2023 (3) TMI 817 - AT - Income Tax

Late payment of employee s contributions to PF / ESI - Payment before the due date - HELD THAT - Assessee has submitted the copies of bank challans and bank statements to prove that the payments to that extent were in fact made before due dates under PF/ESI laws. We further note that the evidences submitted by assessee are not at all disputed by revenue. Thus, it is clearly established that the sum paid before due dates under PF/ESI laws does not attract any disallowance under the provisions of Income-tax Act, 1961; the same had been made merely due to wrong reporting by the auditors. When it is so, CIT(A) was not justified in merely reproducing the provision of section 143(1)(a)(iv) in his order and thereby upholding the action of Ld. AO. We believe that the lower authorities, at least the CIT(A), should have taken a correct and judicious view in the situation and do not resort to making / confirming disallowance which even the provisions of section 2(24)(x) read with 36(1)(va) do not provide. More so, when the assessee has loudly explained that there was no delay, it was just a reporting mistake by auditors. Disallowance which is paid after due date under PF/ESI laws - Identical issue is recently decided against assessee M/s Prashanti Engineering Works (P) Ltd. Vs. ADIT, CPC, Bangalore 2023 (3) TMI 729 - ITAT INDORE after taking into account the latest decision of Hon ble Supreme Court in Checkmate Services (P.) Ltd. 2022 (10) TMI 617 - SUPREME COURT the legal provision of section 143(1) of the Act and various judicial rulings. We are also inclined to hold that the 2nd component i.e. employees contributions to PF / ESI paid after due date under PF / ESI laws is not an allowable deduction in computing taxable income of business and the revenue-authorities have rightly disallowed the same.Appeal of assessee is partly allowed.

Summary

Issues Involved:

1. Sustaining addition of Rs. 2,46,614/- under section 43B towards Provident Fund.
2. Consideration of facts by the Commissioner of Income Tax (Appeals), NFAC.
3. Relief entitlement for the assessee.
4. Excessiveness of the addition made.
5. Procedural issues regarding grounds of appeal.

Summary:

1. Sustaining Addition of Rs. 2,46,614/- under Section 43B:
The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi erred in sustaining the addition of Rs. 2,46,614/- under section 43B of the Income Tax Act, 1961 towards Provident Fund. The assessee contended that out of the total disallowed amount, Rs. 2,10,005/- was incorrectly reported as late payment by the auditors, and Rs. 36,609/- was paid before the due date for filing the return under section 139(1). The Tribunal observed that the assessee had submitted sufficient documentary evidence to prove timely payment of Rs. 2,10,005/-, which was not disputed by the revenue. Thus, the Tribunal deleted the disallowance of Rs. 2,10,005/-.

2. Consideration of Facts by the Commissioner of Income Tax (Appeals), NFAC:
The Tribunal noted that the lower authorities, including the Commissioner of Income Tax (Appeals), did not properly consider the evidence provided by the assessee regarding the timely payment of Rs. 2,10,005/-. The Tribunal emphasized that the provisions of section 2(24)(x) read with section 36(1)(va) did not warrant disallowance for this amount, and the disallowance was made due to a reporting mistake by the auditors.

3. Relief Entitlement for the Assessee:
The assessee argued for relief, stating that the disallowance was excessive and unjustified. The Tribunal partially allowed the appeal, granting relief for the disallowed amount of Rs. 2,10,005/-.

4. Excessiveness of the Addition Made:
The Tribunal found that the addition made was excessive to the extent of Rs. 2,10,005/-, which was paid within the due dates under PF/ESI laws. The Tribunal upheld the disallowance of Rs. 36,609/-, which was paid after the due date under PF/ESI laws but before the due date for filing the return under section 139(1), following the decision of the Hon'ble Supreme Court in Checkmate Services (P.) Ltd.

5. Procedural Issues Regarding Grounds of Appeal:
The Tribunal noted that the assessee had the right to add, alter, or amend any grounds of appeal as necessary. The Tribunal proceeded with the hearing in the absence of the assessee, as the notice sent by the registry was returned with the remark "left."

Conclusion:
The appeal of the assessee was partly allowed, with the disallowance of Rs. 2,10,005/- deleted and the disallowance of Rs. 36,609/- upheld. The order was pronounced on 13/03/2023.