Tribunal Rules for Assessee: Disallows Rs. 1,34,632 ESI Deposit Disallowance; Penalty Appeal Sent for Reconsideration.

The Tribunal ruled in favor of the assessee, deleting the disallowance of Rs. 1,34,632 for late ESI deposit, as the payment was made before the financial year's end and the return filing due date. Citing precedents from the High Court and Tribunal, the Tribunal found the disallowance unjustified. The penalty appeal was remanded to CIT(A) for reconsideration, acknowledging the Tribunal's decision. The assessee's appeal was allowed, and the addition by the Assessing Officer was deleted.

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Issues:
Disallowance of ESI contribution on account of late deposit.

Analysis:
The appeal was against the order confirming the disallowance of Rs. 1,34,632 on account of late deposit of ESI. The assessee argued that despite a minor delay, the payment was made before the end of the financial year and before the due date of filing the return. The Department did not dispute this fact. The Tribunal noted that similar issues had been decided in favor of the assessee by the High Court and Tribunal in previous cases. The Tribunal cited the case of M/s K.S. Automobiles Ltd. vs. DCIT where it was held that such payments made before the due date of filing the return were allowable. The Tribunal also referred to the decision in the case of PCIT vs. Rajasthan Renewable Energy Corporation Limited where the High Court ruled in favor of the assessee regarding similar issues.

The Tribunal emphasized that the High Court had followed previous decisions favoring the assessee, despite a typographical error in the conclusion of one case. The Tribunal clarified that the decisions were indeed in favor of the assessee, and the issue was decided in favor of the assessee and against the Revenue. The disallowances and additions made by the Assessing Officer on account of employees' contributions to PF & ESI were deleted. The Tribunal also noted that the penalty appeal was dismissed by the CIT(A) without considering the outcome of the quantum appeal, which was a mistake. Therefore, the matter was remanded back to the CIT(A) for fresh consideration after giving the assessee an opportunity to be heard and considering the Tribunal's order in the quantum proceedings.

Based on the decisions of the Tribunal and the High Court, as well as the dismissal of the SLP filed by the Department, the Tribunal decided the issue in favor of the assessee and against the Revenue. Consequently, the disallowance/addition made by the Assessing Officer was deleted, and the appeal of the assessee was allowed.

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