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2022 (2) TMI 166 - AT - Income TaxLate deposit of employee's contribution to ESI/EPF - amount paid before the due date of filing of return of income u/s 139(1) - HELD THAT - As relying on case of Raja Ram 2021 (11) TMI 370 - ITAT CHANDIGARH the impugned additions made by the Assessing Officer and sustained by the 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. Condonation of delay in filing the appeal. 2. Disallowance of ?5,43,203/- on account of late deposit of employee's contribution to ESI/EPF. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal was filed by the assessee against the order of the CIT(Appeal), National Faceless Appeal Centre, Delhi, dated 25/08/2021, confirming the addition on account of late deposit of employee's contribution to ESI/EPF. The Registry pointed out that the appeal was belated by 37 days. The assessee submitted an application dated 10/11/2021 requesting condonation of the delay, citing reasons such as the impact of the Covid-19 pandemic and the belief that the issue was covered against them due to amendments in sections 36(1)(va) and 43B of the Income Tax Act, 1961. The assessee also referenced a Supreme Court judgment that relaxed the delay due to Covid-19, which excluded the period from 15.03.2020 to 02.10.2021 from the computation of the limitation period. The Ld. Counsel for the assessee reiterated these points during the hearing, and the Ld. Sr. DR did not contest them. After considering the submissions, the delay was deemed beyond the control of the assessee, and the appeal was admitted. 2. Disallowance of ?5,43,203/- on Account of Late Deposit of Employee's Contribution to ESI/EPF: The primary grievance of the assessee was the disallowance of ?5,43,203/- made by the A.O. due to late payments towards EPF and ESI under section 36(1)(va) of the Income Tax Act, 1961. The assessee argued that the contributions were deposited before the due date of filing the return of income under section 139(1) of the Act, and thus, should be an allowable expenditure. The assessee cited the judgment in the case of Pr. CIT vs Rajasthan State Beverages Corporation Ltd., which supported their claim. The Ld. DR supported the orders of the authorities below, reiterating the observations made by the Ld. CIT(A). The ITAT, after considering the submissions and the material on record, noted that similar issues had been adjudicated by various benches of the ITAT, including the ITAT Chandigarh Bench in the case of Jagmohan Singh Vs. DCIT and Raja Ram Vs. ITO Yamuna Nagar. In these cases, it was held that contributions made before the due date of filing the return of income under section 139(1) could not be disallowed, even if deposited late under section 36(1)(va). The ITAT also referenced several other cases, including Harendra Nath Biswas vs DCIT Kolkata and Salzgitter Hydraulics Private Ltd., Hyderabad vs ITO, where similar issues were decided in favor of the assessee. The consistent view across these cases was that the amendments made by the Finance Act, 2021, were applicable prospectively and not retrospectively. Respecting the earlier orders of different benches of the ITAT and the binding decisions of the jurisdictional High Court, the ITAT concluded that the disallowances made by the A.O. and sustained by the Ld. CIT(A) were not justified. Therefore, the disallowances were deleted, and the appeal of the assessee was allowed. Conclusion: The appeal was admitted after condoning the delay due to valid reasons, including the impact of the Covid-19 pandemic. The disallowance of ?5,43,203/- on account of late deposit of employee's contribution to ESI/EPF was deleted, following the consistent judicial view that contributions made before the due date of filing the return of income under section 139(1) are allowable, irrespective of the amendments made by the Finance Act, 2021. The appeal of the assessee was thus allowed.
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