Issue Involved-The assessee has filed an appeal against the order dated 23/09/2021 passed by the NFAC, Delhi for the quantum of assessment for the A.Y.2018-19 under section 143(1) of the Income Tax Act.
The grounds of appeal raised by the assessee include challenging the assessment order for making disputed additions without affording an opportunity of being heard, confirming the disallowance of payment of employers and employees contribution to ESIC and PF made before the due date of filing of the return, and seeking the deletion of all illegal additions and disallowances made by the assessing officer. The assessee has also requested the admission of the appeal, grant of stay against the recovery of demand, setting aside of the order of the assessing officer, and for the grant of justice.
The facts of the case indicate that the assessee had filed the return of income declaring a total income of Rs. 1,61,50,980/-, which was processed by the CPC under section 143(1) resulting in an addition of Rs. 1,00,240/- on account of disallowance of late payment of PF/ESI. The issue in the appeal is related to the disallowance made by the CPC under section 36(1)(va) of the Act on account of late deposit of Provident Fund / ESI. The Commissioner of Income Tax (Appeal) upheld the disallowance relying on the judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd vs CIT reported in 448 ITR 518, which held that the due dates mentioned in Section 36(1)(va) and 43B are deemed income held in trust and have to be deposited by the due dates mentioned in the respective welfare acts.
The appellant's counsel argued that the said judgment was rendered in the context of assessment proceedings passed under section 143(3) and not under section 143(1), and relied on another decision of the ITAT Mumbai 'SMC' Bench in the case of M/s. P R Packaging Services vs. CIT.
Findings-The ITAT noted that there were various sets of judgments in favor of the assessee on the issue of whether employees' contribution towards PF and ESI, which has not been deposited before the due date, can be treated as deemed income under section 2(24)(x) read with section 36(1)(va) of the Act. The ITAT also referred to the judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs CIT, which held that the legislative intent was to treat the employees' contribution as income of the assessee in the previous year in which the contribution is due, and that the due date for depositing the contribution is the due date for filing the return of income under section 139(1) of the Act. The ITAT further noted that the judgment of the Hon'ble Supreme Court was in conflict with the judgments of the jurisdictional High Court on the issue. Based on the submissions and findings, the ITAT concluded that there is no dispute that the employees' contribution towards PF and ESI has been made late and beyond the due date prescribed under section 36(1)(va) of the respective acts, and that the issue of whether such contribution can be treated as deemed income under section 2(24)(x) read with section 36(1)(va) of the Act requires further examination in light of the conflicting judgments. Therefore, the ITAT allowed the appeal and remanded the matter back to the assessing officer for fresh consideration in accordance with law.
Case Title: M/s. Salasar Balaji Vs. ACIT
Court- ITAT Mumbai (ITA No.1947/Mum/2021)
Dated-12/04/2023
Team Taxonation
Comment: