ITAT Mumbai in the case of P R Packaging Service Vs ACIT (ITAT Mumbai), Appeal Number : ITA No. 2376/Mum/2022 vide Order dated 07/12/2022 differentiates ruling of apex court given in Checkmate Services Pvt. Ltd vs. CIT and deletes addition on account of delayed payment of employees contribution to Provident Fund.
The issue before Hon Tribunal was “whether the Ld. CIT (A) was justified in upholding the action of the ADIT-CPC Bangalore in making disallowance of employee’s contribution to Provident Fund based on the statement made in the Tax Audit Report while processing the return under section 143(1) of the Act.”
Brief facts of the Case and Sequence of Events
1. That assessee had remitted the employees contribution to Provident Fund beyond the due date prescribed under the Provident Fund Act, but had duly remitted the same before the due date of filing the return of income under section 139(1) of the Act.
2. That the fact of remittance made by the assessee with delay had been reported by the Tax Auditor in the Tax Audit Report who had merely mentioned the due date for remittance of Provident Fund as per
the Provident Fund Act and the actual date of payment made by the assessee.
3. That the Tax Auditor did not contemplate to disallow the employees’ contribution to Provident Fund where it is remitted beyond the due date prescribed under the Provident Fund Act.
4. That The CPC Bangalore took up this data from tax audit report and sought to disallow the same while processing the return u/s. 143(1) of the Act, apparently by applying the provisions of section 143(1)(a)(iv) of the Act.
Relevant Provisions of the Act
For ready reference the relevant provision i.e. section 143(1)(a)(iv) is reproduced hereunder:
“143(1) Where a return has been made under section 139, or in response to a notice under sub section (1) of section 142, such return shall be processed in the following manner, namely:-
(a) The total income or loss shall be computed after making the following adjustments, namely:-
(iv) disallowance of expenditure (or increase in income) indicated in the audit report but not taken into account in computing the total income in the return.”
Observations of the Hon. Tribunal
That the Tribunal after analyzing the aforesaid provisions interpreted the word indicated in the following manner and observed that “The tax auditor had not stated in the instant case to disallow Employees Contribution to Provident Fund wherever it is remitted beyond the due date under the respective Act. Hence, in our considered opinion, the said action of the Ld. CPC Bangalore in disallowing the employees’ contribution to Provident Fund while processing the return under section 143(1) of the Act is against the provisions of the Act as it would not fall within the ambit of prima facie adjustments. “
That the tribunal followed the the earlier decision of ITAT Mumbai in the case of Kalpesh Synthetics Pvt Ltd vs. DCIT ITA No. 1785/Mum./2021 order dated 27.04.2022 also reported in 195 ITD 142 (Mum)and deleted the additions made in respect of delayed employees’ contribution to Provident Fund by CPC Bangalore.
That the tribunal further observed that it was conscious of the fact the issue on merits was decided against the assessee by Hon. Supreme Court in Checkmate Services Pvt. Ltd. Order dated 12.10.2022, but the context of where assessment was framed under section 143(3) of the Act and not under section 143(1)(a).