TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1670
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.... has furnished return of income on 30.01.2021 declaring income of Rs. 1,17,41,840/-. The return was processed u/s 143(1) of the IT Act by CPC on 29.11.2021 on an income of Rs. 1,27,49,780/- after making disallowance of Rs. 10,07,934/- u/s 36(1)(va) of the IT Act being disallowance on account of delayed payment towards employees' contribution towards Provident Fund & ESIC on the basis of details provided in the audit report. Thereafter, the assessee filed an application for rectification u/s 154 of the IT Act and consequently the order u/s 154 was passed by CPC on 12.10.2023 wherein the disallowance u/s 36(1)(va) of the IT Act was restricted to Rs. 9,67,333/-. 4. Aggrieved with the action of CPC, the assessee preferred appeal before Ld. CIT(A) who partly allowed the appeal of the assessee and further reduced the addition of Rs. 9,67,333/- to Rs. 9,42,944/- since the amount of Rs. 24,389/- was paid within due date as prescribed under the respective Act i.e. ESI. While doing so, he followed the judgement of Hon'ble Supreme Court passed in case of Checkmate Services Pvt. Ltd. vs. CIT, [2022] 143 taxmann.com 178 (SC), Ld. CIT(A) confirmed the addition of Rs. 9,42,944/-. It is this orde....
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.... The case of the assessee before the authorities below has been that such payments before the due date as per section 139(1) of the Act amounts to sufficient compliance of the provisions in terms of section 43B of the Act, not calling for any disallowance. Per contra, the Department has set up a case that the disallowance is called for because of the per se late deposit of the employees' share beyond the due date under the respective Act and section 43B is of no assistance. 4. Before proceeding further, it would be apposite to take note of the relevant statutory provision in this regard. Section 2(24) provides that 'income' includes: '(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees'. Thus, contribution by employees to the relevant funds becomes income of the employer. Instantly, there is no dispute as to the taxability of such income in the hands of the assessee. Once such an amount becomes income of the employer-assessee, then section 36(1)(va) comes into pla....
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.... on actual payment basis, has been relaxed by the proviso so as to enable the deduction even if the payment is made before the due date of furnishing the return u/s 139(1) of the Act for that year. The claim of the assessee is that the deduction becomes available in the light of section 36(1)(va) read with section 43B on depositing the employees' share in the relevant funds before the due date u/s 139(1) of the Act. This position was earlier accepted by some of the Hon'ble High Courts holding that the deduction is allowed even if the assessee deposits the employees' share in the relevant funds before the date of filing of return u/s.139(1) of the Act. This was on the analogy of treating the employee's share as having the same character as that of the employer's share, becoming deductible u/s 36(1)(iv) read in the hue of section 43B(b). Recently, the Hon'ble Supreme Court in Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC) has threadbare considered this issue and drawn a distinction between the parameters for allowing deduction of employer's share and employees' share in the relevant funds. It has been held that the contribution by the employees to the releva....
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....h incorrect claim is apparent from any information in the return; (iv) disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return' 8. Sub-section (1) of section 143 states that a return shall be processed to compute total income by making six types of 'adjustments' as set out in sub-clauses (i) to (vi). As noted supra, we are concerned only with the examination of two sub-clauses, viz., (ii) and (iv). Sub-clause (ii) talks of 'an incorrect claim, if such incorrect claim is apparent from any information in the return". The expression "an incorrect claim apparent from any information in the return" has not been generally used in the provision. Rather, it has been specifically defined in Explanation (a) to section 143(1) as under: 'Explanation.-For the purposes of this sub-section,- (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,- (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished unde....
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....s under consideration, namely, S.M. Auto Stamping Pvt. Ltd. (ITA No.521/PUN/2022) has been placed on record. Point 20(b) of the audit report gives the 'Sum received from employees' at Rs. 21,800/-. 'Due date for payment' has been reported as 15-07-2017 and 'The actual date of payment to the concerned authorities' has been given as 20-07-2017. Similar is the position regarding other items disallowed u/s.36(1)(va) having 'The actual date of payment' after the 'Due date for payment'. Thus, it is manifest that the audit report clearly points out that as against the due date of payment of the employees' share in the relevant fund on 15.7.2017 for deduction u/s 36(1)(va), the actual payment is delayed and deposited on 20.7.2017. The legislature, for the disallowance under sub-clause (iv) of section 143(1)(a), has used the expression 'indicated in the audit report'. The word 'indicated' is wider in amplitude than the word 'reported', which envelopes both the direct and indirect reporting. Even if there is some indication of disallowance in the audit report, which is short of direct reporting of the disallowance, the case gets covered within the purview of the provision warranting the disa....
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....point no. 20(b) of the audit report, dealing with section 36(1)(va), has columns, inter alia, (i) 'Sum received from employees'; (ii) 'Due date for payment'; and (iii) 'The actual date of payment to the concerned authorities'. The column (i) having details of the amounts received from employees indicates about the 'increase in income' as per sub-clause (iv) of section 143(1)(a) if the assessee does not take this sum in computing total income. The columns (ii) and (iii) having details of due date for payment and the actual date of payment indicate about 'disallowance of expenditure' if the assessee does not make suo motu disallowance in computing total income. Right now, there is no case of 'increase in income' because the AO did not make adjustment for non-offering of income of the 'Sums received from employees', but made the adjustment for 'disallowance of expenditure' with the remarks that :'Amounts debited to the profit and loss account, to the extent disallowance under section 36 due to non- fulfillment of conditions specified in relevant clauses'. Thus, it is evident that it is a case of 'disallowance of expenditure' and not 'increase of income'. Further, the entire challenge ....