2022 (1) TMI 959 - AT - Income Tax

Late deposit of Employees Contribution to ESI and EPF - amount deposited after the due date but before the due date of filing of return of income - AO made the additions of the impugned amounts for the reasons that the assessee did not deposit the amounts of employees contribution as per the provisions of section 36(1)(va) - HELD THAT - As decided in RAJA RAM VERSUS THE ITO, WARD 3 AND SANCHI MANAGEMENT SERVICES PRIVATE LIMITED VERSUS THE ITO, WARD 5 (2) , CHANDIGARH 2021 (11) TMI 370 - ITAT CHANDIGARH assessee deposited the contribution of PF ESI belated in terms of section 36(1)(va) of the Act, however, the said deposits were made prior to filing of return of income u/s 139(1). Impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee

Issues Involved:
1. Prejudicial observations in the appellate and assessment orders.
2. Confirmation of addition due to late deposit of Employees' Contribution to ESI and EPF.
3. Arbitrary and unwarranted nature of the addition.
4. Right to add, alter, or amend grounds of appeal.
5. Legality and factual correctness of the appellate and assessment orders.

Detailed Analysis:

1. Prejudicial Observations:
The appellant contended that the prejudicial observations made in the appellate and assessment orders were either unfounded or not susceptible to any adverse conclusion. However, this issue was not separately adjudicated as the main grievance pertained to the disallowance of ?56,026.

2. Confirmation of Addition Due to Late Deposit of Employees' Contribution to ESI and EPF:
The primary issue in this appeal was the disallowance of ?56,026 made by the Assessing Officer (A.O.) due to late payments towards Employees' Provident Fund (EPF) and Employees' State Insurance (ESI) under Section 36(1)(va) of the Income Tax Act, 1961. The appellant argued that the contributions were deposited before the filing of the income tax return under Section 139(1) of the Act. The CIT(A) had sustained this disallowance.

The appellant's counsel cited the ITAT, Chandigarh Bench's common order dated 20/10/2021 in similar cases, arguing that the issue was covered by these precedents. The ITAT, Chandigarh Bench had adjudicated identical issues in the cases of Raja Ram Vs. ITO, Yamunanagar, and Sanchi Management Services Private Limited Vs. ITO, Chandigarh, where it was held that contributions to PF and ESI deposited before the due date of filing the return under Section 139(1) should not be disallowed.

3. Arbitrary and Unwarranted Nature of the Addition:
The appellant claimed that the addition of ?56,026 was arbitrary, unwarranted, and uncalled for. This contention was addressed by examining the consistency of the issue with previous ITAT judgments, which had ruled in favor of allowing such contributions if made before the due date for filing the return.

4. Right to Add, Alter, or Amend Grounds of Appeal:
The appellant reserved the right to add, alter, or amend grounds of appeal. This procedural right was acknowledged but not specifically adjudicated as the main issue was the disallowance.

5. Legality and Factual Correctness of the Appellate and Assessment Orders:
The appellant argued that both the appellate and assessment orders were against the law and facts of the case. The tribunal examined the consistency of the issue with previous rulings and found that the disallowance was not justified.

Conclusion:
The tribunal considered submissions from both parties and perused the material on record. It noted that identical issues with similar facts had been adjudicated by various ITAT benches, including the ITAT, Jodhpur Bench, and ITAT, Kolkata Bench. The decisions consistently held that contributions made before the due date for filing the return under Section 139(1) should not be disallowed, even if deposited late under the respective statutes.

The tribunal referenced multiple cases, including Harendra Nath Biswas vs. DCIT Kolkata, Salzgitter Hydraulics Private Ltd, Hyderabad vs. ITO, and Mohangarh Engineers and Construction Company, Jodhpur & Others vs. CPC, Bangalore, which supported the appellant's position.

Consequently, the tribunal deleted the disallowance of ?56,026 sustained by the CIT(A), following the earlier orders of different ITAT benches. The appeal of the assessee was allowed, and the order was pronounced in the open court on 07.12.2021.

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