2021 (10) TMI 496 - AT - Income Tax

Allowable business expenses - deduction on account of shortfall of PF Trust Earning (Interest) as per schedule 9.4 of the P L Account of the assessee - AO was of the view that since liability for payment of interest was of the PF Trust fund and not of the assessee company, hence these expenses are not allowable to the assessee company as deduction from income from busines and hence consequently should be disallowed by adding to income of the assessee and brought to income-tax - HELD THAT - As the applicability of provision of Section 36(1)(iv) read with Schedule IV of the Income-tax Act,1961, Section 43B of the 1961 Act, and Rule 75 and 88 of the Income-tax Rules, 1962 and other relevant applicable provisions/rules/notifications/judicial precedence s etc. dealing with employer contribution to PF and the quantum allowable has not been looked into by both the authorities below - these provisions/rules prima facie have bearing on the resolution of the dispute between both the rival parties and it is only after detailed arguments and bringing relevant evidences on record which may requires inquiry into facts, the dispute between both the rival parties can be resolved both as to allowability as well on quantum allowable. In our considered view in the fitness of matter, fairness to both the parties and in the interest of justice , the issue need to be restored to the file of the AO for fresh adjudication on merit in accordance with law. Allowance of Employee s Contribution to Provident Fund received - Addition made on the ground that the said amount received by assessee from employees towards employees contribution of PF was not deposited by assessee to the credit of employees with the Provident Fund trust before the due date as prescribed under the P.F Act as stipulated under Section 36(1)(va) - assessee submitted before AO that amount was deposited on various dates which were all prior to the date of filing of return of income u/s 139(1) - HELD THAT - As observed that Hon'ble Jurisdictional High Court in the case of Sagun Foundry Private Limited 2016 (12) TMI 1479 - ALLAHABAD HIGH COURT has held that deduction is to be allowed for belated payment of employee contribution to PF/ESI which is deposited beyond the due date stipulated under the relevant statutes governing PF/ESI , but the same stood deposited before the due date for filing of return of income as is prescribed u/s 139(1) of the 1961 Act. We at tribunal being inferior judicial body to Hon'ble Allahabad High Court , are bound by decision of Hon'ble jurisdictional High Court in the case of Sagun Foundry (supra) as a cardinal principles of judicial discipline and to instill certainty among tax-payers, thus, Respectfully following it we allow the claim of the assessee for deduction towards employees contribution to PF which was deposited late beyond due date as prescribed under relevant statute governing PF but the same stood deposited to the credit of employees with relevant fund before the due date for filing of return of income as prescribed u/s 139(1) of the 1961 Act. The assessee has , however, itself conceded that the assessee has not deposited ₹ 49,96,680/- received towards employee contribution to PF before the due date for filing of return of income u/s 139(1) of the 1961 Act and hence the said amount was rightly disallowed by authorities below. Undisclosed deposit/ investment by assessee - AO observed that the assessee has credited interest income of ₹ 73,93,000/- in its P L Account, while the assessee was able to submit evidences of interest bearing investments/deposit held to the tune of ₹ 1951.42 lacs corresponding to interest income - Assessee filed reconciliation statement before ld. CIT(A) to explain the difference which was accepted by ld CIT(A) and the additions to the tune of ₹ 1,47,36,408/- were deleted by ld. CIT(A) - HELD THAT - As observed on perusal of the appellate order passed by ld CIT(A), that the ld. CIT(A) passed a cryptic unreasoned order accepting the contentions of the assessee without passing a reasoned/detailed /speaking order as to how the contentions of the assessee stood accepted - CIT(A) did not forwarded to AO additional evidences filed by the assessee to reconcile the issue of interest income for seeking AO s comments, as no remand report/comments were called by ld. CIT(A) from the Assessing Officer. Reference is drawn to sub-rule (3) of Rule 46A of the Income-tax Rules, 1962 - appellate order passed by ld. CIT(A) cannot be accepted and is hereby set aside. Thus, keeping in view the entire factual matrix of the case as well in the interest of justice and fairness to both the parties, in our considered view, the matter need to be set aside and restored to the file of Assessing Officer for fresh determination of the issue after considering the evidences/details/explanation filed by assessee in its defense in the set aside proceedings . AO shall provide proper and adequate opportunity of being heard to the assessee in set aside proceedings in accordance with principles of natural justice. Difference in income as reflected in 26AS and income as declared in Profit and Loss Account - CIT(A) remitted the matter to the file of AO to reconcile the figures as submitted by assessee - HELD THAT - CIT(A) did not have powers u/s 251 to set aside and restore the matter to the file of the AO , as he is required to pass an order in an appeal against an order of assessment either confirming, reducing, enhancing or annulling the assessment , but there are no powers vested with ld. CIT(A) to set aside or restore the matter to the file of AO. Reference is drawn to provisions of Section 251(1)(a) of the 1961 Act. Secondly, in case additional evidences are filed by the assessee, the ld. CIT(A) is required to forward additional evidences to AO for its comments/remand report - CIT(A) in the instant case did not call for any remand report/comments from AO and rather set aside the matter to AO for reconciliation/verification - Reference is drawn to sub-rule (3) of Rule 46A of the Income-tax Rules, 1962. Thus , keeping in view the entire factual matrix of the case and in the interest of justice and fairness to both the parties, we are inclined to restore this issue back to the file of Assessing Officer for fresh determination of the issue after considering the evidences/details/explanation filed by assessee in its defense.

Summary

Issues Involved:
1. Whether the sums paid to the BPCL Employees Provident Fund Trust for interest shortfall are allowable as business expenditure.
2. Whether the disallowance of employees' contributions to VPF deposited after due dates but before the end of the relevant previous year or after the due date of filing the return is justified.
3. Whether the addition of undisclosed investment in fixed deposits corresponding to admitted interest income is justified.
4. Whether the addition due to the difference in contractual and professional fee receipts as per 26AS vis-à-vis P&L account is justified.

Issue-wise Detailed Analysis:

1. Allowability of Sums Paid to BPCL Employees Provident Fund Trust:
The assessee claimed deductions for sums paid to the BPCL Employees Provident Fund Trust to cover the shortfall in interest earnings. The Assessing Officer (AO) disallowed these expenses, arguing they were not related to the regular business activities of the assessee. The CIT(A) allowed the deduction, stating that the expenses were incurred as per BPCL Employees Provident Fund Rules, which mandated the company to make good any shortfall. The Tribunal observed that the applicability of Section 36(1)(iv) and Section 43B of the Income Tax Act, 1961, was not considered by the lower authorities. Therefore, the Tribunal remanded the matter back to the AO for fresh adjudication, directing the AO to consider all relevant provisions and provide a reasoned order.

2. Disallowance of Employees' Contributions to VPF:
The AO disallowed ?2,32,95,170/- as employees' contributions to VPF were not deposited within the due dates. The assessee conceded that ?49,96,680/- was not deposited before the due date of filing the return and accepted its disallowance. The CIT(A) allowed the remaining amount, citing the Allahabad High Court's decision in CIT v. Manoj Kumar Singh, which allowed deductions for contributions deposited before the due date of filing the return. The Tribunal upheld the CIT(A)'s decision, referencing the jurisdictional High Court's rulings and the principle that Section 43B applies to both employer and employee contributions, provided they are deposited before the due date of filing the return.

3. Addition of Undisclosed Investment in Fixed Deposits:
The AO added ?1,47,36,408/- as undisclosed investment based on unexplained interest income. The CIT(A) deleted the addition, accepting the assessee's reconciliation of interest income without calling for a remand report from the AO. The Tribunal found the CIT(A)'s order to be unreasoned and lacking a detailed explanation. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the AO for fresh determination, directing the AO to consider all evidences and provide a reasoned order.

4. Addition Due to Difference in Contractual and Professional Fee Receipts:
The AO added ?1,16,62,230/- due to discrepancies between the receipts as per 26AS and the P&L account. The CIT(A) confirmed an addition of ?11,61,000/- and remitted the rest for reconciliation by the AO. The Tribunal noted that the CIT(A) did not have the power to set aside matters to the AO and failed to call for a remand report. Therefore, the Tribunal remanded the issue back to the AO for fresh determination, instructing the AO to provide an opportunity for the assessee to present evidence and pass a reasoned order.

Conclusion:
The Tribunal allowed the Revenue's appeals for statistical purposes, directing the AO to re-examine the issues afresh, considering all relevant evidences and provisions, and to provide reasoned and speaking orders after giving the assessee a fair opportunity to present its case.