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2024 (1) TMI 51
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..../s. 143(1), while doing so a communication was issued to the assessee, as to why not make a disallowance u/s. 36(1)(va) of Rs. 1,75,24,856/- being the late payment of PF and ESIC and disallowance u/s. 40(a)(ia) of Rs. 4,96,610/- for non-deduction of tax. 2.1. In response, the assessee filed its explanation as follows: Incorrect claim u/s. 143(1)(a)(ii) Sr. No. Schedule Error Description Amount to Income Tax Return Amount as computed Response 1 Schedule BP In Schedule BP, SL. No. 14. Amounts debited to the profit and loss account, to the extent disallowable under section 36 (6r of Part A-Ol) is not consistent with amount shown in Sl.No.6.r. Total amount disallowable under section 36 (total of 6a to 6q) of Schedule Ol 0 1,75,24,856 856 No amount is reported under Sl. No. 6r Part A Ol since no amount is disallowable u/s 36. The sum referred to in section 36(1)(va) of the Income Tax Act, is paid on or before the due date of furnishing the return of income and hence following judgment of Honble Supreme Court in the case of Commissioner of Income Tax vs. Vinay Cement Ltd. (2007) 213 CTR 268 (SC) no amount is disallowable u/s 36(1)(va). 2 ....
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....o disallowance of Rs. 1,20,000/- (being 30 percentage of Rs. 4,00,000/- on which tax is not deducted) is required. 2.2. After considering the above response, the CPC passed the intimation u/s. 143(1) dated 09-01-2020 disallowance of Rs. 1,75,24,856/- on late payment of Employees' Contribution to Provident Fund and ESI and disallowing u/s. 40(a)(ia) of Rs. 4,96,610/- for non-deduction of tax thereby determining taxable income as Rs. 3,18,29,479/- and demanded tax thereon. 3. Aggrieved against the same, the assessee filed an appeal before National Faceless Appeal Centre, Delhi (NFAC). The assessee moved an application under Rule 46A for additional evidences being Form 26A namely Chartered Accountant Certificate certifying the furnishing of Return of Income and payment of tax by the payees in the case of Rajkumar Rawat, Dimple Oza and Nisar Ahmed. The Ld. NFAC by a very detailed order confirmed the disallowance made u/s. 36(1)(va) and thereby dismissed Ground no. 1 filed by the assessee. 3.1. So far as second ground, the Ld. NFAC directed the Assessing Officer to verify the payment made to Shri Raju Pawa whether liable for TDS or not in the light of CBDT Circular No. 1/2017. ....
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....month of salary in which becomes payable" and demonstrated as follows: * To illustrate,- > "Salary" of "April 2017" is actually "paid" in "May 2017". > In Tax Audit Report, - ✓ "due date" for payment to respective fund is reckoned by taking "April" as the month in which contribution is received. ✓ Accordingly, for "salary of April 2017", "due date" as per Tax Audit Report is "15.05.2017"; > Since "actual date of payment of contribution to PF / ESI" is "30.05.2017", it is belated payment as per Tax Audit Report. > However, since the underlying salary has been paid in "May 2017" and while paying such salary, assessee has deducted contribution of respective employees towards PF & ESI, it can be said that "assessee" "received" such "contribution from employees" in the month of "May 2017" and accordingly, "correct due-date" for depositing such PF & ESI to respective fund shall be "15.06.2017". Since the sum has been deposited on "30.05.2017", it is within the prescribed time limit. Hence, no disallowance is called for. * Details of "month of actual payment of salary" as well as "due-date based on such ....
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.... u/s 36(1)(va) of the Act cannot be disallowed u/s 143(1) of the Act (more specifically under sub-clause (d) to 143(1) of the Act). Secondly, the counsel argued that the issue at the time when the disallowance was made, issue was debatable and accordingly could not be the subject matter of disallowance under section 143(1) of the Act. In response, DR relied upon the observations made by the Ld. CIT(Appeals) in the appellate order. 6. We have heard the rival contentions and perused the material on record. Regarding the argument that the auditors did not specifically mention in the audit report regarding inadmissibility of claim with respect to contributions received from the employees for various funds as referred to in section 36(1)(va) of the Act, it would be useful to reproduce section 143(1) of the Act, which reads as under: Assessment. 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments, namely:- i) any arithmetical error in ....
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.... whether the expenditure is admissible/allowable or not. However, so far as section 36(1)(va) of the Act, the audit report does not require the auditor to make a specific observation regarding "admissibility/inadmissibility" of the above expenditure. 6.2 Therefore, once the auditor has mentioned the "actual" dates of ESI/PF remittance and the "due" dates of ESI/PF remittance by the assessee u/s 36(1)(va) of the Act at serial number 20(b) of the audit report, then, in our considered view, the requirement of section 143(1) of the Act viz. "disallowance of expenditure ....indicated in the tax audit report" stands satisfied and the Department is permitted to make disallowance in terms of section 143(1) of the Act. 6.3 With regards to the second argument of the counsel for the assessee that at the time when the disallowance was made, the issue was debatable, we observe that the position on this issue has now been unambiguously clarified by the Hon'ble Supreme Court with respect to all assessment years prior to AY 2021-22 in the case of Checkmate Services (P.) Ltd. [2022] 143 taxmann.com 178 (SC) wherein the Supreme Court held that for assessment years prior to AY 2....
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....eduction of belated payment of ESI and PF of employees' share of contribution as per provisions of section 36(1)(va) of the Act. Again, recently Pune ITAT in the case of Cemetile Industries v. ITO [2022] 145 taxmann.com 209 (Pune-Trib.) held that where assessee-employer deposited amount of employees contribution towards employees' provident fund and employees' state insurance corporation beyond due date stipulated in respective Acts, disallowance made under section 36(1)(va) was justified. The ITAT further held that adjustment under section 143(1)(a) by means of disallowance made for late deposit of employees' share to relevant funds beyond date prescribed under respective Acts was proper. 6.4 In view of the above observations respectfully following the decision of the Honourable Supreme Court in the case of Checkmate Services Private Ltd supra and Harrisons Malayalam Ltd supra and in the light of our observations, we hereby dismiss the assessee's appeal. 7. In the result, the appeal of the assessee is dismissed." 7.1. Further the Hon'ble Supreme Court judgment is being followed by the Apex Court in the case of PCIT vs. Strides Arcolab Ltd....
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....called Limited Scrutiny cases and only the remaining returns are taken up for complete scrutiny u/s 143(3) of the Act. 13. Meaning thereby, that exercise of power under sub-section (2) of section 143 of the Act leading to the passing of an order under subsection (3) thereof, is to be undertaken where it is considered necessary or expedient to ensure that the assessee has not understated income or has not computed excessive loss, or has not under paid the tax in any manner, 14. If any narrow interpretation is given to the decisions of the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd [supra], it would not only defeat the very purpose of the enactment of the provisions of section 143(1) of the Act but also defeat the very purpose of the Legislators and the decision of the Hon'ble Supreme Court would be made redundant because there would be discrimination and chaos, in as much as, those returns which are processed by the CPC would go free even if the employees' contribution is deposited after the due date and in some cases the employer may not even deposit the employees' contribution and those whose returns have been scrutinized and assessed u/s....
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.... dispute that the issue of disallowance of late deposited employees' contributions of PF and ESIC stands covered by the Division Bench judgment of this Court in case of Commissioner of Income-Tax Gujarat State Road Transport Corporation reported in [2014] 366 ITR 170 (Guj). He however raised a slightly different contention which did not arise for consideration before this Court in case of Gujarat State Road Transport Corporation (supra). He submitted that that in terms of section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, reference to the time limit for depositing the contributions within 15 days of close of the month must be to the month in which the salary payment is made. For example, therefore if the salary payment for the month of June is made on 5th July, the employer would have time upto 15^th of August for depositing the employee's contribution of provident fund. Looking from this angle, there was no delay or default on the part of the present assessee. 4. In terms of section 36(1) (va) of the Act, any sum received by the assessee from any of his employees to which the provisions of section 2(24)(x) applies, would be deducte....
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....ee's contribution to the fund arises. The expression "within fifteen days of the close of every month" therefore must be interpreted as having reference to the close of the month, for which, the wages are required to be paid with corresponding duty to deduct employee's contribution and to deposit the same in the fund. 6. Learned counsel for the appellant is therefore not correct in contending that if such wages are paid in the following month, the liability to deposit the employee's contribution to the fund gets differed by another month." 7.3. Respectfully following the above Jurisdictional High Court Judgment, this argument of the assessee is hereby rejected. Thus Ground No. 1 raised by the assessee is hereby dismissed. 8. Regarding Ground No. 2, it is seen from the objection filed by the assessee before CPC, the assessee is being contending that the payees have shown the corresponding income and paid the taxes, filed their respective Return of Income. However the assessee could not file Form 26A namely furnishing Chartered Accountant Certificate as per Section 201(1) of the Act r.w. Rule 31ACB of the Income Tax Rules. Though the assessee filed the abov....