2024 (3) TMI 1156 - AT - Income Tax

Revenue wins appeal on late PF ESI remittance following Supreme Court precedent in Checkmate Services

ITAT Hyderabad upheld Revenue's appeal regarding late remittance of PF and ESI following SC precedent in Checkmate Services case. CIT(A)'s decision to ... Late remittance of PF and ESI - HELD THAT:- We find the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd [2022 (10) TMI 617 - SUPREME COURT] has decided the issue in favour of the Revenue and therefore, respectfully following the decision of the Hon'ble Supreme Court, we allow the grounds raised by the Revenue. Loans advanced to sister concerns - CIT (A) reducing the rate of interest from 16% to 8% on the loans advanced by the assessee to the sister concerns - HELD THAT:- The findings given by the CIT (A) cannot be faulted with CIT(A) as he had examined the availability of funds and thereafter had restricted the interest at 8% correctly. Disallowance of expenses - assessee has not filed the requisite bills/vouchers/documents substantiating the increase in expenditure which is in the range of more than 39% of the earlier expenditure - HELD THAT:- AO is required to be disbelieved as the assessee had filed a letter dated 26.3.2015 before the AO which was filled before the passing of the order, where in the assessee had explained the increase in the expenditure . The situation continues to be the same even before the CIT (A). CIT (A) mentioned that the “ Manufacturing, administrative and selling and distribution expenditures along with ledger extracts.” were produced before the revenue authority. The above said, categorical finding of the CIT (A) recorded in the order have gone unrebutted. Undoubtedly, there is no ground raised by the Revenue challenging the order of the learned CIT (A) on the ground of the no adherence to principles of natural justice mentioned in Rule 46A of I.T. Rules. In the absence of any ground-raising violation of principles of natural justice or accepting the evidence at the back of the assessee, the finding recorded by the CIT (A) that the assessee has produced bills/vouchers explaining the increase in expenditure before the AO and before CIT (A) is required to be accepted. Once the bills have been produced by the assessee before the Revenue authorities and the bills have been examined by the CIT (A) and thereafter only the disallowance made by the AO has been deleted. We do not find any reason to interfere with the findings given by the CIT (A) and accordingly, the disallowance deleted by the learned CIT (A) is sustained. Issues Involved:1. Deletion of disallowance for late remittance of PF and ESI.2. Reduction of interest rate on loans advanced to sister concerns.3. Deletion of disallowance of expenses.Summary:1. Deletion of disallowance for late remittance of PF and ESI:Ground of appeal No.2 in ITA 1061/Hyd/2018 and Ground of appeal No.3 in ITA No.1062/Hyd/2018 pertain to the deletion of disallowance made by the Assessing Officer for late remittance of PF and ESI. The learned CIT (A) had allowed these disallowances based on the decision of the Tribunal in the case of Tetrasoft India (P) Ltd. However, the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd vs. CIT decided the issue in favor of the Revenue. Respectfully following the Supreme Court's decision, the grounds raised by the Revenue were allowed.2. Reduction of interest rate on loans advanced to sister concerns:Ground of appeal No.4 in ITA 1061/Hyd/2018 and Ground of appeal No.2 in ITA 1062/Hyd/2018 concern the reduction of the interest rate from 16% to 8% on loans advanced by the assessee to sister concerns. The learned CIT (A) had restricted the interest rate to 8% after examining the availability of interest-free funds with the assessee. The Tribunal found that the learned CIT (A)'s decision was in accordance with the law and upheld the reduction of the interest rate to 8%. Consequently, the appeals of the Revenue on this issue were dismissed.3. Deletion of disallowance of expenses:Ground No.3 in ITA No.1061/Hyd/2018 pertains to the deletion of disallowance of expenses amounting to Rs. 2,86,63,051/-. The Assessing Officer had made these disallowances on an estimation basis due to a significant increase in expenses. However, the learned CIT (A) deleted the disallowances, noting that the Assessing Officer had not provided specific reasons for the percentage disallowances and had made them arbitrarily. The Tribunal found that the assessee had produced the requisite bills and vouchers before the Revenue authorities, which were examined by the learned CIT (A). Therefore, the Tribunal upheld the deletion of the disallowances by the learned CIT (A) and dismissed the Revenue's ground on this issue.Conclusion:Both the appeals of the Revenue were partly allowed.Order pronounced in the Open Court on 22nd March, 2024.