Case Law Details
Jagati Mining Company Private Limited Vs ACIT (ITAT Surat)
ITAT Surat held that employee’s contribution towards PF and ESI cannot be allowed if it is deposited after the due dates under those Acts but before filing of return. Accordingly, disallowance u/s. 36(1)(va) confirmed and appeal dismissed.
Facts- The assessee filed its return of income on 30.09.2019 for AY.2019-20, declaring total income at Rs.1,02,02,740/-. The return was processed by the Central Processing Centre (CPC) where it made disallowance of Rs.1,78,411/- u/s 36(1)(va) of the Act for deposit of ESI and EPF contribution of employees after due date.
CIT(A) dismissed the appeal by relying on the decision of Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. vs. CIT. Being aggrieved, the present appeal is filed.
Conclusion- Held that there were delays from 3 days to 34 days in various months. There was delay of 34 days in July and 19 days in August, 2018. But there was no delay in September, December, 2018 and January, 2019. The assessee has not explained such irregularity in deposit of the EPF and ESI contribution. How could there be technical glitch in one month and no such glitch in the next month and again another technical glitch in the next two months. Hence, the claim of delay only due to technical glitches has not been satisfactory explained. Be that as it may, the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) has clearly held that employee’s contribution towards PF and ESI cannot be allowed if it is deposited after the due dates under those Acts but before filing of return.
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 17.11.2023 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2019-20.
2. The grounds of appeal raised by the assessee are as under:
“1. On the facts and circumstances of the case LD CIT(A) erred and failed to recognize the fact that delays in the deposit of employee contributions towards the Employee Provident Fund (EPF) and the ESIC was due to non-working of the ESIC site which was beyond the control of the assessee specifically that of the inability to generate the necessary online forms by assessee due to the nonfunctioning of ESIC site which contributed to the delay hence in view of jurisdictional ITAT decision in the case of Devendra Singh Chauhan Vs ITO (TAT Indore) Appeal Number ITA No.202/Ind/2022 Date of Judgment/Order: 25/07/2023 Assessment Year:2018-19 addition made of Rs.1,78,411/-may kindly be deleted.
WITHOUT PREJUDICE TO ABOVE
2. That, the learned CT(A) grossly erred, both on facts and in law, in upholding the action of the AO in making addition of Rs.1,78,411/-, which is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law.
3. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.1,78,411/- made by the AO in the appellant’s income, on account of delay deposition of Employees Contribution towards Provident Fund and ESIC by invoking the provisions of section 36(1)(va) r.w.s. 2(24)(x) of the Income-Tax Act, 1961, without considering the material fact that the appellant had made the entire payment before the due date prescribed under section 139(1) of the Act for furnishing of return of income.
4. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.1,78,411/- made by the AO in the appellant’s income, on account of delay deposition of Employees Contribution towards Provident Fund and ESIC by invoking the provisions of section 36(1)(va) r.w.s. 2(24)(x) of the Income-Tax Act, 1961, without considering the material fact that there was no default on part of the appellant in deposition of payment on time rather it was technical fault in PF portal which yielded in delay of mere one day.
5. That, the learned CIT(A) grossly erred, both on facts and in law, in not considering and appreciating the material fact that the entire payment of the impugned sum made by the appellant was also eligible for deduction under section 37(1) of the Act if at all is not allowed under section 36(1)(va).
6. That, the learned CIT(A) grossly erred, both on facts and in law, in not considering and appreciating the fact that addition made of Rs. 1,78,411/- on account of the delay in employee PF and ESI payments are the disputed matters and cannot be dealt in order u/s 143(1).
7. The appellant craves leave to add or amend any ground of the appeal.”
3. Brief facts of the case are that the assessee filed its return of income on 30.09.2019 for AY.2019-20, declaring total income at Rs.1,02,02,740/-. The return was processed by the Central Processing Centre (CPC) on 27.02.2020 where it made disallowance of Rs.1,78,411/- u/s 36(1)(va) of the Act for deposit of ESI and EPF contribution of employees after due date. Aggrieved by the order of CPC, the assessee filed this appeal before the CIT(A) who has dismissed the appeal by relying on the decision of Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. vs. CIT, in Civil Appeal No.2833 of 2016, dated 12.10.2022.
4. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Learned Authorized Representative (Ld. AR) of the assessee submitted that in the previous year relevant to AY.2019-20, the assessee company was supposed to pay EPF contribution within the time frame as stipulated by PF Act. However, due to technical glitches of PF portal, the challans were not generated and there were delays of 34, 19, 13, 3 and 15 days for the months of July, August & November, 2018 and January & March, 2019. The Ld. AR submitted that non-generation of challans was informed to the PF office which informed that due to technical error in portal, the challans were not generated. He further submitted that assessee has sufficient bank balance in these months and shortage of fund was not an issue for delay in deposit of the impugned sums. He has relied on the decisions of ITAT, Jabalpur in case of Phoenix Poultry vs. ACIT, ITA No.76/Del/2023, dated 21.09.2023.
5. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) of the revenue supported the order of CIT(A). He has also relied on the decision of Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. (supra).
6. We have heard both the parties and perused the material available on record. We have also deliberated on the decisions relied upon by both parties. Though the assessee has raised several grounds of appeal, they are interrelated and pertain to a single issue of addition of Rs.1,78,411/- due to delay in deposit of ESI and EPF contribution from employees. There is no dispute regarding the delay in deposit of the ESI and EPF contribution from employees after the due dates. This is also clear from the submission made by the Ld. AR where there were delays ranging from 3 days to 34 days for various months. The Ld. AR has relied in the case of Phoenix Poultry (supra). However, those contributions were deposited within grace period allowed under respective Acts and in some cases the deposits were delayed due to technical difficulties of E-portal of EPF. Considering that these facts were overlooked by lower authorities, the Tribunal granted one more opportunity to assessee to substantiate the claim before the AO. The appeal was allowed for statistical purpose. Thus, claim of the assessee is not correct. In the present case, we find that there were delays from 3 days to 34 days in various months. There was delay of 34 days in July and 19 days in August, 2018. But there was no delay in September, December, 2018 and January, 2019. The assessee has not explained such irregularity in deposit of the EPF and ESI contribution. How could there be technical glitch in one month and no such glitch in the next month and again another technical glitch in the next two months. Hence, the claim of delay only due to technical glitches has not been satisfactory explained. Be that as it may, the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) has clearly held that employee’s contribution towards PF and ESI cannot be allowed if it is deposited after the due dates under those Acts but before filing of return. The decision of Hon’ble Supreme Court as provided in Article 141 of the Constitution in binding on account courts within the territory of India.
Hence, respectfully following the decision of Hon’ble Supreme Court, which has also been relied upon by the CIT(A), we are of considered view that the order of CIT(A) does not require any interference. We also find that the Co-ordinate Bench of ITAT, Surat in case of Shri Raghukul Textprints Pvt. Ltd. vs. DCIT, in ITA No.32/SRT/2022, dated 30.11.2022 has dismissed appeal of assessee by respectfully following the judgement of Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. (supra). In view of the above facts and decisions cited supra, the appeal of the assessee is dismissed.
7. In the result, the appeal of the assessee is dismissed.
Order is pronounced in the open court on 22/11/2024.
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