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December 24, 2022

Delayed deposit of employee’s contribution to PF/ESI upheld by ITAT

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

Delayed deposit of employee’s contribution to PF/ESI upheld by ITAT

Facts and Issue of the case

The facts of the case  Ld.DR. reiterated the grievance raised in M.P. and submitted that there is mistake regarding disallowance due to belated remittance of PF/ESI pursuant to the decision of Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. Vs CIT-1 reported in [2022] The ld. AR objected for recalling the order passed by the bench and submitted that the there is no mistake apparent from the record.

Considering the rival submissions, it was observed that there is apparent mistake on the order passed by the bench in regard to the belated remittance of PF/ESI as per the respective Act in pursuant to the decision of Hon’ble Supreme Court recently passed in case of Checkmate Services (P.) Ltd. Vs CIT- 1 (supra). I therefore, rectify this mistake which is apparent from the record and the order passed by the bench is recalled.In the result the miscellaneous petition filed by the revenue is allowed. The case was heard on merits.

Observation of court

The ld. DR submitted that the latest decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. Vs CIT-1, [2022] where the Apex Court has held that Section 43B(b) does not cover employees’ contributions to PF/ESI etc. deducted by employer from the salaries of employees and that employees’ contribution has to be deposited within the due date u/s 36(1)(va) of the Act i.e. due dates under the relevant employees welfare legislation like PF/ESI Act etc., failing which the same would be treated as ‘income in the hands of the employer’ u/s.2(24)(x) of the Act. Therefore, the order of lower authorities should be restored.

The ld. AR reiterated the order dated 02/06/2022 passed by the bench and submitted that in the intimation issued under section143(1)(a) of the Act on 18.09.2019, the aforesaid disallowance was made and, therefore, one has to examine as to whether it was within the powers of the Revenue authorities to make the disallowance while electronically processing the return of income under section 143(1)(a) of the Act. She further submitted that the only prime facie arithmetical mistakes has be rectified and referred to the Explanation of the section.

On the rejoinder submitted by the ld.DR, the adjustments u/s 143(1)(a) of the Act can be made and in the section, it is very clear that which type of adjustments can be made. He also relied on judgment of the Hon’ble Madras High Court in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs. Deputy Commissioner of Income-tax reported in (2022) 138 taxmann.com 571, wherein he also relied on the decision of the coordinate bench of the Tribunal in the case of M/s. IV Sanctum vs Asstt. Director of Income Tax CPC Bengaluru, in ITA No. 986/Bang/2022 vide order dated 24.11.2022 for the AY 2019-20

After considering the rival submissions Court notice that the Hon’ble Supreme Court in the case of Checkmate Services (supra) has considered the issue of whether the employees’ contribution paid before due date for filing the return of income u/s.139(1) of the Act otherwise allowable u/s.43B of the Act and putting to rest the contradicting decisions of various High Courts.

Conclusion

After hearing to the both parties it was held that the addition can be made in respect of the employees’ contribution in regard to PF/ESI, which has not been deposited within the stipulated date as per the respective Act, since in the case on hand, the assessee has not deposited the employees, contribution within the due date as per the respective Act. Therefore, the disallowance can be made as per section 36(1)(va) r.w.s. 2(24)(x) of the Act.

DCIT-Vs-Automac-Diesels-ITAT-Bangalore

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