TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 1283
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.... Labour Services engaged in providing Manpower supply services. For the Assessment Year 2019-20, the assessee filed its Return of Income on 25.09.2019 declaring total income of Rs. 1,35,09,600/-. The Return of Income was processed u/s. 143(1), while doing so a communication dated 19.02.2019 was issued to the assessee, why not to make a disallowance u/s. 36(1)(va) of Rs. 1,79,96,570/- being the late payment of PF and ESIC. However the assessee has not replied to the above communication. Hence intimation u/s. 143(1) dated 14.07.2020 was passed, determining the total income at Rs. 3,16,82,825/- and demanded tax, which was adjusted against the refund due to the assessee. 3. Aggrieved against the same, the assessee filed an appeal before Ld. National Faceless Appeal Centre. The Ld. NFAC by a very detailed order confirmed the disallowance made u/s. 36(1)(va) and thereby dismissed the appeal filed by the assessee. 4. Aggrieve against the same, the assessee is in appeal before us raising the following Grounds of Appeal 1. The learned CIT(A) has erred in law and on facts in not granting sufficient opportunity of hearing, especially during the COVID-19 pandemic which is in violation of t....
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....d. vs. DCIT (2014) 366 ITR 408 (Karnataka); > CIT vs. Hindustan Organics Chemicals Ltd. (2014) 366 ITR 1 - (Bom); > CIT vs. Ghatge Patil Transports Ltd. - (2014) 368 ITR 141 (Bom); > Kalpesh Synthetics P. Ltd. vs. DCIT (2022) 137 taxmann.com 475 (Mumbai Tribunal); > Kanthi Agency Networks vs. ADIT (Bangalore); (2022) 194 ITD 581 > Punjab Bevel Gears Ltd. vs. DCIT - (20220 188 taxmann.com 299 (Delhi); > Rakesh Janghu vs. CPC (2022) 136 taxmann.com 154 (Delhi Tribunal); > Vyona Logistics (P) Ltd. vs. ITO (2022) 139 taxmann.com 302 (Jaipur); > Paramjeet Singh vs. DCIT - (2022) 138 taxmann.com 147 (Chandigarh Tribunal); 4.3. However the Jurisdictional High Court of Gujarat in the case of CIT Vs. Gujarat State Road Transport Corporation reported in [2014] 366 ITR 170 has decided the issue "against" the assessee. In view of the "conflicting decisions", it is amply clear that the issue of disallowance u/s. 36(1)(va) is a "debatable and controversial issue" which cannot be adjusted u/s. 143(1) of the Act and relied upon decision of the of the Tribunal in the case of Chintoo Creatios Vs. DCIT {2022} 138 taxmann.com 499 (Delhi Tribunal) and A.P. Warehousing Corporat....
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.... from the employees' income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under section 43B. [Para 53] The reasoning in the impugned judgment that the non obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non obstante clause has to be understood in the context of the entire provision of section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributio....
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.... 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 the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, i....
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...."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 2021- 22, non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was held in t....
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....2] 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. reported in [2023] 147 taxmann.com 202 (SC) and Harrisons Malayalam Ltd. Vs. CIT reported in [2022] 145 taxmann.com 608 following Checkmate Services (P.) Ltd. held that non obstante clause under section 43B could not apply....
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.... 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 143(3) of the Act would have to face the disallowance. 15. This can neither be the intention of the Legislators nor the decision of the Hon'ble Supreme Court has to be interpreted in such a way so as to create such discrimination amongst the tax payers....