Mahadev Cold Storage Vs Jurisdictional Assessing Officer (ITAT Agra)
No disallowance on late deposit of ESI and PF in section 143(1)(a) if deposited before due date of return u/s 139(1). Decision of Jurisdictional Honorable Allahabad High Court in the case of Sagun Foundry (P) Ltd. Vs CIT ( 97CCH 0160 and 145 DTR 0265) followed held to be binding on NFAC AND INCOME TAX.
FULL TEXT OF THE ORDER OF ITAT AGRA
These four appeals are filed by the assessee, feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals) National Faceless Appeal Centre Delhi on the following grounds
ITA no 41/2021
1. That the appellant denies its liability to be assessed at total income of Rs. 13,22.156/- as against returned income of Rs. 10,67,861/- and accordingly denies its liability to pay tax, cess and interest demand here on.
2. That having regard to the facts and circumstances of the case, Ld. C1T(A) has erred in law and on facts in confirming the action of Ld. AO in making adjustments u/s 143(1)(a) of the Income Tax Act, 1961 by disallowing the contribution received from employees towards ESI and EPF amounting to Rs. 2,54,295/- with complete disregards to the Decision of Jurisdictional Honorable Allahabad High Court in the case of Sagan Foundry (P) Ltd. Vs CIT ( 97CCH 0160 and 145 DTR 0265) as the payments have been made before due date specified u/s 139(1) and assuch are fully allowable.
ITA no 42/2021
That the appellant denies its liability to be assessed at total income of Rs.9.45,640/- as against returned income of Rs. 8,18,607/- and accordingly denies its liability to pay tax, cess and interest demand thereon.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making adjustments u/s 143(1)(a) of the Income Tax Act, 1961 by disallowing the contribution received from employees towards ESI and EPF amounting to Rs. 1,27,032/- with complete disregards to the Decision of Jurisdictional Honorable Allahabad High Court in the case of Sagun Foundry (P) Ltd. Vs CIT ( 97CCH 0160 and 145 DTR 0265)as the payments have been made before due date specified u/s 139(1) andas such are fully allowable..2. That while rejecting the assessee’s submissions and charging the tax under the Head ‘long term capital gain‘, the authorities below have not considered the facts and the explanation offered before them. After taking into consideration the above, no capital gain arises on the compulsory acquisition of the above land, the capital gain charged on the compulsory acquisition of this land is not called for, the addition made on this score is liable to be deleted.
3. That the appellate order dated 28.12.2018 is bad in law.
ITA NO 20/21
That the Ld. Assessing Officer (CPC) made an addition of Rs.15,97,250/-on processing u/s. 143(1) on account of late deposit of employee contribution towards ESIC/EPF on account of late deposit of employee contribution towards ESIC/EPF. In view of the provisions of section 2(24)(x) read with section 36(I)(va) & section 43B of the Income Tax Act,1961, being late deposit of employees contribution towards ESIC/EPF which has been duly deposited on or before the due date of filing of return of income as per the provisions under section 139(I) of The Income Tax Act 1961, employee contribution towards ESI and PF paid after due date of respective statue but before the filling of Income Tax return due date as per section 139 (1) are allowable expenses and cannot be disallowed under section 36 (l)(va). But the Ld. Assessing Officer (CPC) without appreciating the legal position and facts of the case made the above mentioned addition and the assessee preferred an appeal before the Hon’ble CIT (A)-1, Agra against said order. And then order has been passed by CIT(A), National Faceless Appeal Centre, Delhi. The Hon’ble CIT (A) NFAC also confirmed theabove said addition of Rs.15,97,250/- and passed the order against the Assessee, on 27/02/2021. Copy of order is enclosed
ITA NO 21/21
That the Ld. Assessing Officer (CPC) made an addition of Rs.17,76,883/-on processing u/s. 143(1) on account of late deposit of employee contribution towards ESIC/EPF on account of late deposit of employee contribution towards ESIC/EPF. In view of the provisions of section 2(24)(x) read with section 36(I)(va) & section 43B of the Income Tax Act,1961, being late deposit of employees contribution towards ESIC/EPF which has been duly deposited on or before the due date of filing of return of income as per the provisions under section 139(I) of The Income Tax Act 1961, employee contribution towards ESI and PF paid after due date of respective statue but before the filling of Income Tax return due date as per section 139 (1) are allowable expenses and cannot be disallowed under section 36 (1)(va). But the Ld. Assessing Officer (CPC) without appreciating the legal position and facts of the case made the above mentioned addition and the assessee preferred an appeal before the Hon’ble CIT (A)-1, Agra against said order. And then order has been passed by CIT(A), National Faceless Appeal Centre, Delhi. The Hon’ble CIT (A) NFAC also confirmed theabove said addition of Rs.17,76,883/- and passed the order against the Assessee, on 27/02/2021. Copy of order is enclosed
We are reproducing herein the facts of ITA 41/2021, as facts of all the appeals are identical .
Brief Facts in AY 2018-19 in ITA no 41/2021
1. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre Delhi in order dated 31/3/2021 in held as under:
“ The present appeal has been preferred against the intimation passed by the9 CPC, Bangalore, u/s.143(1) of the I.T. Act, 1961 for the assessment year 2018-1. The appellant e-filed the appeal vide acknowledgement No.190423N761041019Delhi. on 04/10/2019 in view of Circular No.20/2016 dtd.26/05/2016 of CBDT, New Delhi
2.2. Date of final hearing was fixed by this office on 26.03.2021 and the Notice u/s 250 of the Act was issued where in assessee was asked to submit written submission on registered email id or on E-Filing Portal. The appellant has uploaded written submission along with copy of the Judgments on E-Filing Portal on 03.03.2021. The case is adjudicated based upon relevant information on record. There is no request for any adjournment. The relevant portion of the statement of facts and reply is under:-
“The Assessee, is engaged in the business of storage of potatoes in Cold storage and filed its return of Inctim ,for AY 2018-19;on 30-09-2018,declaring a net taxable income of Rs1167861/- having the income from Profit and Gains from Business and Profession however the, assessing officer DCIT while processing the return of Income has disallowed the expenditure, of Employees contribution to ESI and PF not credited to Employees account on or before the due date (Section 36(1) (va) being Rs. 254295 and having tax impact of Rs. 81807 (refund cancelled for Rs.60720 and net demand Rs. 21087) and hence this appeal.”
“Further we would like to draw your attention regarding the allowability of Employees Contribution towards ESI and PF which have been deposited after due date but before the due date of filing of Income Tax Return, the same has been allowed u/s 43B of theIncome Tax Act by the Worthy CIT(Appeals), Agra in the case of Mrs.Rekha Agarwalin Appeal No. 497679031100619/2019- 20/Aligarh for AY 2017-18 dated 23.09.2020which relied on the Judgment of Allahabad H C Sagun Foundry Private Limited and held in the case of Sagun Foundry (P) Ltd. vs CIT {2017) 78 Taxmann 47, even employee contribution, actually paid by the employer into the relevant fund before the due date u/s 139(1) for filing of return of income for the relevant assessment year, is allowable as adeduction in the relevant year. Accordingly, the adjustment of Rs. 99788/-is deleted subject to verification by the AO that the sum of Rs. 99788/- has been actually paid by the assessee into the relevant fund before the due date u/s 139(1) for filing of return of income for the relevant assessment year”
Copy of the Judgment is attached as annexure.
Hence, in view of above, the issue is aptly clear that payments for labour welfare dues like PF and ESI if paid before the due date of filing of income tax return u/s 139(1) will be allowable deduction is fully covered by section 438 and as such the disallowance of Rs. 254295/- made by the Ld A.O. is bad-in-law and may kindly be deleted.”
Decision
3.1 ………… ..
3.2 …………..
3.3 On the other hand, it was argued by the Appellant that Employee’s contribution towards Provident Fund and ESI has been deposited within the time limit prescribed u/s 139(1) of the Act and accordingly contended that the same is allowed as deduction in view of provisions of section 43B of the Act.
On carefully consideration of observation of Assessing Officer and contention of Appellant, I observe that entire issue is covered against Appellant by decision of Hon’ble Gujarat High Court in case of State Road Transport Corporation (366 ITR 170) wherein it is held as under:
Section 43B, read with section 36(1)(va) of the Income Tax Act, 1961 Business disallowance – Certain deductions to be allowed on actual payment (employee’s contribution) – whether where an employer has not credited sum received by it as employee’s contribution to employee’s account in relevant fund on or before due date as prescribed in Explanation to section 36(1)(va), assessee shall not be entitled to deduction of such amount though he deposits same before due date prescribed under section 43B i.e. prior to filing of return under section 139(1). Held, yes – assessee State Transport Corporation collected a sum being Provident Fund contribution from its employees. However, it had deposited lesser sum in Provident Fund account. Assessing Officer disallowed same under section 43B. However, Commissioner (Appeals) deleted disallowance on ground that employee’s contribution was deposited before filing return. Whether since assessee had not deposited said contribution in respective fund account on date as prescribed in explanation to section 36(1)(va), disallowance made by Assessing OfficerAkas just and proper. Held, yes (para 8) (in favour of revenue)
With due respect to case laws relied by the appellant and as more than one high court decision involved, it is felt that the final verdict is evolving on this issue. Considering the above decision of Hon’ble High Court In the -case of State Road Transport Corporation( 366 ITR 170) addition of Rs. 2,54,295/- made by Assessing Officer is upheld. The groundno.2 of appeal is dismissed. The ground no.1 &3 are routine and subsidiary in nature hence dismissed.”
2. The Ld.AR for the assessee had submitted that the order passed by the CIT(A) was contrary to the law laid down by the Jurisdictional High Court and therefore the order passed by the CIT(A) is required to be set aside and the appeal of the assessee is required to be allowed. He had submitted that national faceless appeal centre, had not considered the binding decision of the High Court and have passed the order. He had also submitted that in all cases EPF/ESI contributions were paid by the assessee before last date of filling return of income. He had also submitted thatin similarfacts, the NFAC had allowed the appeal of Mr Rajbir,PAN no AVPPS5601P in its order dated 9/3/2021, in ITBP/NFAC/S250/2020-21/1031333008(1).
3. Per contra DR for the revenue had vehemently relied upon the order passed by the assessing officer as well as by the CIT (A). It was submitted that the CIT(A) had noted down jurisdictional High Court decision however he had relied upon the decision of the Gujrat High Court, as the issue has not been finally concluded by the apex court. Therefore he had supported the order passed by the lower authority.
4. In the rebuttal the Ld.AR for the assessee, had submitted that the tax effect in the present case is well below the limit prescribed for filing the appeal before the High Court or before the Supreme Court. It was submitted that the reliance on the Non-jurisdictional High Court judgement had resulted into burdening the litigant unnecessarily, as no appeal can be filed before the High Court against the order of the tribunal, in case the appeal of the assessee is allowed. The net result would be the same. It was submitted that the doctrine of precedent requires this tribunal to follow the decision of the jurisdictional High Court. He had also drawn our attention to the newly inserted provision of the faceless assessment and faceless appeal.
5. We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the course of hearing by both the parties. From the reading of the impugned order it is abundantly clear that the NFAC, had relied upon the decision of Gujarat High Court in the matter of State Road Transport Corporation (366 ITR 170), for the purposes of dismissing the appeal of the assessee and have ignored binding decision of the Jurisdictional High Court in the matter of Sagun Foundry (P) Ltd. vs CIT {2017) 78 Taxmann 47. In our view the approach of the NFAC , is not correct and is against the scheme of the notification issued by the Board for creating the centralised NFAC and also against the settled principle of precedent. As NFAC, is the new concept produced by virtue of the notification dated 25 September 2020, therefore we deem it appropriate to deal the issue in some detail.
6. It will be useful to state some background development in the field of Faceless appellate adjudication by the revenue .The Hon’ble Prime Minister on August 13, 2020 launched the platform for Honouring the Honest which included a Scheme for Faceless Appeals inter alia which has been notified by the Central Board for Direct taxes (CBDT) vide Notifications dated September 25, 2020 bearing No. 76 of 2020and No. 77 of 2020. The Finance Act, 2020 (2020) 428 ITR 1 (St )vide amendment in section 250(6C) of the Income-tax Act, 1961 (Act) expanded the scope of e-assessment to include e-appeals.
7. Lot of articles and research papers were published by various erudite tax practitioners and academician highlighting the various features of notification dated 25/9/2020 . Wehave gone through the notification and some of the article including article written by K. Shivaram, Senior Advocate,
and Mr. Shashi Bekal, Advocate ,( posted on itatonline.org on 27.3.2021) .
8. The Finance Bill, 2020(2020) 420 ITR 145/ 221 (St) vide proposed amendments under section 274 and 250 of the Act sought to expand the scope of e-assessment by introducing provisions pertaining to e-penalty and e-appeals, respectively.According to the Memorandum to the Finance Bill, 2020,(2020) 420 ITR 249 (St) The filing of appeals before Commissioner (Appeals) has already been enabled in an electronic mode. However, the first appeal process under the Commissioner (Appeals), which is one of the major functions/ processes that is not yet in full electronic mode. A taxpayer can file appeal through his registered account on the e-filing portal. However, the process that follows filing of appeal is neither electronic nor faceless. In order to ensure that the reforms initiated by the Department to eliminate human interface from the system reach the next level, it is imperative that an e-appeal scheme be launched on the lines of e-assessment scheme.Accordingly, it was proposed to insert sub-section (6A) in section 250 of the Act to provide for the following:
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