Case Law Details
Balmatta Diagnostic & Research Centre Ltd. Vs DCIT (ITAT Bangalore)
Introduction: In the case of Balmatta Diagnostic & Research Centre Ltd. Vs DCIT, ITAT Bangalore addressed the disallowance of delayed payments of Employees’ State Insurance (ESI) and Provident Fund (PF) to the government. Despite facing glitches in the IT portal, the Income Tax Appellate Tribunal (ITAT) upheld the disallowance, emphasizing the need for timely payments. This article provides a comprehensive overview of the case, including grounds of appeal, the delay condonation issue, and the merits of the disallowance.
Detailed Analysis: Balmatta Diagnostic & Research Centre Ltd., a limited company, filed its return for the assessment year 2020-21, declaring an income of Rs.36,95,890. The return was processed under Section 143(1) of the Income Tax Act, 1961, accepting the returned income. Subsequently, a rectification order under Section 154 was issued on 14.03.2022, enhancing the income by disallowing Rs.2,96,778 related to ESI & PF payments made after the prescribed due dates but before the due date for filing the return.
The main contention in the appeal was the delay of 181 days in filing the appeal before the National Faceless Appeal Centre (NFAC). The assessee attributed the delay to glitches in the IT portal, which hindered access to the rectified intimation. The ITAT condoned the delay, considering the reasonable cause.
On the merit of the case, the ITAT examined the disallowance concerning delayed ESI & PF payments. The assessee argued that at the time of processing under Section 143(1), decisions favoring the assessee existed. The judgment of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd., rendered on 12 October 2022, postdates the rectification order. The ITAT acknowledged this legal position, stating that the delay in employer’s contribution attracts deferment, while employee’s contribution leads to permanent negation of deduction.
Conclusion: The ITAT Bangalore, in the matter of Balmatta Diagnostic & Research Centre Ltd. Vs DCIT, upheld the disallowance of delayed ESI & PF payments. Despite portal glitches causing a delay in filing the appeal, the ITAT, after condoning the delay, affirmed the disallowance based on the legal distinction between employer’s and employee’s contributions. The case underscores the importance of timely compliance with ESI & PF payment deadlines to secure tax deductions.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal filed by assessee is directed against the order of NFAC passed u/s 250 of the Income-tax Act,1961 [‘the Act’ for short] for the assessment year 2020-21 dated 24.8.2023. The assessee has raised following grounds of appeal:
“1. The Learned Commissioner of Income T (Appeals) erred in dismissing the appeal on limitation holding the explanation that appellant could not able to open the intimation due glitches in portal is not a reasonable cause for condonation of delay.
2. The Learned Commissioner of Income Tax (Appeals) erred in holding disallowance of belated ESl and Provident Fund payments are prima facie disallowance for the computation u/ s. 143(1)(a) of the Act, when the Jurisdictional Hon ‘ble High Court decision was in favour of the appellant, on the date of intimation was made u/ s. 143(1)(a) of the act for the asst. ear 2020-2021.
3. The Learned Commissioner of Income Tax (Appeals) ought to have observed the rectification of intimation is dated 14-03-2022 and the Hon’ble Supreme Court decision was rendered on 12-10-2022 in Check Mate Service P Ltd.
4. The Learned Commissioner of Income Tax (Appeals) ought to have cancelled interest levied u/s.234A, 234B & 234C of the Act could not have been enhanced in rectification proceedings on 14 03-2022 through the Hon’ble Supreme Court on 12-10-2022 decisions rendered by Hon’ble High Court of Karnataka in the case of Commissioner of Income Tax Vs. Sabari Enterprises 298 1TR 141 (Karn) deemed stands revised.
5. The appellant prays that this Hon’ble Tribunal be pleased to permit the appellant to add, delete or modify any ground at the time of hearing.”
2. Facts of the case are that assessee is a limited company filed its return of income for the assessment year 2020-21 on 15.02.2021 (Extended time to file return u/s. 139(1) of the Act, declaring an income of Rs.36,95,890/-. The return of income was processed u/s. 143(1) of the Act accepting the returned income on 06.08.2021 and no additions were made. Thereafter on 14.03.2022 an order u/s. 154 of the Act has been made enhancing the income to Rs.37,56,269/-by way of disallowing a sum of Rs.2,96,778/- which relates to payments of ESI & Provident Fund paid after due date prescribed in those provisions, but before the due date for filing the return of income u/s. 139(1) of the Act. The assessee could not be able to open the rectified intimation on account of glitches in the portal and now the assessee has downloaded the rectified intimation and filed this appeal against the rectified intimation dated 14.03.2022 made u/s. 154 of the Act.
3. The main contention of the ld. A.R. is that the ld. CIT(A) has not condoned the delay of 181 days in filing the appeal before NFAC. The ld. A.R. explained that the delay was due to glitches in the I.T. Portal and prayed that the delay may be condoned.
4. I heard the rival submissions and perused the materials available on record. The assessee has explained that due to glitches in the I.T. portal which was not able to go through the order passed by the ld. AO, hence there was a delay of 181 days in filing appeal before NFAC. In my opinion, there is a good and sufficient reason in filing the appeal before NFAC. Accordingly, the delay of 181 days in filing the appeal before NFAC is condoned.
4.1 After condoning the delay, the issue on merit is with regard to disallowance of Rs.2,96,778/- which relate to payment of ESI & PF paid after the due date of prescribed in the respective Act. The contention of the ld. A.R. is that at the time of processing the return u/s 143(1) of the Act, there are decisions in favour of the assessee and the judgement of Hon’ble Supreme Court rendered in the case of CHECKMATE SERVICES PVT LTD VS CIT-1 in CIVIL APPEAL 2833/2016 vide its judgment dated 12 October 2022 is pronounced subsequent to the rectification order passed by ld. AO u/s 154 of the Act on 14.3.2022. Hence, the judgement of Hon’ble Supreme Court cannot be applied to the facts of the present case.
4.2 In my opinion, as of now, the judgement of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. cited (supra), wherein decided the issue on allowability/treatment of ‘delayed’ Employee PF Contribution payment in hands of assessee under provisions of Income Tax Act and held that Section 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e., employee’s contribution is linked to payment before the due dates specified in the respective Acts and employer’s contribution is linked to the payment before the prescribed due date for filing of return u/s. 139(1) of the Act. The result of any failure to pay within the prescribed dates also leads to different results. In the case of employee’s contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer’s claim for deduction permanently forever u/s.36(1)(va) of the Act. On the other hand, delay in payment of employer’s contribution is visited with deferment of deduction on payment basis u/s.43B of the Act and is therefore not lost totally.
4.1 Hence, in my opinion, this is the land of law on this issue and to be applied to the facts of the present case. Accordingly, in our opinion, in applying the ratio laid down by Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. cited (supra) to be applied for delay in payment of employees’ contribution of ESI & PF to the Government account beyond the date prescribed in respective Act and to be disallowed, I do not find any infirmity in the order of the lower authorities on this issue and the same is confirmed.
5. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 15th Nov, 2023
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