2022 (4) TMI 322 - AT - Income Tax

Late payments towards EPF and ESI u/s 36(1)(va) - payment before furnishing the return of income u/s 139(1) - HELD THAT - It is not in dispute that the assessee deposited the contribution of PF ESI belatedly 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) of the Act. It is noticed that an identical issue having similar facts has already been adjudicated in RAJA RAM 2021 (11) TMI 370 - ITAT CHANDIGARH wherein addition 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. Disallowance of ?332,815 on account of late deposit of ESI/EPF of employees' contribution.
2. Short credit of TDS of ?311,746.
3. Disallowance of ?1,945 on account of labor welfare fund employees' share.

Detailed Analysis:

1. Disallowance of ?332,815 on account of late deposit of ESI/EPF of employees' contribution:
The primary issue revolves around the disallowance of ?332,815 due to the late deposit of employees' contribution towards EPF and ESI, which was deposited before filing the return of income under section 139(1) of the Income Tax Act, 1961. The appellant argued that this issue is covered by the ITAT Chandigarh Bench's common order dated 20/10/2021 in ITA Nos. 191 & 192/Chd/2021 and ITA No. 190/Chd/2021, where similar disallowances were deleted. The Tribunal noted that the identical issue has been adjudicated by various Benches of the ITAT, including the ITAT Jodhpur Bench and the ITAT Kolkata Bench, which held that the amendment by the Finance Act, 2021, effective from 01.04.2021, does not apply retrospectively. The Tribunal referenced decisions from the Hon'ble Calcutta High Court in Vijayshree Ltd. and the Hon'ble Rajasthan High Court in CIT vs. State Bank of Bikaner & Jaipur, which supported the deletion of such disallowances if the contributions were deposited before the filing of the return. Consequently, the Tribunal allowed the appeal and deleted the disallowance of ?332,815.

2. Short credit of TDS of ?311,746:
The appellant contended that the CIT(A) erred in confirming the short credit of TDS amounting to ?311,746, which was duly reflected in Form 26AS. However, the judgment does not provide detailed reasoning or a separate discussion on this issue. The focus remained on the primary issue of disallowance related to the late deposit of ESI/EPF contributions.

3. Disallowance of ?1,945 on account of labor welfare fund employees' share:
The appellant also raised the issue of disallowance of ?1,945 on account of labor welfare fund employees' share, which was already disallowed by the assessee while filing the return of income. Similar to the TDS credit issue, the judgment does not elaborate on this issue separately. The Tribunal's primary focus was on the significant disallowance related to ESI/EPF contributions.

Conclusion:
The Tribunal, after considering the submissions and referencing various precedents, concluded that the disallowance of ?332,815 for late deposit of ESI/EPF contributions was not sustainable as the deposits were made before filing the return of income. The appeal was allowed, and the disallowance was deleted. The judgment did not provide separate detailed discussions on the issues of short credit of TDS and disallowance of labor welfare fund employees' share. The order was pronounced on 21/03/2022.

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