2023 (6) TMI 1207 - AT - Income Tax

Adjustment u/s 143(1)(a) - Addition u/s u/s.36(1)(va) - disallowance made for late deposit of employees share of PF/ESI contribution to the relevant funds beyond the date prescribed under the respective Acts - HELD THAT - From the material available on the record, find that the matter is squarely covered by the decision of Emson Tools Mfg. Corp. 2023 (4) TMI 626 - ITAT CHANDIGARH as CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made for late deposit of employees share of PF/ESI contribution to the relevant funds beyond the date prescribed under the respective Acts. CIT(A) was justified in sustaining the adjustments u/s 143(1)(a) by means of disallowances made for late deposit of employees share of PF/ESI contributions to the relevant funds beyond the date prescribed under the respective Acts. Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of employees' contribution to PF/ESI under Section 36(1)(va) read with Section 143(1)(a)(iv).
2. Applicability of Section 43B for deduction of employees' contribution.
3. Prima facie adjustment under Section 143(1)(a) for disallowance of expenditure.

Summary:

1. Disallowance of Employees' Contribution to PF/ESI:
The assessee's return was processed under Section 143(1) with a disallowance for not paying employees' contributions to PF/ESI before the due date as per Section 36(1)(va). The CIT(A) confirmed the disallowance, stating that contributions must be paid within the prescribed due date under the relevant welfare funds. This position of law was upheld, noting that the amendment to the provisions applies retrospectively.

2. Applicability of Section 43B:
The assessee contended that the deduction should be available under Section 36(1)(va) read with Section 43B if the employees' share is deposited before the due date for filing the return under Section 139(1). However, the Supreme Court in Checkmate Services P. Ltd. & Ors. Vs. CIT & Ors. clarified that the deduction for employees' contributions is allowed only if deposited before the due date under the respective Acts, not the due date under Section 139(1).

3. Prima Facie Adjustment under Section 143(1)(a):
The Tribunal examined whether the disallowance falls under the prima facie adjustments permissible under Section 143(1)(a). It was found that the audit report indicated late payment of employees' contributions, which warranted disallowance under Section 36(1)(va). The Tribunal held that this disallowance is a prima facie adjustment under Section 143(1)(a)(iv), as it was indicated in the audit report but not accounted for in the return.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, confirming the adjustment under Section 143(1)(a) for the late deposit of employees' share of PF/ESI contributions beyond the prescribed due date under the respective Acts. The appeal of the assessee was dismissed.