Erroneous reporting of payment dates of EPF Contribution by Auditor, ITAT directs re-adjudication

Ernst & Young Merchant Vs ACIT (ITAT Mumbai)

Ernst & Young Merchant, involved in corporate advisory and merchant banking services, contested an addition of Rs. 22,37,042/-made under Section 36(1)(va) of the I.T. Act. This was pertaining to the employees’ contribution to the provident fund, where the tax auditor had erroneously reported the payment dates of the fund.

As a result of this error, the Centralized Processing Center (CPC) disallowed the aforementioned amount during the processing of the company’s income return under Section 143(1) of the Act. The tax auditor subsequently issued a revised certificate outlining the correct dates, and the company furnished supporting documents such as challans and bank account statements.

The tribunal deemed it necessary to admit these additional pieces of evidence as they clarified the facts and facilitated the correct application of law. However, these pieces of evidence required further examination, prompting the tribunal to set aside the order passed by the learned CIT(A) and send it back to the Assessing Officer for reconsideration.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The assessee has filed this appeal challenging the order dated 30.11.2022 passed by the learned CIT(A), National Faceless Appeal Centre, Delhi for A.Y. 2009-10. The main ground urged by the assessee relates to addition of employees’ contribution to the provident fund under section 36(1)(va) of the I.T. Act.

2. The facts relating to the issue are stated in brief. The assessee herein is engaged in the business of providing corporate advisory services and merchant banking services. It filed its return of income on 30.10.2019 declaring a total income of Rs. 16.34 crores, which was later revised to Rs. 16.33 crores by way of filing a revised return of income. The said return of income was processed by the CPC under section 143(1) of the Act, wherein the CPC proposed to make certain adjustments. In response to the notice issued by CPC, the assessee filed its replies. Subsequently the CPC issued intimation under section 143(1) of the Act determining total income at Rs.17.36 crores by making various adjustments. In this appeal, we are concerned with the adjustment made by way of addition of Rs. 22,37,042/-made u/s 36(1)(va) of the Act on account of employees’ contribution to the provident fund. The learned CIT(A) confirmed the said addition and hence the assessee has filed this appeal before the Tribunal.

3. It is the submission of the assessee that the tax auditor has committed an error in reporting the date of payment of the provident funds collected from the employees in respect of four payments, out of 11 payments mentioned in the Tax audit report. He submitted that the above said four payments have been made within the due dates and hence no disallowance of the same is called for. In this regard, the learned AR submitted that the tax auditor has issued a revised certificate mentioning the correct dates of payment and the same is being furnished as additional evidence. He submitted that, as per the revised certificate issued by the tax auditor the addition will fall down by Rs. 21,99,338/-. The Learned AR further submitted that the assessee has also furnished copies of challans and relevant bank account copies in support of the revised certificate issued by the tax auditor. Accordingly, the learned AR prayed that the above said additional evidences may be admitted and relief may be granted to the assessee.

4. The Learned DR, however, submitted that the additional evidences furnished by the assessee would require examination at the end of the Assessing Officer. Accordingly, he submitted that the matter may be restored to the file of the Assessing Officer for examining it afresh by duly considering the additional evidences furnished by the assessee.

5. We have heard the rival contentions and perused the record. In the tax audit report, the tax auditor has listed out the dates of payment of employees’ provident fund by the assessee, wherein the assessee seems to have paid the employees contribution to PF beyond the due date prescribed under provident fund Act in eleven instances. The aggregate amount of the above said payments was Rs. 22,37,042/-. Accordingly in terms of section 36(1)(va) of the Act, the CPC disallowed the above said amount while processing the return of income of the assessee under section 143(1) of the Act. It the submission of the assessee us that in the following four cases, the date of payments has been wrongly mentioned by the tax auditor.

In support of the above said contention, the learned AR has furnished a revised certificate issued by the tax auditor mentioning correct dates of payment. The assessee has also furnished copies of challans for the payment of provident fund and also relevant copy of bank statements in support of the claim of actual date of payment mentioned above. Accordingly, it is prayed that the assessee may be granted relief of Rs. 21,99,338/- out of the above said addition. We are of the view that these additional evidences need to be admitted as the same brings out the facts correctly and help in applying law correctly. Accordingly, we admit the additional evidences furnished by the assessee.

6, However, as submitted by Ld D.R, these evidences require examination at the end of the Assessing Officer. Accordingly, we set aside the order passed by the learned CIT(A) on the issue of the addition made under section 36(1)(va) of the Act and restore the same to the file of the Assessing Officer with the direction to examine the same afresh by considering the additional evidences furnished/that may be further furnished by the assessee. After examining them, the AO may take appropriate decision in accordance with the law. Needless to mention, the assessee should be provided adequate opportunity of being heard.

7. The assessee has raised certain more grounds regarding charging of interest under section 234A, 234B & 234C of the Act. These are consequential in nature and hence do not require adjudication.

8. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

Pronounced in the open court on 24.5.2023.