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TMI Blog2023 (9) TMI 1540X X X X Extracts X X X X X X X X Extracts X X X X ..... under the respective Act of PF/ESI the Bench directs the ld. AO to look into the payments of the employees contribution made by the assessee timely in respect of ESI/PF and give relief accordingly whose details are submitted by the ld. AR of the assessee after necessary verification. - DR. S. SEETHALAKSHMI, JM SHRI RATHOD KAMLESH JAYANTBHAI, AM For the Appellant : Shri Sharwan Kumar Gupta For the Respondent : Ms. Monisha Choudhary, Addl. CITa ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against the order of ld. CIT(A) dated 23-09-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC)] for the assessment year 2019-20 wherein the assessee has raised the following ground of appeal. On the facts and circumstances of the case the ld. CIT(A) has erred in approving the action of the CPC of making addition towards delay in deposit of employees contribution of PF and ESI against the provisions of the Act. Further, the assumption of jurisdiction by CPC u/s 143(1) was erroneous as adjustments were made on highly debatable issue as on that date which was not covered within the powers of said section. It is hereby thus praye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law Actual Payment date May 18 16427 15-06-2018 27-06-2018 June 18 17101 15-07-2018 19-07-2017 July 18 16239 15-08-2018 16-08-2019 Aug. 18 14176 15-09-2018 15-09-2018 Sept. 18 13414 15-10-2018 15-10-2019 Oct.18 12495 15-11-2018 16-11-2018 Nov. 18 12088 15-12-2018 13-12-2018 Dec. 18 7973 15-01-2019 17-01-2019 Jan. 19 8282 15-02-2019 13-02-2019 Feb. 19 9055 15-03-2019 13-03-2019 March 18 9336 15-04-2019 12-04-2019 2.4 On the other hand, the ld. DR supported the order of the ld. CIT(A). 2.5 We have heard both the parties and perused the materials available on record including the case laws cited by the respective parties. In this case, it is noted that the AO disallowed an amount of Rs. 2,53,300/- u/s 36(1)(va) of the Act on the ground that payments of employees contribution towards ESI and PF had not been made on or before the due date by the employer as per respective Acts which has been confirmed by the ld. CIT(A). It is not imperative to repeat the facts of the case and the case laws cited by both the parties. The Bench has observed that the recently the Hon ble Supreme Court has opined in the case of Checkmate Services Pvt. Ltd. vs CIT-1, 143 Taxmann.com 178 (SC)/Civil Appeal No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are deducted from their income. They are not part of the assessee employer s income, nor are they heads of deduction per se in the form of statutory pay out. They are others income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee s contribution on or before the due date as a condition for deduction. 55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue in the case of Salveen Kaur Vs Income Tax Office vide its order darted 9th January 2023 (in IT Appeal Nos. 2197,2249, 2250 and 2293 (Delhi) of 2022 A.Y. 2017-18 to 2019-20 [2023] 147 taxmann.co. 402 (Delhi-Trib) by observing as under:- 4. The undisputed fact in the captioned appeals is that there was a delay in depositing the employees contribution and the contribution has been deposited beyond the date stipulated under the relevant Fund Act. 5. Though the quarrel is no more res integra, as it has been settled by the decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd 143 Taxmann.com 178. But, before us, the decision of the co-ordinate bench at Mumbai has been placed in the case of PR Packaging Service in ITA No. 2376/MUM/2022 and it has been seriously argued that the co-ordinate bench has considered the decision of the Hon'ble Supreme Court and yet decided the quarrel in favour of the assessee and against the Revenue. 6. Another argument taken before us is that the disallowance made by the CPC Bengaluru while processing the return u/s 143(1) of the Act is beyond the scope of provisions of section 143(1)(a) of the Act and, therefore, cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l proceedings relating to the processing of the return shall lie with Commissioner of Income Tax (Appeals) [CIT(A)] having jurisdiction over the jurisdictional Assessing Officer Then situs of the CPC or the Assessing Office CPC is thus irrelevant for the purpose of ascertaining the jurisdictional High Court. Therefore, in the present case, whether the CPC is within the jurisdiction of Hon'ble Bombay High Court or not, as for the regular Assessing Officer of the assessee and the assessee are located in the jurisdiction of Hon'ble Bombay High Court, the jurisdictional High Court, for all matters pertaining to the assessee, will be Hon'ble Bombay High Court. In our considered view, it cannot be open to the Assessing Officer CPC to take a view contrary to the view taken by the Hon'ble jurisdictional High Court- more so when his attention was specifically invited to binding judicial precedents in this regard. For this reason also, the inputs in question in the tax audit report cannot be reason enough to make the impugned disallowance. The assessee must succeed for this reason as well. 9. With our utmost respect to the findings of the co-ordinate bench [supra], we are of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a condition (i.e., depositing the amount on or before the due date) has not been enacted in relation to the employer s contribution (i.e., Section 36(1)(iv)). 33. The significance of this is that Parliament treated contributions under Section 36(1)(va) differently from those under Section 36(1)(iv). The latter (hereinafter, employers contribution ) is described as sum paid by the assessee as an employer by way of contribution towards a recognized provident fund . However, the phraseology of Section 36(1)(va) differs from Section 36(1)(iv). It enacts that any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. The essential character of an employees contribution, i.e., that it is part of the employees income, held in trust by the employer is underlined by the condition that it has to be deposited on or before the due date. 34. It is therefore, manifest that the definition of contribution in Section 2(c) is used in entirely different senses, in the relevant deduction clauses. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyers contribution was deposited with the authorities, the deduction otherwise permissible in law, would not be available. This court was of the opinion that the omission was curative, and that as long as the employer deposited the dues, before filing the return of income tax, the deduction was available. 45. A reading of the judgment in Alom Extrusions, would reveal that this court, did not consider Sections 2(24)(x) and 36(1)(va). Furthermore, the separate provisions in Section 36(1) for employers contribution and employees contribution, too went unnoticed. The court observed inter alia, that: 15. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, is retrospective in operation. Moreover, the judgement in Allied Motors (P) Limited (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003 will operate retrospec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted stood changed on account of any subsequent event the exemption would not operate. 24. In our view, an exception or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the industrial policy and the exemption notifications. 25. In our view, the failure to comply with the requirements renders the writ petition filed by the respondent liable to be dismissed. While mandatory rule must be strictly observed, substantial compliance might suffice in the case of a directory rule. 26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction, and, therefore, it would be incorrect to say that the decision of the Hon'ble Supreme Court is applicable only in the case of an assessment farmed u/s 143(3) of the Act. In our considered view, the ratio decidendi is equally applicable for the intimation framed u/s 143(1) of the Act. 12. Now coming to the challenge that the impugned adjustment is beyond the powers of the CPC Bengaluru u/s 143(1) of the Act is also not correct. In light of the aforementioned decision of the Hon'ble Supreme Court [supra], as mentioned elsewhere, it cannot be stated that the impugned adjustment u/s 143(1) of the Act is beyond the powers of the CPC, Bengaluru. 13. The provisions of section 143(1)(a) read as under:- 143(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of Section143, such return shall be processed in the following manner, namely;- (a) The total income or loss shall be computed after making the following adjustments, namely;- (i) Any arithmetical error in the return; (ii) An incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) Disallowance of loss claimed, if return of the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been scrutinized and assessed u/s 143(3) of the Act would have to face the disallowance. 15. This can neither be the intention of the Legislators nor the decision of the Hon'ble Supreme Court has to be interpreted in such a way so as to create such discrimination amongst the tax payers. Such interpretation amounts to creation of class [tax payer] within the class [tax payer] meaning thereby that those tax payers who are assessed u/s 143(3) of the Act would have to face disallowance because of the delay in deposit of contribution and those tax payers who have been processed and intimated u/s 143(1) of the Act would go scot- free even if there is delay in deposit of contribution and even if they do not deposit the contribution. 16. We are of the considered view that the ratio decidendi of the Hon'ble Supreme Court is equally applicable to the intimation u/s 143(1) of the Act and, therefore, the decision of the co-ordinate bench relied upon by the assessee is distinguishable. Therefore, respectfully following the binding decision of the Hon'ble Supreme Court [supra], all the three appeals of the assessee are dismissed and that of the revenue is allowed. 17. In the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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