noting that the payment was made before the due date of filing the Return of Income. The ITAT highlighted that NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013, which does not prescribe a due date for payments. The ITAT concluded that the adjustment made by the CPC on the NPS payment was not justified, as all payments were made before filing the Return of Income as per section 139(1) of the Act. The ITAT allowed the appeal, stating that the amount in question should be treated as allowable under section 43B(b) of the Act, and directed the deletion of the addition made by the CPC.

4. Correctness of the order passed by the Lower Authorities:
After considering the submissions and perusing the materials on record, the ITAT found that the grounds of appeal raised by the appellant were valid. The ITAT observed that the CPC was not justified in making the disallowance in the section 143(1) proceedings, especially when the appellant had provided a detailed explanation and made the payments before the due date. Consequently, the ITAT allowed the appeal filed by the assessee.

In conclusion, the ITAT allowed the appeal filed by the assessee, directing the deletion of the additions made by the CPC and emphasizing the timely payment of contributions under the NPS as per the provisions of the PFRDA Act, 2013.

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