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TMI Blog2022 (5) TMI 1433X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the assessee and has held that employees' contribution 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. Perhaps, it would have been a different factual situation in case the jurisdictional High Court had decided the issue on late deposit of employee s Provident fund in favour of the assessee or there would have been no jurisdictional High Court decision on this issue, in which case, in our view, the issue could have been debatable. So far as the present facts are concerned, in our considered view, Ld. 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. - ITA No. 55/Ahd/2022 - - - Dated:- 17-5-2022 - Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to do so. Therefore, considering the period of delay in filing of appeal (which is just 16 in the instant case) and relying on the decision of Collector, Land Acquisition v. Mst. Katiji 1987 taxmann.com 1072 referred to above, in the interests of justice, we are hereby condoning the delay of 16 days in filing the appeal. 3. Now on merits, the brief facts of the case are that the assessee firm is engaged in providing manpower to different clients. The assessee filed its income tax return for assessment year 2019-20 under section 139(1) electronically declaring the total income of _ 56,640/-. The return was processed under section 143(1) by CPC on 06.03.2020 wherein addition was made on account of delay deposit of employee s contribution of the Provident Fund and ESI amounting to _ 8,85,284/-. Aggrieved by this, the assessee filed appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(Appeals) dismissed the assessee s appeal with the below observations: 5.19 Detailed reference to the genesis of this debate as discussed in these judgements would help in putting the issues in right perspective and help in understanding the legislative intent and interpretation of law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said section to clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of 2(24)(x) applies. 5.22 The rational of the amendment was explained by the Memorandum to the Finance Bill, 2021 as below: There is a distinction between employer contribution and employee's contribution towards welfare fund. It may be noted that employee's contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer's contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee's contribution towards welfare funds. Employee's contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of subsection (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measure of penalizing employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry amendments, therefore are not applicable to the present case. 5.30 It is therefore, held that the 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 of Rs.8,85,284/- within the prescribed due dates as per section 36(1)(va) is strictly in accordance with law. The order is therefore, confirmed fully. Appellant's Ground on the issue fails. 4. Before us, the counsel for the assessee submitted that adjustment under section 143(1)(a) is prima facie and adjustment under the said section can be made only with respect to issues on which there is no ambiguity or dispute. However, so far as disallowance in respect of delay in deposit of Employees Provident Fund contribution is concerned, the courts have been divided on this issue and it was submitted that this is not the case which falls within the purview of subject matter of section 143(1)(a) of the Act. He submitted that in instant facts, the assessee had deposited the employees Provident fund contribution before the due date of filing of return and hence, though admittedly, the jurisdictional Gujarat High Court in the case of Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents accompanying it, allowable or disallowable, can be adjusted. Further, the Board's Circular No. 581 dated 28-9- 1990 makes it clear that the Board itself has viewed the power to make adjustments as co-terminus with the power to rectify mistake apparent from the record under section 154. In the absence of any specific provision in the Act, which disallows a deduction because a specific document specified in that section is not annexed to the return, the ITO cannot, under clause (iii) of the proviso to section 143(1)(a), disallow a claim or a deduction because, in his view, adequate evidence in support of such a claim or deduction is not before him. He can disallow a claim for deduction only if he is satisfied, on the basis of the material which is before him, that the assessee is not entitled to such a deduction Thus, from the above decision, it evident that CBDT Circular No. 581 dated 28-9-1990 makes it clear that the Board has viewed the scope of the powers to make prima facie adjustments under section 143(1)(a) as co-terminus with the power to rectify a mistake apparent from the record under section 154. 6. In view of the above discussion, we are of the considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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