Delayed EPF/ESIC deposits disallowed under section 36 following Checkmate Services precedent, but section 43(B) issues remanded for fresh review

ITAT Delhi dismissed assessee's appeal regarding delayed EPF/ESIC deposit addition under section 36, following SC precedent in Checkmate Services that such delays are not allowable deductions. However, ITAT remanded two issues under section 43(B) back to CIT(A) for fresh adjudication - one concerning EPF/ESIC/service tax deposits where assessee claimed amounts were deposited timely and not part of P&L account, and another regarding GST on services similarly claimed as not part of P&L account per audit report.

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Issues Involved:

1. Addition under Section 36 for delayed deposit of EPF & ESIC.
2. Addition under Section 43(B) for delayed deposit of EPF, ESIC, and Service Tax.
3. Addition under Section 43(B) for delayed deposit of GST payable amount.

Detailed Analysis:

Issue 1: Addition under Section 36 for delayed deposit of EPF & ESIC

The assessee challenged the addition of Rs. 44,03,784/- under Section 36 of the IT Act for the delayed deposit of EPF and ESIC, arguing that the deposits were made before the due date of filing the return of income. The Department argued that the issue had been settled by the Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT-1, where it was held that delayed deposits beyond the stipulated period prescribed in the respective Acts are not allowable. The Tribunal, following the Supreme Court's ruling, dismissed the assessee's ground, finding no merit in the argument and upholding the CIT(A)'s order.

Issue 2: Addition under Section 43(B) for delayed deposit of EPF, ESIC, and Service Tax

The assessee contended that the addition of Rs. 5,14,395/- under Section 43(B) was erroneous as the amounts of EPF and ESIC were deposited within the stipulated time, and the service tax payable was never part of the profit and loss account. The Department argued that the CIT(A)'s findings required no interference. The Tribunal decided to remand the issue back to the CIT(A) for de-novo adjudication, directing the assessee to substantiate their claim and the CIT(A) to decide the issue in accordance with the law.

Issue 3: Addition under Section 43(B) for delayed deposit of GST payable amount

For the assessment years 2018-19 and 2019-20, the assessee argued that the additions of Rs. 37,69,476/- and Rs. 75,20,262/- respectively under Section 43(B) were incorrect as the amounts were never part of the profit and loss account and were declared in the audit report. The Department maintained that the CIT(A)'s findings were correct. The Tribunal restored both issues to the file of the CIT(A) for reconsideration, directing the assessee to substantiate their claims and the CIT(A) to dispose of the issues in accordance with the law.

Conclusion:

The Tribunal dismissed the assessee's appeal concerning the addition under Section 36 for delayed deposit of EPF & ESIC, following the Supreme Court's ruling. However, it remanded the issues concerning additions under Section 43(B) for delayed deposits of EPF, ESIC, Service Tax, and GST payable amounts back to the CIT(A) for de-novo adjudication, directing the assessee to substantiate their claims and the CIT(A) to decide the issues in accordance with the law.

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