Pravin Malshi Shah Vs Circle-23(1) (ITAT Mumbai)
ITAT held that if there is any incorrect claim apparent from any information in the return, then adjustment is permissible. Here in this case, once the claim of deduction as per the law in not allowable, same can be disallowed in the intimation u/s 143(1). The judgment of Hon’ble Supreme Court is a law, which has to be interpreted that this was the position of law from the date of enactment of provision. Further, clause (iv) states that, if any disallowance of expenditure has been indicated in the audit report, but not taken into account in computing the total income in the return, same also can be adjusted. The auditor in the audit report specifies the due date as prescribed u/s. 36(1)(va) of the Act and the date on which deposit has been made, then in the computation of income, the same cannot be claimed as deduction, because the law envisages that such payment is disallowable, because it has not been paid within the due date.
ITAT hold that such an adjustment is permissible under the scope of section 143(1) of the Act. However, the adjustment has to be to the extent of employees’ contribution. Therefore, Assessing Officer is directed to restrict the disallowance to the extent of employee contribution i.e., ₹.6,74,509/-
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. These appeals are filed by the assessee against different orders of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 21.12.2022 and 10.11.2022 for the A.Ys. 2018-19 and 2019-20 respectively.
2. Since the issues raised in both these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 33/MUM/2023 for Assessment Year 2018-19 as a lead appeal.
3. The Assessee has challenged the disallowance of ₹.13,73,999/ being payment of Provident Fund and ESI respectively, u/s.36(1)(va) of Income-tax Act, 1961 (in short “Act”).
4. The Assessee in the return of income filed on 13.10.2018 had declared total income of ₹.58,05,700/-. The said return was processed online by CPC Bangalore and accordingly, adjustment of ₹.13,73,999/-was made in the intimation u/s.143(1) on account of late payment of employee contribution towards PF & ESI. The contention of the Assessee has been that payments have not been made within the due date of 15 day of next months as per the respective Act but made much before the due date of filling of return income.
5. Before the Ld. CIT(A) various submissions and judgments were cited by the Assessee in favor of the proposition that if the payment of PF & ESI has been made before the due date of filling of the return of income u/s 139(1) the same should not be disallowed.
6. The Ld.CIT (A), after discussing the various issues relating to employees contribution and finally justified the disallowance made as per provisions of section 143(1)(a)(iv) of the Act. After detail discussion and relying on various judicial pronouncements, Ld.CIT(A) dismissed the appeal filed by the assessee.
7. On perusal of the material placed on record, we find that, it is undisputed fact that at payment of PF & ESI for sums amounting to ₹.13,73,999/- was not made within the due date prescribed under the PF & ESI Act, but has been filed much before the due date of filing the return of income.
8. Before us, the Ld. Counsel reiterated the submissions made before the Ld.CIT(A) and further he submitted that the payment of employees’ contribution towards EPF and ESIC includes both employer and employee contributions. In this regard he brought to our notice From 3CB at Page No. 4 and 15 of the Paper Book. was paid before due date of filing return of income. However, now Hon’ble Supreme Court in the case of “Checkmate Services Private Limited vs. CIT in Civil Appeal No. 2833 of 2016 dated 12.10.2022” has decided this issue against the Assessee. At the same time, he relied on the Coordinate Bench decision in the case of M/s. P.R. Packaging Services v. ACIT in ITA.No. 2376/Mum/2022 dated 07.12.2022.
9. The relevant observation and finding given by the Hon’ble Supreme Court in Para No. 31-37 and Para No. 52-54 of the judgement are summarized as under: –
