2022 (6) TMI 632 - AT - Income Tax

Late deposit of employees' share of contribution of ESI and PF - HELD THAT - As there is no dispute between the parties regarding the date of deposit of PF ESI, which clearly is beyond the prescribed date of deposit as applicable under the relevant section of the I.T. Act. Further, there is no dispute between the parties that the deposits were made before the filing of return of income for the relevant assessment year. The Hon'ble Allahabad High Court, in the case of 'Sagun Foundry (P.) Ltd 2016 (12) TMI 1479 - ALLAHABAD HIGH COURT has dealt with a similar issue and after taking into account the judgment of the Hon'ble Supreme Court in the case of 'CIT vs. Alom Extrusion Ltd.' 2009 (11) TMI 27 - SUPREME COURT has decided the issue in favour of the assessee - there has been amendment in section 36(1)(va) of the Act, I find that the said amendment is applicable w.e.f. 1.4.2021 and is prospective in nature and not retrospective. - Decided in favour of assessee.

Issues Involved:
1. Addition of Rs. 3,37,008/- on account of late payment of employee's contribution to ESI and PF.
2. Application of jurisdictional High Court's ruling versus other High Courts' rulings.
3. Adjustment under Section 143(1)(a)(iv) without indication in the audit report.
4. Excessive and illegal charge of interest under Sections 234B and 234C.

Detailed Analysis:

1. Addition of Rs. 3,37,008/- on account of late payment of employee's contribution to ESI and PF:
The assessee filed a return for the Assessment Year 2018-19, declaring an income of Rs. 15,41,956/-, but the Assessing Officer (A.O.) added Rs. 3,37,008/- due to late deposit of employees' share of ESI and PF contributions. The assessee contended that the deposits were made before the due date for filing the return, citing the Hon'ble Allahabad High Court's judgment in 'Sagun Foundry (P.) Ltd. vs. CIT' and the Supreme Court's ruling in 'CIT vs. Alom Extrusions Ltd.' The Tribunal found that the Allahabad High Court had addressed similar issues, ruling in favor of the assessee, emphasizing that contributions made before the return filing date should be allowed as deductions.

2. Application of jurisdictional High Court's ruling versus other High Courts' rulings:
The assessee argued that the CIT(A) erred by not following the jurisdictional High Court's ruling and instead relying on other High Courts' judgments. The Tribunal noted that the Allahabad High Court, in 'Sagun Foundry (P.) Ltd. vs. CIT', had considered various High Courts' judgments and the Supreme Court's decision, ultimately ruling in favor of the assessee. The Tribunal reiterated that the Allahabad High Court's judgment should prevail, as it is the jurisdictional High Court.

3. Adjustment under Section 143(1)(a)(iv) without indication in the audit report:
The assessee claimed that the A.O. made adjustments under Section 143(1)(a)(iv) without any disallowance indicated in the audit report. The Tribunal did not specifically address this issue in detail, as the primary contention was the legality of the addition based on late deposit of contributions.

4. Excessive and illegal charge of interest under Sections 234B and 234C:
The assessee argued that the interest charged under Sections 234B and 234C was excessive and illegal due to the wrongful addition. The Tribunal, having decided the primary issue in favor of the assessee, implied that the interest charges would also be affected by this ruling.

Conclusion:
The Tribunal allowed the appeal, ruling in favor of the assessee, and emphasized that the jurisdictional High Court's judgment in 'Sagun Foundry (P.) Ltd. vs. CIT' should be followed. The amendment to Section 36(1)(va) by the Finance Act, 2021, was deemed prospective and not applicable to the assessment year in question. Consequently, the addition of Rs. 3,37,008/- was deleted, and the interest charges under Sections 234B and 234C were deemed excessive and illegal. The appeal was allowed, and the order was pronounced on 06/04/2022.

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