2023 (5) TMI 1322 - AT - Income Tax

Employee contributions to PF/ESI deposited after due date but before ITR filing cannot be claimed as deduction

Siddhi Vinayaka Graphics Pvt. Ltd. Versus ADIT, CPC, Bengaluru/ACIT, Circle-7 (2), Kolkata.

Siddhi Vinayaka Graphics Pvt. Ltd. Versus ADIT, CPC, Bengaluru/ACIT, Circle-7 (2), Kolkata. - TMI Issues Involved:1. Disallowance of employees' contribution to PF/ESI due to delayed deposit.2. Jurisdiction of Assessing Officer/CPC to make adjustments under section 143(1)(a) of the Income Tax Act.3. Interpretation of statutory provisions prior to amendments by Finance Act 2021.4. Precedence of later enactments over earlier ones.Summary of Judgment:Issue 1: Disallowance of Employees' Contribution to PF/ESIThe sole issue raised by the assessee was the disallowance made by the Assessing Officer/CPC due to the delayed deposit of employees' contribution to PF/ESI under section 36(1)(va) read with section 2(24)(x) of the Income Tax Act. The assessee argued that the adjustment should not consider the Supreme Court's judgment in Checkmate Services Pvt. Ltd. vs. CIT (2022) as it was subsequent to the filing of the ITR. The assessee relied on the jurisdictional Calcutta High Court judgment in CIT vs. Vijay Shree Ltd. (2014), which allowed such contributions if deposited before the due date of filing the ITR.However, the Tribunal noted that the Supreme Court in Checkmate Services Pvt. Ltd. vs. CIT clarified that the conditions of section 43B prescribing the due date as the date of filing of the return of income would not apply to employees' contributions under section 36(1)(va). The Supreme Court held that the due date for depositing employees' contributions is as prescribed under section 36(1)(va) and not section 43B.Issue 2: Jurisdiction of Assessing Officer/CPC to Make AdjustmentsThe assessee contended that the Assessing Officer could disallow the employees' contribution only in an assessment carried out under section 143(3) and not under section 143(1)(a). The Tribunal referred to the Mumbai Bench's decision in M/s P R Packaging Service vs. ACIT, which held that the tax auditor's report merely records facts and is not a basis for disallowance under section 143(1)(a)(iv). However, the Tribunal disagreed, noting that the information in the audit report indicates the allowance or disallowance required while processing the return. The Tribunal emphasized that adjustments under section 143(1) could be made after giving the assessee an opportunity to respond.Issue 3: Interpretation of Statutory Provisions Prior to AmendmentsThe assessee argued that the amendments by Finance Act 2021, introducing Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B, changed the law, implying that prior to these amendments, the law was otherwise. The Tribunal rejected this argument, stating that the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT clarified the law as it always was, and the amendments did not change the statutory provisions retrospectively.Issue 4: Precedence of Later Enactments Over Earlier OnesThe assessee contended that the later enactment (Finance Act 2021) should prevail over the earlier interpretation by the Supreme Court. The Tribunal found no conflict between the old and new provisions and held that the amendments were prospective. The Tribunal emphasized that the new provisions clarified that section 43B does not apply to employees' contributions, aligning with the Supreme Court's interpretation.Conclusion:The Tribunal dismissed the appeal, upholding the disallowance of employees' contributions to PF/ESI deposited after the due date prescribed under section 36(1)(va) and affirming the jurisdiction of the Assessing Officer/CPC to make adjustments under section 143(1)(a). The Tribunal clarified that the law as interpreted by the Supreme Court in Checkmate Services Pvt. Ltd. vs. CIT was applicable retrospectively.