Case Law Details
GMW Private Limited Vs DCIT (ITAT Ahmedabad)
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) in Ahmedabad addressed the appeal filed by GMW Private Limited concerning an order from the Commissioner of Income Tax (Appeals) dated September 23, 2021. The appeal pertains to the assessment year 2019-20 and centers on the disallowance of contributions made to the Provident Fund (PF) and the Employees’ State Insurance (ESI) that were paid after the statutory due dates.
Background of the Case
The company filed its income tax return on October 25, 2019, declaring a gross income of ₹1,72,23,838. During the processing of the return under Section 143(1) of the Income Tax Act, the Centralized Processing Centre (CPC) in Bangalore disallowed the delayed payments of ESI and PF amounting to ₹22,69,973. Consequently, the Assessing Officer issued a total demand of ₹7,80,520 based on this disallowance.
Displeased with the CPC’s decision, GMW Private Limited filed an appeal before the CIT(A), but the appeal was dismissed. The company contended that the adjustments made by the CPC lacked prior notice and argued that the decision to disallow the delayed payments was incorrect.
Arguments Presented
During the proceedings, the legal representative for the assessee argued that the Section 143(1) intimation regarding the disallowance was not communicated adequately before the adjustments were made. The representative cited the landmark Supreme Court ruling in Checkmate Services Private Limited vs. CIT, which upheld the disallowance of similar contributions under specific conditions. However, the appellant contended that the Supreme Court’s decision was made after the date of intimation, suggesting that the addition made under Section 143(1) was debatable.
The representative supported this argument by referencing multiple precedents where adjustments for delayed PF and ESI contributions were scrutinized, suggesting that previous rulings should inform the current case’s outcome. The representative noted that in cases like Geo Milller & Co. Ltd. Vs. Deputy CIT, adjustments should not be applied retrospectively without proper grounds.
Findings of the ITAT
The ITAT examined the merits of the case alongside the procedural aspects. It noted that the adjustments made were properly communicated to GMW Private Limited via email on February 14, 2020. The tribunal pointed out that the communication was sent to the same email address provided by the assessee, undermining the argument that there was a lack of notice.
Furthermore, the ITAT reaffirmed that the Supreme Court’s decision in the Checkmate Services case and the prevailing stance of the Gujarat High Court were against GMW Private Limited. As a result, the tribunal found no grounds to overturn the disallowance of contributions made after the statutory due dates.
Conclusion
Ultimately, the ITAT upheld the order from the CIT(A), dismissing the appeal from GMW Private Limited. The tribunal’s decision underscores the importance of timely contributions to statutory funds and the adherence to procedural norms in the income tax assessment process.
Taxpayers are advised to ensure compliance with statutory deadlines to avoid disallowances, as courts continue to support rigorous enforcement of tax laws. This ruling also emphasizes that even in the face of procedural objections, the substantive application of tax law prevails, particularly when backed by Supreme Court and High Court rulings.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee against order dated 23.09.2021 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2019-20.
2. The assessee has raised the following ground of appeal :-
“1. The learned Commissioner (Appeals) erred in upholding addition and disallowance of Rs.22,69,973/- on account of contributions to Provident Fund and ESI which are paid during the same year but after the due date for payment under relative labour law.”
3. The assessee filed return of income for the Assessment Year 2019-20 declaring gross income of Rs.1,72,23,838/-on 25.10.2019. The income tax return was processed under Section 143(1) of the Income Tax Act, 1961 in which the delayed payments of ESI/Provident Fund payments of Rs.22,69,973/- was disallowed by the CPC, Bangalore vide order dated 01.05.2020. Accordingly, the Assessing Officer issued total demand of Rs.7,80,520/-.
4. Being aggrieved by the Intimation under Section 143(c) of the Act dated 01.05.2020, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The ld. AR submitted that Section 143(1) intimation was not given to the assessee prior to the adjustment made vide order dated 01.05.2020. The Ld. AR submitted that the issue relating to disallowance of amount of Rs.22,69,973/- for delayed payments of employee’s contribution to PF, the disallowance per se not challenged by the Hon’ble Gujarat High Court and the Hon’ble Supreme Court decision in case of Checkmate Services Private Limited vs. CIT, 143 com 178. However, in assessee’s case, addition is not justified for the reason that the addition was made by way of adjustment under Section 143(c) of the Act whereas the decision of Hon’ble Supreme Court in case of Checkmate Services Private Limited (supra) was delivered after the date of intimation of addition. The Ld. AR further submitted that the jurisdiction under Section 143(1) of the Act should be tested on the date of intimation and addition by way of adjustment of intimation under Section 143(1) of the Act is debatable and controversial matter and, therefore, on the basis of retrospective amendment of Income Tax Act is beyond the scope of Section 143(1) of the Income Tax Act, 1961. The Ld. AR relied upon the following decisions :-
1) Geo Milller & Co. Ltd. Vs. Deputy CIT & Ors. (2003) 262 ITR 237 (Cal).
2) Smriti Properties (P) Ltd. Vs. Settlement Commission (It And Wt) & Ors (2005) 278 ITR 274 (Cal)
3) CIT vs. K. Venkateshwar Rao (1988) 169 ITR 330 (AP)
4) CIT vs. Palani Andavar Cotton and Synthetic Spinners Limited, 326 ITR 339 (Madras High Court)
5.1 The Ld. AR also relied upon the following decisions of other Benches of the Tribunal :-
i) The issue of adjustment on account of delayed payments of provident fund contributions came up before Mumbai bench of ITAT in case of M/s. P.R. Packaging Service vs. ACIT in ITA No.2376/Mum/2022 after the Hon’ble Supreme Court held that such contributions are disallowable.
The Hon’ble Tribunal took cognisance of the decision of Hon’ble Supreme Court and thereafter held that adjustment on this account could not be made in earlier years in intimation under Section 143(1)
ii) The Hon’ble Delhi Bench of ITAT in case of M/s.360 Realtors LLP vs. ADIT, Central Processing Centre in ITA No. 303/Del/2022 has held deleted the addition made in the assessment on this ground.
6. The Ld. DR relied upon the intimation under Section 143(1) of the Act and the order of the CIT(A).
7. We have heard both the parties and perused all the relevant material available on record. After going through the order dated 01.05.2020 in respect of intimation under Section 143(1) of the Act, at page no.7 of the said order there is a categorical mention at the top of the table related to incorrect claim under Section 143(1)(a)(ii) indicating that “please refer to this office communication dated 14.02.2020 sent to the e-mail ID and [email protected]. As there has been no response/the response giver is not acceptable the adjustments as mentioned below are being made to the total income as per the provisions of Section 143(1)(a).” From this noting itself it appears that the intimation related to the adjustment was properly communicated on 14.02.2020 to the assessee on the same e-mail ID which was mentioned by the assessee before the Tribunal in Form No. 36 & before the CIT(A) in Form no. 35 as well. In the intimation order dated 01.05.2020 the first page of the said order at the footnote has also mentioned the same e-mail ID. Thus, the contention of the ld. AR does not sustain.
8. As regards to merits of the case, the issue related to belated payment of contribution to PF and ESI is already covered against the assessee by the decision of the Hon’ble Apex Court in the case of Checkmate Services Private Limited (supra) and in fact as on date of intimation order by CPC, the Hon’ble Gujarat High Court, which is the jurisdictional High Court, was against the assessee. Therefore, the CIT(A) has rightly dismissed the appeal of the assessee.
9. In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on this 27th August, 2024.
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