2021 (8) TMI 563 - AT - Income Tax

Addition in respect of employees contribution to ESI PF - delayed deposits of contributions - HELD THAT - As noted that the assessee has deposited the employees s contribution towards ESI and PF well before the due date of filing of return of income u/s 139(1) and the last of such deposits were made on 16.04.2019 whereas due date of filing the return for the impugned assessment year 2019-20 was 31.10.2019 and the return of income was also filed on the said date. Admittedly and undisputedly, the employees s contribution to ESI and PF which have been collected by the assessee from its employees have thus been deposited well before the due date of filing of return of income u/s 139(1) of the Act. The issue is no more res integra in light of series of decisions rendered by the Hon ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner Jaipur 2014 (5) TMI 222 - RAJASTHAN HIGH COURT and subsequent decisions. Also see JAIPUR VIDYUT VITRAN NIGAM LTD AND RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD 2014 (1) TMI 1085 - RAJASTHAN HIGH COURT as been consistently held that where the PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income under section 139(1), the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act. Thus addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the delayed deposit of the employees s contribution towards ESI and PF though paid well before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) - Decided in favour of assessee.

Issues Involved:
1. Validity of order passed by CPC under Section 143(1) of the Act.
2. Sustaining the addition in respect of employees' contribution to ESI & PF.
3. Disregard of jurisdictional High Court's decision.
4. Principle of natural justice.

Detailed Analysis:

1. Validity of Order Passed by CPC under Section 143(1):
The assessee contended that the Central Processing Centre (CPC) in Bangalore processed its return of income and made an adjustment by disallowing the deduction of ?4,38,530/- in respect of employees' contribution to ESI & PF under Section 36(1)(va) without providing any opportunity and disregarding the binding decision of the Hon'ble Jurisdictional High Court. The Tribunal noted that the CPC had made the adjustment without following the jurisdictional High Court's decision, which supported the assessee's claim.

2. Sustaining the Addition in Respect of Employees' Contribution to ESI & PF:
The Tribunal observed that the employees' contribution towards ESI and PF was deposited before the due date of filing the return of income under Section 139(1). The Hon'ble Rajasthan High Court had consistently held that such contributions, if paid before the due date of filing the return, could not be disallowed under Section 43B read with Section 36(1)(va). The Tribunal directed the deletion of the addition made by the CPC, as it was contrary to the binding decisions of the Hon'ble Rajasthan High Court.

3. Disregard of Jurisdictional High Court's Decision:
The Tribunal highlighted that the CIT(A) had erred by relying on decisions of the Hon'ble Delhi, Kerala, and Madras High Courts, instead of following the binding decisions of the Hon'ble Rajasthan High Court. The Tribunal emphasized that the jurisdictional High Court's decisions are binding on all appellate authorities and the Assessing Officer within its jurisdiction. Consequently, the Tribunal set aside the order of the CIT(A) and allowed the appeal of the assessee.

4. Principle of Natural Justice:
The assessee argued that the CIT(A) did not follow the principle of natural justice. The Tribunal noted that the CIT(A) had sustained the disallowance without considering the binding decisions of the jurisdictional High Court, thereby violating the principle of natural justice. The Tribunal allowed the appeal of the assessee, ensuring adherence to the principle of natural justice.

Separate Judgments:
The Tribunal delivered a consolidated order for four appeals, noting that the facts and circumstances in all appeals were identical. The Tribunal's findings and directions in ITA No. 05/JODH/2021 applied mutatis mutandis to the other appeals (ITA No. 28, 29, and 43/JODH/2021). The appeals were allowed, and the additions made by the CPC were directed to be deleted.

Conclusion:
The Tribunal allowed the appeals filed by the respective assessees, emphasizing that the jurisdictional High Court's decisions are binding and should be followed by the appellate authorities and the Assessing Officer. The Tribunal directed the deletion of the additions made by the CPC, ensuring compliance with the binding decisions of the Hon'ble Rajasthan High Court and adherence to the principle of natural justice.

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