Tribunal allows deletion of disallowed amount for delayed deposit of employee contributions

The Tribunal concluded that the addition made by the CPC under Section 143(1) for delayed deposit of employees' contributions towards ESI and PF, paid before the due date for filing the return, should be deleted. The Tribunal allowed the assessee's appeal and directed the deletion of the disallowed amount of Rs. 2,24,270/-. The same reasoning and conclusions were applied to other related appeals for the assessment years 2018-19 and 2019-20, resulting in those appeals being allowed as well.

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Issues Involved:
1. Confirmation of addition under Section 36(1)(va) due to delayed payment of employees' contribution towards PF/ESI.
2. Legality of adjustments made under Section 143(1)(a)(iv) when different High Courts have divergent views.

Issue-wise Detailed Analysis:

1. Confirmation of Addition under Section 36(1)(va):
The assessee filed its return of income on 11.03.2020, declaring a total income of Rs. 3,09,30,472/-, which was processed under Section 143(1). The Centralized Processing Center (CPC) issued an intimation on 24.10.2019, disallowing Rs. 2,24,270/- towards employees' contribution to ESI and PF due to delayed payment. The CIT(A), NFAC confirmed this disallowance, citing the assessee's failure to pay within the prescribed due dates under Section 36(1)(va).

The assessee argued that the contributions were deposited before the due date for filing the return of income, relying on decisions from the Rajasthan High Court, including CIT vs. Rajasthan State Beverages Corporation Ltd. and CIT vs. State Bank of Bikaner and Jaipur. The assessee also referenced recent Tribunal decisions supporting this view and contended that the explanation added by the Finance Act, 2021, effective from 1st April 2021, does not apply to the assessment year in question (2019-20).

2. Legality of Adjustments under Section 143(1)(a)(iv):
The Department Representative (DR) argued that the CPC's disallowance was justified as the employee contributions were not made within the prescribed due dates, and the discrepancy between the tax audit report and the ITR was flagged by the CPC under Section 143(1)(a)(iv). The DR also cited the Finance Act, 2021 amendments to Section 36(1)(va) and Section 43B as clarificatory and applicable retrospectively.

Tribunal's Findings:
The Tribunal referred to its previous ruling in Mohangarh Engineers and Construction Company vs. DCIT, CPC, where it was established that contributions made before the due date for filing the return of income under Section 139(1) should not be disallowed under Section 43B read with Section 36(1)(va). The Tribunal emphasized the binding nature of the Rajasthan High Court's decisions, which consistently held that contributions paid before the filing due date cannot be disallowed, even if paid after the statutory due dates.

The Tribunal also noted that the Finance Act, 2021 amendments explicitly state they apply from 1st April 2021, thus not affecting the assessment year 2019-20. The Tribunal cited similar views from the Bangalore Benches in Shri Gopalkrishna Aswini Kumar vs. ACIT, reinforcing that the amendments are prospective.

Conclusion:
The Tribunal concluded that the addition made by the CPC under Section 143(1) for delayed deposit of employees' contributions towards ESI and PF, paid before the due date for filing the return, should be deleted. The Tribunal allowed the assessee's appeal and directed the deletion of the disallowed amount of Rs. 2,24,270/-.

Application to Other Appeals:
The Tribunal applied the same reasoning and conclusions to other related appeals (I.T.A No(s). 281, 280, 246, 262 & 308/JP/2021 & 01/JP/2022) for the assessment years 2018-19 and 2019-20, allowing these appeals as well.

Order Pronouncement:
The order was pronounced in the open Court on 19/01/2022.

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