TaxTMI 
TaxTMI 
2023 (8) TMI 1618
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....e Assistant Director of Income Tax, Centralized Processing Center, Bengaluru (ADIT, CPC) is without jurisdiction. 3. For that the Commissioner of Income Tax (Appeals) without affording an opportunity of being heard erred in dismissing the appeal as infructuous. 4. For that the Commissioner of Income Tax (Appeals) erred in dismissing the appeal as infructuous and non-existent merely because assessment u/s. 143(3) of the Act was completed for the impugned assessment year. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the principle of doctrine of merger would not apply to the facts and circumstances of the instant case. 6. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the intimation passed u/s. 143(1) is bad in law. 7. For that without prejudice to the above grounds, the Commissioner of Income Tax (Appeals) failed to appreciate that the issue of allowability of employee's contribution to PF & ESI within the due date of filing return of income is a debatable one and the disallowance on that ground cannot be made while processing return of income u/s. 143(1). For these gr....
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....of the AO, submitted that the issue is squarely covered in favour of the Revenue in the case of Checkmate Services P. Ltd. v. CIT (supra), and thus, appeal filed by the assessee should be dismissed. 6. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. v. CIT (Civil Appeal No. 2833 of 2016 dated 12.10.2022), has considered the issue of disallowance of employees' contribution to PF & ESI beyond due date specified under respective Acts, but within due date prescribed u/s. 139(1) of the Act, and after considering relevant provisions of the Act, held that belated payment of employees' contribution to PF & ESI cannot be allowed as deduction in terms of provisions of Sec. 36(1)(va) r.w.s. 43B of the Act. The ITAT Chennai Benches in the case of Sree Gokulam Chit and Finance Co. P. Ltd., in ITA No. 765/Chny/2022 dated 21.12.2022, had considered an identical issue and by following the decision of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. v. CIT (Civil Appeal No. 2833 of 2016 dated 12.10.2022) held as under: ....
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.... 199 Mar-20 HO 887 15-May-20 05-Oct-20 143 2,09,425 Employees State Insurance Month Place Employees contribution Due date for payment Actual date of payment No. of days delay Aug-19 HO 94 15-Sep-19 19-Sep-19 4 Aug-19 HO 366 15-Sep-19 20-Sep-19 5 Dec-19 HO 758 15-Jan-20 16-Jan-20 1 Dec-19 HO 2,190 15-Jan-20 21-Jan-20 6 Total 2,12,833 This is extracted from the audit report as filed by assessee along with return of income and particularly clause No. 20(b). The details are completely provided by assessee. 8. Now, the question arises whether in view of the provisions of section 143(1)(a) of the Act, while processing the return of income filed by the assessee, the total income or loss shall be computed after making the following adjustments as described u/s. 143(1)(a) (ii) of the Act i.e., an incorrect claim, if such incorrect claim is apparent from any information in the return or not. The Memorandum of Finance Bill, 2008 as well as Finance Bill, 20....
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....s specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction. Further, these adjustments will be made only in the course of computerized processing without any human interface. In other words, the software will be designed to detect arithmetical inaccuracies and internal inconsistencies and make appropriate adjustments in the computation of the total income. (emphasis supplied). For this purpose the Department is in the process of establishing a system for Centralized Processing of Returns. To facilitate this. it is also proposed that- (a) the Board may formulate a scheme with a view to expeditiously determine the tax payable by, or refund due to, the assessee, (b) the Central Government may issue a notification in the Official Gazette, directing that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such restrictions, modifications and adaptations as may be specified in the notification. However, such direction shall not be issued after 31st March 2009; (c) every notification shall be laid before each House of Parliament as soon as such notif....
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....es that total income shall be computed after making adjustments inter-alia on account of incorrect claim, if such incorrect claim is apparent from any information in the return of income. In the present case before us, the adjustment u/s. 143(1)(a) has been made on the basis of information contained in the tax audit report with respect to the belated payments of employees contribution of EPF and ESI paid beyond the due dates as prescribed under the respective Act and these various funds are referred in section 36(1)(va) of the Act. The information gives the details of due date of payment, actual date of payment to the concerned authorities and these payments have been made beyond the due dates specified in the respective acts i.e., Provident Fund Act & ESI Act, which attracted the provisions of section 36(1)(va) r.w.s. 2(24)(x) of the Act leading to disallowance of this sum to the extent not paid on or before the due date stipulated in the respective PF Act and ESI Act. 10. Coming to another angle that this issue has been settled by the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd., supra and what will be the impact of law laid down by Hon'ble Supreme C....
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....oducing the Finance Bill clearly stated that the provisions - especially second proviso to Section 43B - was introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. That Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee's income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of "income" amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time - by way of contribution of the employees' share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that thi....