2022 (6) TMI 473 - AT - Income Tax

Late deposit of employees Provident fund/ ESIC contribution - Addition u/s 36(1)(va) r.w.s. 43B - ESIC/PF not having been paid before due date under the respective Acts - disallowance made by the CPC u/s 143(1) - HELD THAT - The Supreme Court in the case Saurashtra Kutch Stock Exchange Ltd 2008 (9) TMI 11 - SUPREME COURT has held that not following decision of the Supreme Court or the jurisdictional High Court would constitute a mistake apparent from record. As in case of Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT has directly ruled on this issue against the assessee and has held that employees' contribution (PF/ ESIC) to specified fund will not be allowed as deduction u/s.36(1)(va) if there is delay in deposit as per the due dates mentioned in the respective legislation, in our view, the Department is bound to follow the decision of the jurisdictional High Court. Tax Audit Report furnished by the assessee also specifically gives the suggestion of disallowance under section 36(1)(va) of the Act i.e. due dates as prescribed under section 36(1)(va) of the Act and the actual dates of payment reported, thus clearly indicates the deviation which attracts such disallowance. A plain reading of section 143(1)(iv) of the Act also specifically states that that an adjustment can be made in respect of disallowance of expenditure/increase in income indicated an audit report but not taken into account in computing the total income of the assessee in the return of income. CIT(A) has not erred in facts and law in coming to the conclusion that disallowance made by the CPC u/s 143(1) of the I.T. Act on account of appellant's failure to pay the employee's contribution of PF/ESI within the prescribed due dates as per section 36(1)(va) is strictly in accordance with law. - Decided against assessee.

Summary

Issues:
Appeal against order of National Faceless Appeal Centre regarding adjustment of employees' contribution under PF and ESI Act.

Analysis:
1. The appellant contested the adjustment of Rs. 23,20,076 under section 143(1)(a)(iv) of the Act made by the Assessing Officer. The contention was that the amount was paid before the due date of filing the return of income, thus not disallowable under section 36(1)(va) of the Act.

2. The CIT(A) upheld the adjustment, stating that the communication regarding the proposed adjustment was sent to the appellant, who did not respond. The CIT(A) referred to judicial decisions, emphasizing that employees' contribution should be credited to the accounts before the due date as per the respective Acts to be allowed as a deduction, which was not done in this case.

3. The CIT(A) dismissed the appeal on jurisdictional grounds and merits, citing precedents that employees' contribution must be credited before the due date to be allowed as a deduction. The CIT(A) highlighted the clarificatory amendment brought by the Finance Act, 2021, stating that the due date for employees' contribution to PF/ESI should be determined without applying section 43B.

4. The Tribunal concurred with the CIT(A)'s decision, emphasizing that the adjustment made by CPC for failure to pay the employees' contribution within the prescribed due dates was in accordance with the law. The Tribunal referred to the Supreme Court's ruling on non-consideration of decisions of jurisdictional High Courts as a mistake apparent from the record.

5. The Tribunal held that the CIT(A) did not err in confirming the disallowance of late deposit of employees' Provident Fund/ESIC contribution under section 36(1)(va) of the Act. The Tribunal stressed the importance of following decisions of jurisdictional High Courts and the Tax Audit Report's suggestion for disallowance under section 36(1)(va) based on prescribed due dates.

6. Ultimately, the Tribunal dismissed the appeal, affirming the disallowance of employees' contribution under PF and ESI Act due to late deposit, as per section 36(1)(va) of the Act. The decision was based on legal precedents and the specific provisions of section 143(1)(iv) regarding adjustments in the audit report not considered in computing total income.

This detailed analysis outlines the legal arguments, precedents cited, and the reasoning behind the decision to dismiss the appeal against the adjustment of employees' contribution under the PF and ESI Act.