Indian Coffee Workers Co-Op. Societies Ltd Vs ITO (ITAT Jabalpur)
Summary: The Jabalpur Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal concerning disallowance of employees’ EPF/ESI contribution under section 36(1)(va) of the Income-tax Act, 1961, where the delay in remittance was attributable to circumstances beyond the assessee’s control. The assessee, a co-operative society engaged in running a hotel/restaurant chain in Madhya Pradesh, had filed its return declaring NIL income after claiming deduction under section 80P. The return was subsequently revised and processed under section 143(1)(a), resulting in disallowance of ₹1,90,67,270/- towards delayed remittance of EPF/ESI contribution for May 2021.
The assessee explained that the one-day delay resulted from technical glitches on the EPFO portal and payment gateway, together with pending Aadhaar-seeding of employees. Its rectification application under section 154 was rejected by CPC and the disallowance was subsequently confirmed by NFAC. Before the Tribunal, the assessee relied on the peculiar factual circumstances and the EPFO communication dated 31.08.2021, while the Revenue relied upon the Supreme Court decision in Checkmate Services Pvt Ltd. Vs CIT and contended that any payment beyond the prescribed due date was fatal to the deduction. The Tribunal accepted that the general legal position under section 36(1)(va), as settled by the Supreme Court, required timely remittance, but considered the peculiar circumstances surrounding the present one-day delay. It noted the statutory requirement of remittance within fifteen days of the close of the month, withdrawal of the erstwhile five-day grace period, the non-availability of the EPFO portal and designated payment facility during the relevant period, and the EPFO communication dated 31.08.2021. The Tribunal further noted that the ECR return had been filed and the scheduled payment was debited from the assessee’s bank account on the very next day. It concluded that the accidental delay was beyond the assessee’s control and could not, in the peculiar circumstances, alone be treated as fatal to the condition for deduction under section 36(1)(va). The Tribunal also noted decisions relied upon by the assessee, including G.D. Foods and Manufacturing (India) (P.) Ltd. Vs ADIT, FIL India Business & Research Services (P) Ltd. Vs DCIT and AMJ Land Holding Ltd. Vs ADIT, where relief had been granted in comparable circumstances.
The Tribunal accordingly treated the remittance debited on the next day as made within the prescribed due date, set aside the impugned order, directed CPC to reverse the disallowance and allowed the substantive grounds of appeal. The order records ₹1,90,67,290 in certain grounds and ₹1,90,67,270 elsewhere; this inconsistency has been retained rather than silently corrected.
Cases Discussed
- Checkmate Services Pvt Ltd. Vs CIT
- G.D. Foods and Manufacturing (India) (P.) Ltd. Vs ADIT [2023, 152 taxmann.com 323]
- FIL India Business & Research Services (P) Ltd. Vs DCIT [2023, ITR(T) 82 9Del)]
- AMJ Land Holding Ltd. Vs ADIT [2025, NYPTTJ 962 (Pune)]
FULL TEXT OF THE ORDER OF ITAT JABLPUR
The present appeal is filed by the assessee u/s 253(1) of the Income Tax Act, 1961 [‘the Act’] against DIN & Order No. ITBA/NFAC/S/250/2024-25/1068151701(1) dt. 30/08/2024 passed by National Faceless Appeal Centre, Delhi [‘Ld. NFAC’] u/s 250 of the Act which ascended out order of rectification passed by Central Processing Centre, Bengaluru [‘Ld. CPC] u/s 154 of the Act in relation to assessment year 2022-23 [‘AY’].
2. The facts of the case succinctly stated are that; the assessee is Indian Coffee workers Co-operative society engaged in the business of running hotel/restaurant chain in the state of Madhya Pradesh. The assessee e-filed its return of income on 19/10/2022 declaring NIL income after claiming deduction u/s 80P of chapter VI-A of the Act. The original return was subsequently revised on 30/12/2022. The revised return was summarily/electronically proceeded with prima-facie adjustment u/s 143(1)(a) of the Act with a disallowance of ₹1,90,67,270/- on account of delayed remission of EPF/ESI for the month May, 2021. Vide an application dt. 06/04/2023 the assessee sought to explain bonafide reasons behind one-day delay in remitting employee’s contribution of EPF/ESI fund for the month May, 2021 was on account of system / technical glitches occurred on EFPO official website and payment-gateway provided for online remittance. The Ld. CPC rejected the said rectification application notifying absence of mistaken in terms of section 154 of the Act.
3. Aggrieved assessee unsuccessfully contested the disallowance in first appeal before the Ld. NFAC. Unhappy with the action cum adjudication the assessee filed the present appeal challenging the impugned order on following grounds;
1. The learned Commissioner of Income tax (Appeal) NFAC, New Delhi was not Justified in passing ex-parte order without issuing any notice of hearing and order was passed by violating the rules of natural Justice.
2. The learned Commissioner of Income tax (Appeal) NFAC, New Delhi was not Justified in confirming the disallowance of Rs. 1,90,67,290 without appreciating that the adjustment of income by the CPC is unjustified, unwarranted, uncalled for arbitrary and illegal and against the principles of natural justice.
3. The learned Commissioner of Income tax (Appeal) NFAC, New Delhi was not in confirming the disallowance of Rs. 1,90,67,290 without appreciating payment of contribution under the EPF contribution under sec. 36(1)(va) of the Income-tax Act, 1961, particularly when the delay in payment for the month of May-2021 has been beyond the control of the appellant as the same has been deposited after few hours of expiring the due date and was due to technical glitches persisting in EPFO portal.
4. The learned Commissioner of Income tax (Appeal) NFAC, New Delhi was not Justified in confirming the addition of Rs. 1,90,67,290 without appreciating that the CPC ought to have considered the application under sec. 154 keeping in view the Circular No. C-I/Misc/Pandemic Relief / 2021 / Vol-l Dated 31/08/2021 issued by the Employee Provident Fund Organisation giving relief to the establishment from any penal actions in case of delay in deposit of dues/ Filling of ECR for wage month May, 2021 in respect of the members due to non-seeding of Aadhar in UAN’S and specifically directing that it should not be presumed as employers default.
5. On the facts and in the circumstances of the case, the disallowance of Rs. 1,90,67,270/- under sec. 36(1)(va) of the Income-tax Act, 1961 for the short delay of few hours in deposit of EPF for the month of May, 2021 being on account of sufficient and reasonable reasons is unjustified, unwarranted and arbitrary and the same deserves to be deleted.
6. On the facts and in the circumstances of the case, the disallowance of Rs. 1,90,67,270/- under sec. 36(1)(va) of the Income-tax Act, 1961 for the short delay of few hours in deposit of EPF for the month of May, 2021 without appreciating that appellant have tried to deposit the amount on 15.05.2021 also but due to technical error in portal it was not deposited and there was no intention of appellant to deposit it late.
4. Without touching grounds individually, in the course of hearing the Ld. AR submitted that, the assessee complying with provisions of law meticulously and was prompt in depositing/remitting contributions to EFP/ESI funds within the prescribed due date every month. The remittance of contribution for May, 2021 alone was delayed by a day by the assessee. The said delay was attributable to technical glitches arisen while making online payment to designated EPFO bank account. The EPF/ESI return for the May, 2021 was filed on the due date; but payment could not be remitted owning to pending employees Aadhar-seeding. The payment was scheduled for the day of filing of ECR to ensure the compliance, however same was debited to the assessee’s account immediately on next day morning. In these circumstances, assessee prayed that it should not be penalised for the reasons that; (a) one-day delay occurred in remitting the contribution for the month of May, 2021 was beyond the control of assessee (b) said delay was attributable to non-availability of EPFO web-portal for remittance owning to ongoing Aadhar-seeding exercise undertaken (c) said delay was also attributable to technical glitches in payment-gateway (d) and most importantly vide notification dt. 31/08/2021 the EFPO advised all field officers not to treat all default blanketly for delay in filing ECR and remittance for the month of May, 2021.
Per contra, the Ld. DR placing reliance on impugned orders argued that, in view of the decision of Hon’ble Apex Court in ‘Checkmate Services Pvt Ltd. Vs CIT’ reported in 448 ITR 518 [equivalent citation 290 TAXMAN 0019, 218 DTR 0401, 329 CTR 0001 & 115 CCH 0112 ISCC] the claim of the assessee for allowance found built on sand against prevailing law. Any default in remittance of contribution beyond prescribed due date is fatal, therefore the disallowance in limine deserves to be upheld and appeal needs to be dismissed.
5. We have heard the rival submission on single & limited ground of bonafied, unintended and accidental delay in remitting the contribution to the credit of designated bank in terms of provisions of EPF & ESI Schemes etc., and considered the facts in the light of settled position of law which are forewarned to the parties for their rebuttal. We note that, there is no dispute that there was one-day-delay in remitting the employee contribution to the respective funds established under EPF & ESI schemes by the appellant assessee employer. Undisputedly, the appellant deflated to comply with the conditional provisions of section 36(1)(va) of the Act subject to which deduction is available. The Revenue, accordingly disallowed the expenditure claimed by the appellant for the month of May, 2021. Further there in hardly any dispute between the rival parties that, the action of the Revenue is copiously is accordance with settled position of law laid down by Hon’ble Supreme Court in the case of ‘Checkmate Services Pvt Ltd. Vs CIT’ (supra).
6. The only issue of dispute in the present appeal thus pertains to as to whether one-day delay caused in remitting the contribution to the funds constitutes violation of condition for claiming deduction u/s 36(1)(va) of the Act when such delay was arisen exclusively on-account of non-availability of payment-gateway coupled with technical glitches at EPFO web-portal meant for filing ECR & remittance and beyond the appellant’s control.
7. Albeit the subject matter is no-more res-integra in the light of Hon’ble Supreme Court judgement in ‘Checkmate Services Pvt. Ltd.’ (supra) r.w. explanation 1 to clause (va) of section 36(1) of the Act, however we are mindful to vouch the contention of the appellant in given peculiar facts and circumstance of the case and in doing so we note that; statutorily the assessee was required to remit the contributions and administrative charges within fifteen days of close of every month as per the provisions of EPF & PF Act 1952 under three Schemes Viz’ Employees’ Provident Funds Scheme [EPFS], 1952, Employees’ Pension Scheme [EPS], 1995 and Employees’ Deposit Linked Insurance Scheme [EDLIS], 1976 [‘respective funds’ hereinafter]. Erstwhile grace period of 5 days was allowed in addition to statutory time limit 15 days allowed for remittance, the Employees Provident Fund Organisation of India, Ministry of Labour & Employment, Government of India was vide its circular No. 608/2016 dt. 08/01/2016 withdrawn aforestated grace period of five days w.e.f. February, 2016, resultantly contribution due w.e.f. January, 2016 were subjected to remittance to respective funds without any grace period i.e. within fifteen days of close of every month (supra).
8. The recipient remittee EPF office & respective fund for a limited purpose was represented by designated internet/online bank account, to which the appellant was obligated to remit contribution electronically by 15th May, 2016. This online/internet banking facility of remittee / respective fund was enabled for 24×7 and 365/366 days a year to receive all electronic remittances. The remittee EPF office/ respective fund had in the month of May, 2021 undertaken Aadhar seeding of employees and therefore EFPO’s website and designate bank account was not effectively available for filing ECR and payment/remittance of contribution on the due date (15th May, 2021). The said facts finds solidified by the notification/circular dt. 31/08/2021 issued by the EPFO.
9. We also note that, the appellant was to under obligation to remit the contribution along-with monthly ECR return. From the material placed on record it is clear that said ECR return for the month of May was filed by the appellant on 15/06/2021 and scheduled the remittance/payment online. The said return was accepted as having been filed within the due date. The scheduled payment however found debited to appellant’s bank account on 16/06/2021 at 7.30am in morning i.e. immediately on the very next day. Therefore we are inclined to accept the plea of the appellant that, the delay was beyond the appellant’s control and was exclusively arisen & attributable to cumulative factors viz; (a) non-availability of EPFO web-portal for remittance owning to ongoing Aadhar-seeding exercise undertaken (b) technical glitches in payment-gateway. Therefore, such accidental delay cannot alone be fatal to hold violation of condition prescribed for claiming deduction u/s 36(1)(va) of the Act. Similar view in like peculiar facts and circumstance came before the Ld. Co-ordinate benches across the country and more particularly in ‘G.D. Foods and Manufacturing (India) (P.) Ltd. Vs ADIT’ [2023, 152 taxmann.com 323],‘FIL India Business & Research Services (P) Ltd. Vs DCIT’ [2023, ITR(T) 82 9Del)], ‘AMJ Land Holding Ltd. Vs ADIT’ [2025, NYPTTJ 962 (Pune)], wherein the appeal of the assessee was allowed by treating the delay remittance as having being made within the due date prescribed for the purpose of deduction u/s 36(1)(va).
10. The Revenue, on the other hand could hardly place any decision/judgment on record so as to persuade the bench from deviating from former judicial precedents (supra) pressed into service by the appellant. In light of aforestated discussion, and judicial precedents, in the present case we are mindful to treat the remittance for the month of May, 2021 debited to appellant’s bank account on very next day i.e. 16/06/2021 as having being made within the prescribed due date so as to entitle the appellant for deduction u/s 36(1)(va) of the Act. In consequence, we set-aside the impugned order and direct the Ld. CPC to reverse the disallowance in very terms. The substantive grounds raised in appeal thus stands allowed.
11. In result, the appeal of the assessee is Allowed.
U/r 34 of ITAT Rules, this order is pronounced in the open court on the date mentioned herein above.
