Tribunal sets aside addition for verification & deletes late deposit disallowance

The Tribunal partly allowed the appeal by setting aside the addition of Rs. 8,20,480 for further verification and deleting the disallowance of Rs. 1,16,779 for the late deposit of employees' contributions to PF and ESI.

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Issues Involved:

1. Addition of Rs. 8,20,480 based on TDS amounts appearing in Form 26AS.
2. Disallowance of Rs. 1,16,779 for late deposit of employees' share towards Provident Fund (PF) and Employees' State Insurance (ESI).

Issue-wise Detailed Analysis:

1. Addition of Rs. 8,20,480 based on TDS amounts appearing in Form 26AS:

The Revenue challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)] confirming the addition of Rs. 8,20,480 due to discrepancies between the assessee's accounts and the TDS amounts recorded in Form 26AS. The Assessing Officer (AO) noted that the assessee did not declare an income of Rs. 8,20,480 from Tata Consulting Engineers Ltd. (TCE) as reflected in Form 26AS. The assessee contended that this amount did not pertain to any bill issued by them and was wrongly shown in their account. Despite this, the CIT(A) upheld the AO's addition, citing the assessee's failure to reconcile the discrepancy.

Before the Tribunal, the assessee argued that they had repeatedly communicated with TCE to rectify the error, but TCE did not amend the TDS statement. The assessee claimed that it was beyond their control to correct the mistake in Form 26AS, and the responsibility lay with TCE. The Revenue countered that the onus was on the assessee to reconcile the difference and produce confirmation from TCE.

The Tribunal observed that the AO made the addition based on the presumption that the amount shown in Form 26AS was the actual gross receipt without verifying the facts. The CIT(A) confirmed the addition on the ground that the assessee failed to reconcile the difference. The Tribunal noted that proper verification by the AO was necessary once the assessee disputed the amount. The Tribunal set aside this issue to the AO for proper enquiry, instructing the AO to obtain necessary information from TCE and decide the issue after giving the assessee an opportunity for a hearing.

2. Disallowance of Rs. 1,16,779 for late deposit of employees' share towards PF and ESI:

The AO disallowed Rs. 1,70,120 for the late deposit of employees' contributions to PF and ESI, despite the amounts being deposited before the due date of filing the tax return under Section 139(1) of the Income Tax Act. The AO relied on CBDT Circular No.22/2015 and Sections 36(1)(va) and 2(24)(x) of the Income Tax Act, asserting that the contributions must be deposited by the due date specified in the respective statutes.

The CIT(A) confirmed the disallowance. The assessee argued that higher courts, including the Supreme Court, have allowed deductions for employee contributions to PF and ESI if paid before the due date of filing the return. The Revenue contended that the amendment by the Finance Act, 2015, restricted the applicability of Section 43B to employer contributions only, not to employee contributions.

The Tribunal referred to the binding precedents, including the decision of the Hon'ble Jurisdictional High Court in CIT vs. Aimil Ltd. (2009) 321 ITR 508 (Delhi), which held that employee contributions paid before the due date of filing the return are allowable under Section 43B. The Tribunal acknowledged the amendment by the Finance Act, 2021, clarifying that Section 43B does not apply to employee contributions, but noted that this amendment is applicable from Assessment Year 2021-22 onwards.

The Tribunal concluded that for the assessment year under consideration, the employee contributions paid before the due date of filing the return are allowable deductions. Consequently, the Tribunal deleted the disallowance of Rs. 1,16,779 made by the AO.

Conclusion:

The appeal was partly allowed, with the Tribunal setting aside the addition of Rs. 8,20,480 for further verification and deleting the disallowance of Rs. 1,16,779 for the late deposit of employees' contributions to PF and ESI.

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