2024 (2) TMI 1572 - AT - Income Tax

Delayed PF/ESI deposits due to portal outages not attributable to taxpayer; disallowance under s.36(1)(va) deleted

Protiviti India Member Private Ltd. Versus ACIT, Circle-3 (1), Gurgaon.

ITAT DELHI - AT allowed the appeals and deleted the disallowance under s.36(1)(va) for delayed deposit of employees' PF and ESI. The Tribunal found ... Disallowance made u/s 36(1)(va) - delayed deposit of employees contribution to Provident Fund (PF) and Employees’ State Insurance (ESI) within the prescribed due date - assessee submitted that most of the employees’ contributions to PF and ESI account have been paid within the due date, however, in some cases the delay is only marginal of 3 to 7 days. HELD THAT:- Once the delay is not attributable to the assessee because of the EPFO website was not working and was out of order, then the assessee cannot be said to have violated any deadline of the provisions of the respective Act. Thus, it cannot be said that there is a delay in depositing of PF and ESI within the prescribed due date. Here it is not a case of whether the decision of Checkmate [2022 (10) TMI 617 - SUPREME COURT (LB)] has to be applied because the Hon’ble Supreme Court has held that if there is a delay in the payment beyond the prescribed due date provided in the respective Act, the same shall be treated as the income of the assessee. Once the delay in depositing the PF and ESI is not on account of failure of the assessee, but the failure of the system of website itself as it was out of order and challans cannot be uploaded, then it cannot be held that the assessee should be fastened with such a liability. Accordingly, the disallowance confirmed by the CIT(A) is deleted. Appeals of the assessee are allowed. Appeals challenge disallowances under section 36(1)(va) made by intimation under section 143(1) for AY 2017-18 (Rs. 24,87,238) and AY 2018-19 (Rs. 12,52,707) for delayed deposit of employees' PF and ESI. Lower authority had upheld disallowance relying on the Supreme Court in Checkmate Services Pvt. Ltd. v. CIT that where payment is made 'beyond the prescribed due date provided in the respective Act, the same shall be treated as the income of the assessee.' The assessee produced evidence that most contributions were paid within due dates and that marginal delays (3-7 days) arose because the EPFO website was non-functional, supported by emails to the EPFO SRO and site screenshots. Tribunal held the delays were not attributable to the assessee but to EPFO system failure; consequently the statutory deadline was not breached by the assessee's conduct and the disallowances were deleted, allowing both appeals.