Rishabh Metals and Chemicals Private Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that payment on account of employees contribution towards PF and ESI after the due date of the respective acts is disallowable in terms of section 36(1)(va) of the Income Tax Act.
Facts- The Assessee has challenged the disallowance of ₹.4,00,168/- being payment of Provident Fund and ESI, u/s.36(1)(va) of Income-tax Act, 1961.
The Assessee in the return of income filed on 09.02.2021 had declared total income of ₹.2,04,98,240/-. The said return was processed online by CPC Bangalore and accordingly, adjustment of ₹.4,00,168/- 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.
CIT(A) justified the disallowance made as per provisions of section 143(1)(a)(iv) of the Act. Being aggrieved, the present appeal is filed.
Conclusion- Held that, it is undisputed fact that payment of PF & ESI amounting to ₹.4,00,168/- was not made within the due date prescribed under the PF & ESI Act, but payment has been made much before the due date of filing the return of income. However, 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.
Held that if the payment has been made with respect employees contribution after the due date of the respective acts, the same has to be disallowed and cannot be allowed as deduction and therefore, adjustment has rightly been made.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 20.01.2023 for the A.Y.2020-21.
2. The Assessee has challenged the disallowance of ₹.4,00,168/- being payment of Provident Fund and ESI, u/s.36(1)(va) of Income-tax Act, 1961 (in short “Act”).
3. The Assessee in the return of income filed on 09.02.2021 had declared total income of ₹.2,04,98,240/-. The said return was processed online by CPC Bangalore and accordingly, adjustment of ₹.4,00,168/- 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.
4. 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.
5. 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.
6. Aggrieved, assessee is in appeal before us raising following grounds of appeal: –
“1. The learned CIT (A) erred in law in confirming the action of CPC in making adjustments in the returned income which are not permissible under section 143(1), of the Act and thereby determined the total income- 21426060 as against the returned income at ₹.20498240, in the intimation dated 18.12.2021 issued under section 143(1) of the ACT, without appreciating the facts and circumstances of the case.
2. The CIT(A) erred in upholding the disallowance of ₹.400168/-made by CPC, under section 36(1)(va) of the Act on account of delayed payment on account of employees contribution towards provident fund and ESIC of employees, without appreciating that the same is not permissible adjustment under section 143(1) of the Act.
3. The CIT(A) failed to appreciate that the assesse has paid the amount on account of Employee contribution before the due date of filing return U/S 139(1) of the Act.
The amendment made in finance Act, 2021 is prospective in nature and thus the same will not apply for the assessment under consideration. Thus, the disallowance made under section 36(1)(va) is not justified and the same may be deleted.
4. The learned AO erred in levying interest under section 234A, 234B, and 234C, without appreciating the facts that the appellant denies his liability to the same.
5. The Appellant craves leave to add, alter, rescind or amend any of the Grounds.”
7. Inspite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought by the assessee. However, assessee has filed written submissions, for the sake of clarity, it is reproduced below and we proceed to dispose off this appeal on hearing the Ld. DR on merits:-
“In continuation of our grounds of appeal, statement of facts we hereby submit as under for kind considerate of the bench.
The return of income of the appellant was processed U/S 143(1) of the ACT by CPC center, and the intimation under section 143(1) dated 18.12.21, by disallowing & addition to income of RS 400168/, for funds deducted from employees as contribution to employees provident fund, or any other fund set under ESIC Act, paid beyond stipulated due date under respective Act, but paid before due date of submission of return U/S 139(1), of the Act. In response to appeal against intimation the learned CIT (A), confirmed the action of CPC in making adjustment to returned income, against the law as making adjustment in the returned income are not permissible under the Act.
The amount of EPF contribution & ESIC of employees are paid before the due date of filling of return of income. The amendment made in finance Act, 2021 is prospective in nature and thus same will not apply for assessment year under consideration, thus the disallowance made under section 36(1)(va).
The details of payments made beyond due date for employees contribution to provident fund & ESIC are as below:
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