2022 (8) TMI 785 - AT - Income Tax

Late payment of Employees' contribution to E.S.I. - Addition u/s 36(1)(va) r.w.s. 43B - whether disallowance on account of late deposit of ESI can be subject of matter of addition/adjustment under intimation issued u/s 143(1) ? - HELD THAT - We note that the issue is squarely covered against the assessee in case of Gujarat State Road Transportation Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT wherein it was held that where assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though he deposits same before due date u/s 43B of the Act. Again, the Gujarat High Court in the case of Pr. CIT v. Suzlon Energy Ltd. 2020 (2) TMI 792 - GUJARAT HIGH COURT held that where assessee had not deposited employees' contributions towards PF and ESI within prescribed period in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified. Respectfully following the above decisions of Jurisdictional High Gujarat High Court, we hold that there is no infirmity in the order passed by ld. CIT(A). Adjustment u/s 143(1) - Addition/adjustment under intimation issued u/s 143(1) of the Act since the issue is a debatable one wherein various Courts/ Tribunals have taken a divergent view in the matter, in our the view, the issue stands covered by the decision of Ahmedabad ITAT in the case of Diversified Services 2022 (5) TMI 1433 - ITAT AHMEDABAD wherein ITAT held that since the jurisdictional Gujarat High Court has decided the issue against the assessee, the same can be subject matter of adjustments u/s 143(1) CIT(Appeals) has not erred in facts and in law in confirming addition/ disallowance in respect of late payment of ESI in the instant set of facts. In the result, the appeal of the assessee is dismissed.

Summary

Issues:
- Late payment of Employees' contribution to E.S.I.
- Time-barred appeal due to Covid pandemic period.
- Merits of the case regarding the addition/disallowance.
- Applicability of jurisdictional High Court decisions.
- Disallowance on account of late deposit of ESI under section 143(1) of the Act.

Late Payment of Employees' Contribution to E.S.I.:
The appeal pertains to the confirmation of the addition/disallowance of the alleged late payment of Employees' contribution to E.S.I. amounting to Rs. 8,86,752. The issue revolves around whether the payment was allowable under the provisions of section 36(1)(va) read with section 43B of the IT Act. The Ld. CIT(A) upheld the addition based on the judgment of the Hon'ble High Court of Gujarat in a similar case. The Tribunal, following the precedent set by the Gujarat High Court, dismissed the appeal, ruling that the addition was justified due to non-compliance with the prescribed due dates for depositing the ESI contribution.

Time-barred Appeal Due to Covid Pandemic Period:
The appeal was time-barred by 75 days, but the delay was condoned due to circumstances beyond the control of the assessee, namely the Covid pandemic period. The Apex Court's directive extended the period of limitation for filing appeals, including this case falling within the Covid pandemic period, thereby allowing the condonation of the delay.

Merits of the Case Regarding the Addition/Disallowance:
The assessee, engaged in pharmaceutical products manufacturing, filed a revised return of income and later received an intimation under section 143(1) of the Act, which included an adjustment for not depositing the ESI contribution before the due date. The Ld. CIT(A) dismissed the appeal, citing the Gujarat High Court's decision in similar cases, leading to the Tribunal upholding the addition based on jurisdictional High Court precedents.

Applicability of Jurisdictional High Court Decisions:
The Tribunal relied on the Gujarat High Court decisions in cases involving non-deposit of employees' contributions towards PF and ESI within the prescribed period. The Tribunal followed the High Court's rulings, emphasizing that the addition made to the income of the assessee was justified due to non-compliance with the statutory provisions.

Disallowance on Account of Late Deposit of ESI under Section 143(1) of the Act:
The issue of late deposit of ESI being a subject of adjustment under section 143(1) of the Act was discussed, with the Tribunal referring to a previous ITAT decision. The Tribunal held that since the jurisdictional Gujarat High Court had ruled against the assessee in a similar case, the disallowance could be a subject of adjustment under section 143(1). The Tribunal affirmed the disallowance of late deposit of employees' Provident fund contribution, concluding that the Ld. CIT(A) did not err in confirming the addition/disallowance in this context.

This comprehensive analysis of the judgment covers the late payment issue, time-barred appeal, merits of the case, reliance on High Court decisions, and the disallowance on account of late deposit of ESI under section 143(1) of the Act.