Parry Engineering & Electronics Ltd. Vs PCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that invocation of section 263 of the Income Tax Act for issue of delayed payment of employees’ contribution to PF/ESIC justifiable as AO’s failure to examine has rendered assessment order erroneous and prejudicial to interest of revenue.
Facts- Pr. CIT issued a notice u/s. 263 of the Act, observing that the AO had erroneously allowed the deduction u/s. 80IA(4) of the Act despite the assessee not submitting the necessary evidence in support of the claim during the assessment proceedings. Pr. CIT also noted that an amount of Rs.1,15,539/- received as employees’ contributions towards PF/ESIC was not credited within the prescribed time limit and should have been disallowed u/s. 36(1)(va) r.w.s. 2(24) of the Act.
Thus, Pr. CIT held that the assessment order passed u/s. 143(3) was erroneous and prejudicial to the interests of the revenue, and therefore, initiated proceedings u/s. 263 of the Act and set aside the order of AO and directed AO to pass a fresh assessment order.
Conclusion- Held that given the complete scrutiny selection and the AO’s duty to examine all relevant aspects, the omission to disallow the delayed payment of employees’ contributions to PF/ESIC under Section 36(1)(va) does constitute an error. This error justifies the invocation of Section 263 by the Pr. CIT to correct the assessment order.
