Delayed EPF/ESI payments allowed when made before Section 139(1) filing deadline despite audit report

The ITAT Raipur allowed the assessee's appeal regarding delayed payment of employees' contribution to EPF/ESI. The AO had treated this as income under Section 36(1)(va) read with Section 2(24)(x) during processing under Section 143(1). Following the precedent in Kalpesh Synthetics (P) Ltd. v. DCIT, the tribunal held that when payments are made before the due date for filing income tax returns under Section 139(1), no disallowance applies despite the tax auditor reporting payment beyond the statutory due date. The addition made by AO under Section 143(1)(a) was vacated.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Legality of addition made under Section 143(1) for delayed deposit of employees' contributions towards ESI & EPF.

Summary:

Condonation of Delay:
The assessee filed an appeal with a delay of 41 days. The delay was attributed to the assessee's initial unawareness of the order sent via email and subsequent financial constraints. The tribunal considered these reasons bonafide and condoned the delay, noting the lack of habitual non-compliance by the assessee.

Legality of Addition under Section 143(1):
The controversy centered on whether the delayed deposit of employees' contributions towards ESI & EPF could be added to the assessee's income under Section 36(1)(va) read with Section 2(24)(x) while processing the return under Section 143(1). The assessee argued that such an addition was beyond the jurisdiction of CPC, Bengaluru and that the issue was highly debatable at the time of processing the return.

Assessment and Judicial Pronouncements:
The tribunal reviewed the audit report and noted that the auditor had only reported the delayed deposits without offering them as income. It was emphasized that the issue was debatable and had been settled only recently by the Supreme Court in Checkmate Services (P) Ltd. Vs. CIT. The tribunal referred to various judicial pronouncements, including the ITAT Mumbai's decision in Kalpesh Synthetics (P) Ltd. Vs. DCIT, which held that such additions could not be made under Section 143(1)(a).

Conclusion:
The tribunal concluded that the addition of Rs. 19,91,318/- made by the A.O under Section 143(1)(a) was unjustified. The order of the CIT(Appeals) was set aside, and the addition was vacated, allowing the appeal of the assessee.

Order Pronouncement:
The order was pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, on 11th May 2023.

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