Sree Gokulam Chit and Finance Co. P. Ltd. Vs DCIT (ITAT Chennai)
ITAT Chennai held that post amendment w.e.f. 01.04.2008, the scope of adjustment u/s.143(1) of the Act has widened and enlarged. Accordingly, adjustments with regard to incorrect claim apparent from any information in the return of income permissible.
Facts- The assessee filed ROI and the same was processed by the ADIT, CPC, Bangalore by intimation u/s.143(1) of the Act thereby making adjustment in regard to delayed payment of employees contributions of PF funds amounting to Rs.2,09,425/- and ESI contribution amounting to Rs.3,408/- aggregating to Rs.2,12,833/- beyond the prescribed period under the respective statutes of PF Act and ESI Act. The CPC, Bangalore made this adjustment by making disallowance under intimation u/s.143(1) of the Act under Annexure ‘other information’ clause – 6(s), wherein amount debited to profit & loss account are disallowable u/s.36(b) of the Act due to non-fulfillment of conditions specified in the relevant clause and as per sub-clause (s), total amount disallowable and consequently disallowed u/s.36 of the Act was Rs.2,12,833/-.
Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) upheld the prime-facie adjustment made u/s.143(1) of the Act by the CPC, Bangalore. Being aggrieved, the present appeal is filed.
Conclusion- The provisions of section 143(1)(a)(ii) specifies the incorrect claim particularly if such incorrect claim is apparent from any information in the return of income and that can be any information as such as the audit report or some other information as provided by assessee in the return of income. In this context, it is pertinent to mention that earlier only prima-facie arithmetic adjustments can be made but in view of the amendment provisions by the Finance Act, 2008 w.e.f. 01.04.2008, the amended provisions empowers adjustments to be made interalia on the basis of remarks indicated in the return of income or incorrect claim apparent from any information in the return of income. Post amendment w.e.f. 01.04.2008, the scope of adjustment u/s.143(1) of the Act has widened and enlarged. It provides that total income shall be computed after making adjustments inter-alia on account of incorrect claim, if such incorrect claim is apparent from any information in the return of income. In the present case before us, the adjustment u/s.143(1)(a) has been made on the basis of information contained in the tax audit report.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-18, Chennai-1 vide ITA No.97/CIT(A)-18/2021-22 dated 17.08.2022. The return of income for the assessment year 2020-21 was processed by ADIT, CPC, Bangalore by issuing intimation u/s.143(1) of the Income Tax Act, 1961 (hereinafter the ‘Act’) dated 24.12.2021.
2. The first issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of ADIT, CPC, Bangalore in making adjustment u/s.143(1) of the Act in regard to the claim of deduction of employees contributions of Provident Fund (PF) amounting to Rs.2,09,425/- and Employees State Insurance (ESI) contribution of Rs.3,408/-, aggregating Rs.2,12,833/- by holding that these payments are made beyond the due date prescribed under the respective statutes i.e., Provident Fund Act and ESI Act.
According to the grounds raised, the first facet of ground raised is that these adjustments falls outside the scope / ambit of the provisions of section 143(1) of the Act and hence, the CIT(A) & ADIT, CPC both erred in fact and in law.
3. Brief facts are that the assessee filed return of income on 30.03.2021 for the relevant assessment year 2020-21 and the same was processed by the ADIT, CPC, Bangalore by intimation u/s.143(1) of the Act dated 24.12.2021 thereby making adjustment in regard to delayed payment of employees contributions of PF funds amounting to Rs.2,09,425/- and ESI contribution amounting to Rs.3,408/- aggregating to Rs.2,12,833/- beyond the prescribed period under the respective statutes of PF Act and ESI Act. The CPC, Bangalore made this adjustment by making disallowance under intimation u/s.143(1) of the Act under Annexure ‘other information’ clause – 6(s), wherein amount debited to profit & loss account are disallowable u/s.36(b) of the Act due to non-fulfillment of conditions specified in the relevant clause and as per sub-clause (s), total amount disallowable and consequentlydisallowed u/s.36 of the Act was Rs.2,12,833/-. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) upheld the prime-facie adjustment made u/s.143(1) of the Act by the CPC, Bangalore by observing in para 7.9 as under:-
“7.9 Therefore, in view of the remarks in the audit report, adjustments can be made in terms of section 143(1). This is also in the nature of incorrect claim which is apparent from the information contained in the tax audit report. Hence, I find that the adjustment is within the purview of section 143(1) of the Income Tax Act. The case laws cited by the assessee relating to adjustments u/s 143(1) of the Act were prior to the amendments to Section 143(1) and therefore quite distinguishable to the facts and circumstances of the assessee’s case.”
4. As regards to merits of the case, the CIT(A) confirmed the disallowance u/s.36(1)(va) of the Act and now before us the ld.counsel for the assessee could not make any argument when the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd., in Civil Appeal No.2833 of 2016, order dated 12.10.2022 was pointed out. We noted that the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd., supra, has categorically held that the payments on account of employees contributions of PF & ESI are allowable only if those are made within the due dates as prescribed under the respective statutes i.e., PF & ESI Act. Accordingly, the CIT(A) dismissed the claim and even now before us, the ld.counsel on merits has not made any arguments.
5. Before us, the ld.counsel in regard to making prima-facie adjustment u/s.143(1) of the Act only argued and drew our attention to the audit report, copy of which is filed in Form No.3CD in assessee’s paper-book from pages 6 to 21. The ld.counsel drew our attention to specific clause 20B of the audit report and stated that there are only indicative payments and not the actual. The ld.counsel further drew our attention to clause 21, sub-clause (b)(8) i.e., payment to PF and other funds, etc., in sub-clause (4), which was left blank and there is no indication.
6. On the other hand, the ld. Senior DR, relied on the provisions of section 143(1) of the Act as amended from time to time and stated that any incorrect claim and if such incorrect claim is apparent from any information in the return of income and moreover disallowance of expenditure indicated in the audit report and not taken into account in the total income in the return of income, the same is to be disallowed while making prima-facie adjustment under this provision. The ld.senior DR relied on the order of CIT(A) who has elaborately discussed this issue.
7. We have heard rival contentions and gone through facts and circumstances of the case. The admitted facts are that as per audit report filed by assessee along with the return of income in Form No.3CA, the assessee has filed complete details of the dates of payments of PF & ESI. Admittedly, the assessee has remitted delayed payment of employees contributions of PF & ESI beyond the due date as prescribed under the PF & ESI Act but before the date of filing of return of income. The details are as under:-
Employees Provident Fund
