Sparrow Security Services Vs ITO (ITAT Amritsar)
ITAT Amritsar held that date of presentation of cheque should be taken as date of payment. Accordingly, payment of employee contribution is deemed to have been made on the date of presentation of cheque.
Facts- The assessee has filed return u/s 139(1) for the impugned assessment year. By passing the audit report of the assessee the return was processed by CPC u/s 143(1) and addition was made Rs.48,07,613/- for late deposit of contribution made in respect of PF & ESI u/s 36 (1)(va) of the Act. Aggrieved assessee filed an appeal before the ld. CIT(A) against the order of the ld. AO.
But without considering the assessees’s submission the order was passed and confirmed the assessment order. Being dissatisfied with the order of the CIT(A) the assessee filed an appeal before us.
Conclusion- As per CBDT circular no. 261 dated 08.08.1979, in terms of rule 80 of the Compilation of the Treasury Rules, if a cheque or draft tendered in payment of Government dues and accepted under the provisions of rule 79 is honoured on presentation, the payment is deemed to have been made on the date on which it was handed over to the Government bankers.
Further the payment by cheque within due date is squarely covered by the Board Circular and the order of the ITAT, Bangalore Bench in the case of Moody’s Analytics Knowledge Services (India) (P.) Ltd. vs. ITO. Therefore, the addition of Rs.28,91,068/- and Rs.8,37,424.9 are liable to be quashed.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
The instant appeal of the assessee was filed against the order of the ld.
Commissioner of Income Tax (Appeals), NFAC, Delhi,[in brevity the ‘CIT (A)’] order passed u/s 250of the Income Tax Act 1961[in brevity the Act], for A.Y. 2018-19.The impugned order was emanated from the order of the NAC Delhi, order passed u/s 143(3) r.w.s. 143(3A) & 143 (3B) of the Act date of order 19.01.2021.
The assessee has taken the following grounds: –
“1. That the Ld. CIT(A) has erred in dismissing the appeal by passing order u/s 250(6) and sustaining the addition made by the AO.
2. That the order passed u/s 250(6) of the Income Tax Act, is bad in law as the same has been disposed off without examining the merits of the case.
3. That the CIT(A) has erred in confirming the addition of Rs. 4807613/- on account of employer and employee contribution paid after the due date as per statute by not appreciating that the same was duly deposited before the due date of filing of return of income.
4. That the Ld. CIT(A) has erred in not appreciating that the addition of Rs. 4807613/-includes employer contribution of Rs. 2891068/- and employee contribution of Rs. 1916345/- and by placing reliance upon the judgement of apex court in the case of Checkmate Services Pvt. Ltd. Without appreciating that before the said judgement, the same issue was decided in favour of the assessee by Hon’ble high Court wherein, the adjustment/disallowance made on account of ESI and EPF constituted mistake apparent from record (being in contravention to jurisdictional high court). That the Ld. CIT(A) has erred in ignoring the judgement of Hon’ble Supreme Court in the case of M/s MEPCO INDUSTRIES LIMITED, in which it has been stated that prior mistake apparent from record cannot be rectified/obliterated by subsequent adverse SC JUDGMENT on the same issue. .
5. That the CIT(A) has wrongly placed reliance upon the judgement of apex court in the case of Checkmate Services Pvt. Ltd by not appreciating that the issue involved in this case in only with respect to employees contribution and as such cannot be applied on employer contribution of Rs. 2891068/- made by the assessee firm. That the CIT(A) has erred in not appreciating that employer’s contribution is covered by section 43B clause (b)
6. That the CIT(A) has erred in not appreciating that the CPC has duly allowed the rectification in subsequent AY 2019-20 by wrongfully stating that each assessment year is distinct since apart from the yearly amendments, the income tax act does not discriminate between different assessment years and the decision in one assessment is applied consistently to another assessment year.
7. That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off.”
2. Brief fact of the case is that the assessee has filed return u/s 139(1) for the impugned assessment year. By passing the audit report of the assessee the return was processed by CPC u/s 143(1) and addition was made Rs.48,07,613/- for late deposit of contribution made in respect of PF & ESI u/s 36 (1)(va) of the Act. Aggrieved assessee filed an appeal before the ld. CIT(A) against the order of the ld. AO. The assessee placed that the entire amount of late contribution of PF & ESI is not the point of addition for violation of section 36. The entire amount is mixed in three parts. The assessee segregated the additions in three parts which are amount to Rs.28,91,068/- is related to employer contribution and the rest amount Rs.19,16,345/- Rs. 837424.90 was related to the late credit of cheque which was produced in the bank within the time limit. So, there is no violation for late payment of the employee contribution. The rest amount Rs.10,79,120/- is well accepted by the ld. AR of the assessee for addition with the total income by respectfully relying on the order of the Hon’ble Supreme Court in the case of Checkmate Services P. Ltd. Vs CIT (Civil Appeal No.2833 of 2016 dated 12.10.2022), [2022] 143 taxmann.com 178 (SC).
The ld. AR placed that all the details were submitted before the ld. CIT(A). But without considering the assessees’s submission the order was passed and confirmed the assessment order. Being dissatisfied with the order of the CIT(A) the assessee filed an appeal before us.
3. Considering the grounds of the assessee, the ld. AR has argued ground wise before the bench.
Ground No.1, is general in nature. As such no additional comments are being given.
Submission in Ground No. 2 to 5
3.1 The ld. AR combinedgrounds in argument and placed that the nature of the
payment of the PF & ESI is combined with employer and employee contribution. The relevant part of the submission is extracted as below:
Submissions for Ground No 2-5
a) That the CIT(A) has erred in confirming the addition of Rs. 4807613/- without going through the facts of the case. The CIT(A) has erred in applying the judgement of apex court in the case of Checkmate Services Pvt. Ltd. In which it was held that the deduction u/s 36(1)(va) cannot be allowed if the employees’ contribution to PF/ESI was not deposited before the due date as per the respective statute. In the extent case, the addition of Rs. 4807613/- comprises of both employer contribution amounting to Rs. 2891068/- and employee contribution amounting to Rs. 1916345/-. The month wise bifurcation for the same has duly been submitted before the CIT(A) and the CIT(A) ignoring the submissions has confirmed the addition of total contribution which includes employer contribution. Even otherwise, the CIT(A) has erred in not appreciating the fact that some of the payments were made on due date but the cheque clearance for the same was made on subsequent dates.
b) The details of payment made by the appellant for PF and ESI which includes employer contribution and employee contribution are as under: –
