Case Law Details
FIL India Business & Research Services Pvt Ltd Vs ACIT (ITAT Delhi)
Introduction: In a significant ruling, the Income Tax Appellate Tribunal (ITAT) of Delhi has declared that delays in Provident Fund (PF) deposits due to technical issues on the Employees’ Provident Fund Organization (EPFO) portal will not warrant disallowance. The appeal was filed by FIL India Business & Research Services Pvt Ltd against the ACIT for the Assessment Year (AY) 2020-21. This article aims to provide a detailed analysis of the ruling and its implications.
Grounds of the Appeal: The appellant (FIL India Business & Research Services Pvt Ltd) raised multiple grounds in the appeal, arguing that the Commissioner of Income Tax Appeals (CIT[A]) had made several errors in judgment. Among these were claims that the CIT(A) had not appropriately considered the impact of technical issues on the EPFO portal, affecting the timely deposit of the Provident Fund.
Technical Glitches: The Heart of the Issue: The crux of the argument centered around delays in PF deposits, amounting to INR 21,439,579, due to technical issues on the EPFO portal. These glitches caused the payment to be reversed and subsequently delayed. The appellant argued that this delay was not their fault and hence should not attract any penalties or disallowances.
Legal Context: Section 143(1) of the Income Tax Act: The appellant argued that the addition of INR 22,329,575 by the Central Processing Centre under Section 143(1) of the Act was not justifiable. This amount constitutes a debatable issue and does not fall under the category of “prima facie adjustment” according to Section 143(1) of the Income Tax Act.
The ITAT’s Judgment: The ITAT agreed with the appellant’s reasoning and directed the Assessing Officer to delete the disallowance/addition. The tribunal noted that the payment had been initially made well before the due date, and any delays were solely due to technical issues on the EPFO portal.
Conclusion: The ITAT’s ruling marks a significant precedent, establishing that companies will not be penalized for Provident Fund deposit delays if the fault lies with technical glitches on the EPFO portal. This brings a sigh of relief for businesses and stresses the importance of considering technical realities when interpreting legal mandates.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been filed against the order of Ld. NFAC, New Delhi dated 23.12.2022 for AY 2020-21.
2. The grounds have been raised by the assessee are as follows:-
1. That on the facts and circumstances of the case and in law, the order passed by the Commissioner of Income Tax Appeals [CIT(A)’1 under section 250 of the Income tax Act (‘the act) dated 23 December 2022 issued by National Faceless Appeal Centre (NFAC’) is bad in law and void ab initio.
2. On the facts and circumstances of the case and in law, the CIT(A) has erred in passing an order basis incorrect set of facts, without application of mind and in a mechanical manner.
3. On the facts and circumstances of the case and in law, the CIT(A) failed to appreciate the fact that the delay in deposit of employees’ contribution to provident fund (PF’) amounting to IN 21 439 579 is not attributable to the Appellant and the same was attributable to technical glitches on the EPFO portal.
4. On the facts and circumstances of the case and in law, the CIT(A) failed to appreciate that the aforesaid addition of IN 22,329,575 could not have been made by the Centra l Processing Centre under Section 143(1) of the Act as the same constitutes a debatable issue and does not fall within the ambit of prima facie adjustment as per Section 143(1) of the Act.
3. The ld. counsel of assessee submitted that on the facts and circumstances of the case and in law, the order passed by the Commissioner of Income Tax Appeals [CIT(A)’1 under section 250 of the Income tax Act (‘the act) dated 23 December 2022 issued by National Faceless Appeal Centre (NFAC’) is bad in law and void ab initio as the same has been passed on the basis of incorrect set of fax without application of mind and in a mechanical manner. The ld. counsel further submitted that the CIT(A) failed to appreciate the fact that the delay in deposit of employees’ contribution to provident fund (PF’) amounting to IN 21 439 579 is not attributable to the Appellant and the same was attributable to technical glitches on the EPFO portal. It has also been contended on behalf of the assessee that the CIT(A) failed to appreciate that the aforesaid addition of IN 22,329,575 could not have been made by the Central Processing Centre under Section 143(1) of the Act as the same constitutes a debatable issue and does not fall within the ambit of prima facie adjustment as per Section 143(1) of the Act.
4. The ld. counsel submitted that for the month of September 2019 the due date payment was 15.10.2019 and the assessee made payments by generating challan on 09.10.2019 and amount was debited to the bank account of assessee on 10.10.2019 which was reversed on 15.10.2019 crediting the bank account of assessee. He further submitted that in the second round finally the payment was transmitted to the account of concerned authority on 16.10.2019. The ld. counsel submitted that it is clearly evident that the appellant had duly deposited the above payment before the due date as per the PF Act i.e., the appellant had duly generated the challan on 9 October 2019 and made the payment pertaining to the month of September 2019 to the EPFO SBI account on October 10, 2019 i.e. 5 days before the due date of October 15, 2019. However, the payment got reversed on 15 October 2019 to the bank account of the appellant due to technical glitches on the EPFO portal/EPFO’s SBI Account. Therefore no disallowance can be made when the amount due was available in the bank account of assessee on 09.10.2019 and it was transmitted to the concerned account on 10.10.2019 then if the payment is reversing and again transmitted the concern account on 16.10.2019 then the assessee cannot be held as defaulter of payment attracting the action of the Assessing Officer to make disallowance therefore the Assessing Officer may kindly directed to delete the disallowance.
5. The ld. Senior DR supported the orders of the authorities below however, he did not controvert the factual position stated by the ld. counsel of the assessee.
6. On careful consideration of above, first of all, we note that the assessee for making payment for the month of September 2019 generated challan on 09.10.2019 and make payment which was debited to his bank account on 10.10.2019 as per statement given by the bank. However, the same was reversed on 15.10.2019 due to technical glitches on the EPFO portal/EPFO’s SBI Account and the amount was again reversed/credited to the bank account of assessee. Finally the payment was transmitted to the bank account of EPFO on 16.10.2019 and realization was shown on 17.10.2019. As per Assessing Officer the payment was made beyond two days of specified date of 15.10.2019 and he made disallowance and the ld. CIT(A) also uphold the same.
7. In our humble understanding when the payment has been debited in the bank account of assessee and flouted further out of coffer of the assessee on 10.10.2019 then the assessee cannot be held responsible attracting the disallowance. Although the amount was again reversed and credited to the bank account of assessee on 15.10.2017 and finally transferred to the EPFO SBI account on 16.10.2019 then also the assessee cannot be held responsible for the two days delay which was caused due to the technical glitches on the EPFO Portal particularly when the assessee was having sufficient funds on 09.10.2019 and after generating challan first transmission of fund was effected on 10.10.2019 five days before the specified date of 15.10.2019. Accordingly, sole grievance of assessee is allowed and Assessing Officer directed to delete the disallowance/addition.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 10.08.2023.
