2021 (9) TMI 1319 - AT - Income Tax

Late PF & ESI deposits deemed valid: Tribunal overturns CIT(A) decisions

Mohangarh Engineers and Construction Company Versus The DCIT, Circle -1, Jodhpur AND Bikaner Ceramics Private Limited Versus The ADIT, CPC, Bangluru

Mohangarh Engineers and Construction Company Versus The DCIT, Circle -1, Jodhpur AND Bikaner Ceramics Private Limited Versus The ADIT, CPC, Bangluru - TMI Issues involved:1. Sustenance of the addition made by the Assessing Officer on account of late deposit of employees' share of PF & ESI.Issue-wise detailed analysis:1. Sustenance of the addition made by the Assessing Officer on account of late deposit of employees' share of PF & ESI:These appeals by different assessees are directed against the separate orders of the CIT(Appeal), National Faceless Appeal Centre (NFAC), Delhi. Since the issues involved are common in all these appeals, they are being disposed of by a common order for the sake of convenience and brevity.In all these appeals, the only issue involved relates to the sustenance of the addition made by the Assessing Officer on account of late deposit of employees' share of PF & ESI, which were deposited after the due date but before the due date of filing of return of income. The Assessing Officer made the additions of the impugned amounts because the assessees did not deposit the amounts of employees' contribution as per the provisions of section 36(1)(va) of the Income Tax Act, 1961 (the Act). The CIT(A) confirmed the action of the Assessing Officer by observing that the amendments made to section 36 and 43B by the Finance Act, 2021 clarified that the provisions of section 43B shall not apply for determining the 'due date' under section 36(1)(va).The Ld. counsels for the assessee submitted that the issue is covered by the decisions of various Benches of the ITAT, including the jurisdictional ITAT, Jodhpur Bench. They cited several cases, including Mohangarh Engineers and Construction Company, Harendra Nath Biswas v/s DCIT, and Salzgitter Hydraulics Pvt. Ltd v/s ITO, where similar issues were decided in favor of the assessees.In her rival submissions, the Ld. DR supported the orders of the authorities below, reiterating the observations made by the CIT(A).It is not in dispute that the assessees deposited the contribution of PF & ESI belatedly in terms of section 36(1)(va) of the Act, but the deposits were made before the filing of return of income u/s 139(1) of the Act. Identical issues with similar facts have been adjudicated by various Benches of the ITAT. For instance, in the case of Harendra Nath Biswas vs DCIT, ITA No. 186/Kol/2021, the ITAT 'B' Bench, Kolkata decided that the Explanation 5 inserted by the Finance Act, 2021, with effect from 01.04.2021, does not apply retrospectively to AY 2019-20.Similarly, the ITAT Hyderabad 'SMC' Bench in ITA No. 644/Hyd./2020 for AY 2019-20 held that the impugned disallowance is not sustainable in view of the latest legislative amendments and CBDT Memorandum of Explanation, which apply prospectively from 1.4.2021.This Bench of the Tribunal, in the case of Mohangarh Engineers and Construction Company, Jodhpur & Others vs CPC, Bangalore, held that the employees' contribution towards ESI and PF, if paid before the due date of filing of return of income u/s 139(1), cannot be disallowed under section 43B read with section 36(1)(va) of the Act.The jurisdictional Hon'ble Rajasthan High Court, in cases like CIT vs. State Bank of Bikaner & Jaipur and subsequent decisions, consistently held that PF and ESI dues paid after the due date under respective statutes but before filing of the return of income under section 139(1) cannot be disallowed under section 43B read with section 36(1)(va) of the Act.Given the divergent views of various High Courts, the CIT(A) should have followed the decisions of the jurisdictional Rajasthan High Court, which are binding on all appellate authorities and the Assessing Officer under its jurisdiction in Rajasthan.In light of the above discussion and the facts and circumstances of the case, the additions made by the Assessing Officer and sustained by the CIT(A) on account of deposits of employees' contribution of ESI & PF before the filing of the return of income u/s 139(1) of the Act, prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021, are deleted.In the result, all the appeals of the assessees are allowed.(Order pronounced in the open Court on 27.09.2021)