2018 (7) TMI 2117 - AT - Income Tax

ITAT decision on EPF, ESI deductions, rent TDS, and undisclosed receipts.

Industrial Security and Allied Services Pvt Ltd. Versus ITO, ward 1 (1), Bhubaneswar.

The ITAT ruled in favor of the assessee regarding the addition of EPF and ESI contributions, allowing deductions if deposited before the due date of ... Disallowance of employee’s contribution to PF and employee’s contribution to ESI u/s.36(1)(va) - contribution not deposited within the prescribed due date under the respective Act - HELD THAT:- Amount claimed on payment of PF and ESI having been deposited on or before due date of filing of returns, same could not be disallowed under section 43B or under section 36(1)(va) - See M/S RAJASTHAN STATE BEVERAGES CORPN. LTD [2017 (7) TMI 1087 - SC ORDER]. - Decided in favour of assessee. TDS u/s 194I - addition of rent paid without deduction of TDS u/s.40(a)(ia) - HELD THAT:- If the recipient of the amount Smt. Sunanda Nayak has disclosed has disclosed the amount received from the assessee in her return of income and paid due tax thereon, in view of the decision of CIT vs. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] then, no disallowance in the hands of the assessee is called for - set aside the orders of lower authorities and restore this issue back to the file of the AO to verify whether the recipient Smt. Sunanda Nayak has disclosed the amount received from the assessee in her return of income or not. - Decided in favour of assessee for statistical purpose. Differential amount of receipts as per 26AS and as per profit and loss - HELD THAT:- CIT(A) confirmed the action of the Assessing Officer on the ground that 26AS statement clearly revealed that the assessee has failed to disclose receipts from certain parties and has also failed to reconcile the discrepancies found in this respect in the 26AS statement. Before us, ld A.R. of the assessee has also failed to reconcile the discrepancies found in 26AS statement. No reason to interfere with the order of the CIT(A) on this ground - Decided against assessee Issues:1. Addition of EPF and ESI under section 36(1)(va)2. Addition of rent paid without TDS deduction under section 40(a)(ia)3. Addition of undisclosed receipts as per 26AS statementAnalysis:Issue 1: Addition of EPF and ESI under section 36(1)(va)The Assessing Officer added the amounts of EPF and ESI contributions not deposited within the prescribed due date to the income of the assessee. The CIT(A) upheld this decision citing relevant legal precedents. However, the assessee argued that the contributions were deposited before the due date of filing the return of income. Referring to the decision of the Hon'ble Supreme Court in a similar case, the ITAT held that deductions for EPF and ESI contributions should be allowed if deposited before the due date of filing returns. Consequently, the addition made by the Assessing Officer was deleted, and the ground of appeal was allowed.Issue 2: Addition of rent paid without TDS deduction under section 40(a)(ia)The Assessing Officer disallowed the rent paid to a party without TDS deduction under section 40(a)(ia) of the Act. The CIT(A) affirmed this disallowance. The assessee contended that the rent was paid by cheque and should be allowed as a deduction. The ITAT, citing a decision of the Hon'ble Delhi High Court, directed the issue to be reconsidered by the Assessing Officer to verify if the recipient had disclosed the income and paid tax on it. If so, no disallowance should be made. The ITAT set aside the orders of lower authorities and allowed the ground for statistical purposes.Issue 3: Addition of undisclosed receipts as per 26AS statementThe Assessing Officer found a variance between the receipts disclosed by the assessee and the details in the 26AS statement. The undisclosed receipts were added to the income of the assessee. The CIT(A) upheld this addition based on the discrepancies in the 26AS statement. The ITAT noted that the assessee failed to reconcile these discrepancies. Consequently, the ITAT confirmed the decision of the CIT(A) on this ground and dismissed the appeal. The overall appeal was partly allowed by the ITAT.In conclusion, the ITAT ruled in favor of the assessee on the EPF and ESI contributions issue, directed a reevaluation of the rent payment issue, and upheld the addition of undisclosed receipts based on 26AS statement discrepancies.