ITAT Delhi allows appeal, directs deletion of addition under IT Act for AY 2018-19

The ITAT Delhi allowed the appeal of the assessee, directing the AO to delete the addition made under section 36(1)(va) of the Income Tax Act for the Assessment Year 2018-19. The ITAT held that no disallowance was warranted as the delayed PF/ESIC contributions were eventually paid before filing the return of income, citing relevant case law and clarifying that the Finance Act 2021 amendment did not apply to the assessment year in question. The order was pronounced on 29.10.2021.

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Issues:
Disallowance of delayed deposit of PF/ESIC contribution under section 36(1)(va) of the Income Tax Act for Assessment Year 2018-19.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi regarding the disallowance of delayed deposit of PF/ESIC contribution for the Assessment Year 2018-19. The assessee, an individual running a factory, declared total income at Rs. 47,17,380/- for the year, which was revised to Rs. 49,55,210/- by the CPC Bangalore due to a disallowance of Rs. 2,37,823/- under section 36(1)(va) for non-deposit of employees' contribution towards PF/ESIC before the prescribed due dates. The assessee challenged this disallowance before the CIT(A), who upheld the AO's order based on the amendment made by the Finance Bill 2021.

The grounds raised by the assessee in the appeal included challenges to the addition made by the Assessing Officer for delayed remittance of employee contributions towards ESI and PF under section 36(1)(va) of the Income Tax Act, questioning the CIT(A)'s reliance on the Finance Act 2021 amendment, and arguing that the contributions were deposited before the return of income was filed. The AR for the assessee contended that no disallowance was warranted under section 36(1)(va) as the contributions were eventually deposited with the authorities, citing relevant case law such as CIT vs. AIMIL Ltd. and decisions from the Punjab and Haryana High Court.

The DR, representing the Revenue, supported the lower authorities' decision and emphasized that the Finance Act 2021 amendment aimed to remove doubts regarding such disallowances. The ITAT Delhi, after considering the arguments from both sides, observed that though there was a delay in depositing the contributions, they were eventually paid before filing the return of income. Citing precedents like CIT vs. AIMIL Ltd. and decisions from the Punjab and Haryana High Court, the ITAT held that no disallowance under section 36(1)(va) was warranted in such cases. Additionally, the ITAT clarified that the Finance Act 2021 amendment would not apply to the assessment year in question, as per the decision in Indian Geotechnical Services case, and directed the AO to delete the addition. The appeal of the assessee was allowed, and the order was pronounced on 29.10.2021.

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