2022 (1) TMI 143 - AT - Income Tax

Disallowance made on account of belated payment of Provident Fund and ESI Contributions - HELD THAT - It is not in dispute that the Contributions to Provident Fund and the ESI were remitted by the assessee before due date for filing of return. The Hon ble Delhi High Court in the case of CIT vs. AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT held that if the Provident Fund and ESI Contributions were remitted before due date of filing of return of income such contributions cannot be disallowed u/s 43B. The Coordinate Bench of the Tribunal in the case of Chatru Mal Garg 2021 (10) TMI 1282 - ITAT DELHI decided identical issue in favour of the assessee by considering the Amendment made by the Finance Bill 2021 w.e.f. 1/4/2021 to the Provisions to Section 36(1)(va) of the Act - Assessing Officer is directed to delete the disallowance made towards PF ESI Contributions - Decided in favour of assessee.

Summary

Issues:
- Disallowance of late payment of Provident Fund and ESI Contributions
- Interpretation of relevant sections and amendments
- Application of judicial pronouncements
- Violation of principles of natural justice
- Charging of interest under sections 234B and 234C

Analysis:

The appeals were filed against the order of the Ld.CIT (A) regarding the disallowance made on account of belated payment of Provident Fund and ESI Contributions while processing the return u/s 143(1) by Central Processing Centre, CPC, Bengaluru. The main contention raised by the assessee was that the contributions were remitted before the due date of filing the return of income u/s 139(1) of the Act. The assessee argued that previous judicial decisions, such as CIT Vs. AIMIL Ltd. and CIT Vs. P. M Electricals Ltd., supported their position that no disallowance should be made if both employer and employee contributions were paid before the due date of filing the return. Additionally, reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. to support their argument.

The Ld. DR supported the orders of the authorities below, but the Tribunal, after hearing both sides, noted that the Contributions to Provident Fund and ESI were indeed remitted by the assessee before the due date for filing the return. Citing the decision of the Hon'ble Delhi High Court in the case of CIT vs. AIMIL Ltd., the Tribunal concluded that if such contributions were made before the due date of filing the return of income, they cannot be disallowed under section 43B of the Act. The Tribunal also referenced a Coordinate Bench decision in a similar case that decided in favor of the assessee by considering the amendments made by the Finance Act 2021.

The Tribunal held that no disallowance under section 36(1)(va) of the Act was warranted in the present case, directing the Assessing Officer to delete the disallowance made towards PF & ESI Contributions and recompute the income accordingly. The Tribunal emphasized that the amendments introduced by the Finance Act 2021 would not apply to the assessment year in question, as they were effective from a later date. Ultimately, both appeals of the assessee were allowed, and the order was pronounced in favor of the assessee on December 13, 2021.