2019 (8) TMI 794 - AT - Income Tax

Addition of delayed payment of employees contribution of EPF and ESI - payment made late, though the same was paid before the due date of filing of return - addition making reliance on decision of the non jurisdictional High Court - HELD THAT - Admittedly on facts, there is no dispute that as per the requirements of the specific Acts there was a delay in depositing the employees contribution which had been collected by the assessee. The fact that the amounts were deposited before the filing of the return is also an admitted fact and is not in dispute. Thus, on a consideration of the position of law as repeatedly enunciated by the different High Courts as well as the Apex Court, we hold that the CIT(A) has erred in ignoring the decision of the jurisdictional High Court on the issue and relying upon the decision of the non jurisdictional High Court when he was duty bound to follow the binding precedent available of the jurisdictional High Court in the case of Hemla Embroidery Mills P.Ltd. 2013 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT which decision stands in the eyes of law as on date. Accordingly, the grounds raised by the assessee is allowed. Said order was pronounced in the Open Court at the time of hearing itself. - Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of the CIT(A) order under section 250(6).
2. Addition of ?4,22,124/- due to late payment of EPF and ESI.

Issue-wise Detailed Analysis:

1. Validity of the CIT(A) order under section 250(6):

The assessee challenged the order passed by the Commissioner of Income Tax (Appeals)-4, Ludhiana, arguing that it was contrary to law and facts. The Tribunal discussed the importance of judicial discipline and the binding nature of High Court decisions on subordinate authorities within its jurisdiction. The Tribunal emphasized that the CIT(A) should have followed the jurisdictional High Court's decision in the case of Hemla Embroidery Mills (P) Ltd., which allowed deductions for EPF and ESI payments made before the filing of the return, even if paid late. The Tribunal reiterated that decisions of the jurisdictional High Court are binding on all subordinate courts and authorities within its territory, and the CIT(A) erred by relying on a non-jurisdictional High Court decision.

2. Addition of ?4,22,124/- due to late payment of EPF and ESI:

The assessee argued that the payments for EPF and ESI were made before the due date of filing the return, though late as per the specific Acts. The Tribunal noted that the jurisdictional High Court in CIT Vs Hemla Embroidery Mills (P) Ltd. had ruled that such payments are deductible if made before the return filing date. The Tribunal also referenced its own decision in a similar case (M/s New Time Contractors and Builder P.Ltd. Vs DCIT), where the addition was deleted based on the same High Court ruling. The Tribunal criticized the CIT(A) for relying on the Gujarat High Court's decision in CIT Vs Gujarat State Road Transport Corp., which was non-jurisdictional. The Tribunal concluded that the CIT(A) should have followed the jurisdictional High Court's binding precedent, leading to the deletion of the addition made by the AO.

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that the CIT(A) erred in not following the jurisdictional High Court's decision, which permitted deductions for EPF and ESI payments made before the return filing date. The Tribunal emphasized the necessity for judicial discipline and adherence to binding precedents within the territorial jurisdiction. The order was pronounced in the Open Court on 31st July 2019.