TaxTMI 
TaxTMI 
2025 (8) TMI 1592
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....ate of u/s 143(1)(a) thus there was no adherence of relevant section and therefore it is clear cut case of mistake of law and thus it is mistake apparent from record u/s 154. 2. That the Authorities below erred in confirming/sustaining the addition made towards belated payment of Employee's contribution to PF&ESI of Rs. 15,87,99,944/- is wholly/ unsustainable both on facts and in law. Since no additions u/s 36(1)(va) could be done, as per the mandate of u/s 143(1)(a) thus there was no adherence of relevant section and therefore it is clear cut case of mistake of law and thus it is mistake apparent from record u/s 154. 3. That the Authorities below failed to appreciate the fact that the no addition by way of adjustment while processing/intimation the return of income u/s 143(l)(a) towards the delayed deposit of the employees's contribution towards ESI and PF [though deposited within the due date of filing of return u/s 139(1)] can be made as. It would not fall clause (iv) of section 143(l)(a) and that the jurisdiction of HC & SC was in favour of assessee at the time of processing under that section. Thus, it was debatable issue at the time of processing of retu....
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....ties below is also erroneous, illegal and against the principals of Natural Justice and Equity and the well settled laws of the land. Thus the department has not demonstrated that there were misuse of funds in disallowed the same. 10. That the Authorities below failed to consider/appreciate the submission of assessee made at various dates in response to their notice u/s. 250 of the Act and proceeded with confirming the impugned addition without considering the documentary evidence submitted and explanation given in support of assessee's claim 11. That the order passed by Authorities below is also erroneous, illegal and against the principals of Natural Justice and Equity and the well settled laws of the land. 15. That the appellant craves leave of the Honorable Income Tax Appellate Tribunal to add, alter, modify, substitute, delete any grounds of appeal at any stage of the proceedings before the Hon'ble Income Tax Tribunal." Grounds of appeal for the AY 2019-20 1. "That the Authorities below erred in confirming/sustaining the addition made towards belated payment of Employee's contribution to PF & ESI of Rs. 11,15,61,113/- is wholly unsustainable both ....
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....) New Delhi (ITAs No.7 & 8/Del/2023 AYs 2018-19 & 2019-20), followings are the details of the payment of contribution were made within 15 days (allowed with further grace period) from the close of the respective months during which the disbursement of the salary/wages was actually made: Particulars Amounts Provident Fund 5,43,99,209/- Any Fund set up under the provisions of ESI Act, 1948 1,20,39,968/- Total 6,64,39,177/-. 8. That the Authorities below erred in both law and facts by chargeability of interest u/s 234A and 234B of the Act are bad in law. The Authority below is directed to alter, modify or delete the same in accordance with law. 9. That the order passed by Authorities below is also erroneous, illegal and against the principles of natural justice and equity and the well settled laws of the land. Thus the Department has not demonstrated that there were misuse of funds in disallowed the same. 10. That the Authorities below failed to consider/appreciate the submission of assessee made at various dates in response to their notice u/s 250 of the Act and proceeded with confirming the impugned addition without considering the documentary evidence sub....
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....preme Court in the case of Checkmate Services Pvt. Ltd. which was delivered on 12.10.2022. The Ld. Counsel for the assessee submitted that in the case on hand the intimations u/s 143(1) were passed on 28.03.2019 and 07.07.2020 for the assessment years 2017-18 and 2019-20 respectively by the CPC disallowing employees contribution towards PF & ESI and whereas the decision in the case of Checkmate Services was rendered much later on 12.10.2022 and therefore the decision of the Hon'ble Chattisgarh High Court in the case of Raj Kumar Bothra Vs. DCIT is squarely applicable to the facts of the assessee's case. 4. On the other hand, the Ld. DR strongly supported the orders of the authorities below and placed reliance on the decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT. 5. Heard rival submissions, perused the orders of the authorities below. The only issue in respect of ground nos. 3 & 2 for the assessment years 2017-18 and 2018-19 respectively is as to whether the disallowance u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act in respect of employees contribution to PF and ESI is permissible while processing the return u/s 143(1) of the Act pri....
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....bution towards Employees' State Insurance (ESI) and Employees Provident Fund (EPF) of Rs. 28,21,065/- under Section 36(1)(va) of the Act of 1961 was disallowed by the order dated 16.12.2021. Feeling aggrieved by the said order, the assessee preferred an appeal under Section 246A of the Act of 1961 before the Commissioner of Income Tax (Appeals) {for short "the CIT(Appeals)"} by submitting Form No.35 and challenging the aforesaid intimation order. In the meanwhile, on 12.10.2022, in the case of Checkmate Services Private Limited Vs. Commissioner of Income Tax-11 judgment was delivered by the Supreme Court, settling the issue with regard to claim of deduction under Section 36(1)(va) of the Act of 1961, wherein, it was held that to claim deduction under the aforesaid provision, employees' contribution should be deposited on or before the due dates specified under the respective employees welfare Acts. Ultimately, the CIT (Appeals) passed the order on 15.07.2024 dismissing the appeal of the assessee, against which, the assessee preferred an appeal before the Income Tax Appellate Tribunal (HAT), which was dismissed by the impugned order dated 26.09.2024 leading to filing of the ....
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.... Raipur4 would not be applicable, as in that case, this Court has considered the issue of delay in filing the appeal and dismissed the same as barred by limitation by holding that no sufficient cause has been shown in filing the appeal and further the substantial question of law formulated in this tax appeal was neither involved nor considered at all in that appeal. As such, the ITAF committed a grave legal error in applying the decision of M/s. BPS Infrastructure (supra) while passing the impugned order. He would finally submit that the ITAT in Satpal Singh Sandhu Vs. DCIT5 and Parv Buildcon Vs. DCIT6 had already held that claim of deduction in respect of delayed deposit in respect of employees' share of contribution towards ESI and EPF could not be summarily disallowed by Assessing Officer under the provisions contained in Section 143(1)(a) of the Act of 1961 and negated disallowance of delayed deposit of employees' share of contribution towards ESI and EPF holding that the decision of the Supreme Court in Checkmate Services Pvt. Ltd. (supra) was not available at the time when the intimation under Section 143(1)(a) of the Act of 1961 was issued in this case on 16.12.2021 and agai....
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....mspection. 7. Admittedly, return of the income filed by the appellant/assessee was processed by the Assessing Officer and an intimation order dated 16.12.2021 was issued exercising power under Section 143(1)(a) Act of 1961, wherein, claims for deduction of delayed deposit of employees' share of contribution towards Employees State Insurance and Provident Fund of Rs. 28,21,065/- under Section 36 (1)(va) of the Act of 1961 were disallowed, inasmuch as, on the said date, the issue with regard to delayed deposit of contribution with respect to interpretation under Section 36(1)(va) of the Act of 1961 and whether the assessee is entitled to deduction of amount deposited by them, which was contribution in terms of the EPF Act, 1952 and the ESI Act, 1948 on or before the due date was pending consideration before the Supreme Court in the matter of Checkmate Services Pvt. Ltd. (supra). In the said judgment, their Lordships of the Supreme Court noticed a division of opinion on the issue of interpretation under Section 36(1)(va) of the Act of 1961, with the High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi favouring the interpretation beneficial to the assesse....
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...., however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non- obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction." 8. As such, their Lordships of the Supreme Court, in the above judgment rendered on 12.10.202....
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....come in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018" 11. In the matter of Kvavemer John Brown Engg. (India) Pvt. Ltd. (supra), their Lordships of the Supreme Court observed that when there are conflicting judgments on interpretation of Section 80-O of the Act of 1961 prima facie adjustments contemplated under Section 143 (1) (a) is not applicable and observed as under :- "...When there were conflicting judgments on interpretation of Section 80-O, in our view, prima facie adjustments contemplated under Section 143(1)(a) was not applicable and, therefore, consequently appellant was not liable to pay a....
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....reme Court by the judgment dated 12.10.2022. Furthermore, the assessee in its audit report had only furnished the details of delayed deposit in Column 20 (b) of the Form No.3CB and had not shown the same as disallowance. Therefore, the Assessing Officer has committed a grave legal error in processing the return of the assessee under Section 143(1)(a) of the Act of 1961., in light of principles of law laid down by their Lordships of Supreme Court in the matters of Kvaverner John Brown Engg. (India) Pvt. Ltd (supra) and Rajesh Jhaveri Stock Brokers Pvt (supra). 14. Furthermore, the orders passed in Satpal Singh Sandhu (supra) and Parv Buildcon (Supra) by the ITAT holding that Section 143 (1) (a) of the Act of 1961 cannot be resorted to in case of highly debatable issue were challenged by the Revenue before this Court by filing two appeals and ultimately, both the appeals vide Tax No. 149/2024 (DCIT Vs. Parv Buildon) and TAX No.1.5/2024 (DCIT Vs. Satpal Singh Sandhu), were withdrawn by the Revenue by orders dated 10.02.2025 and 21.05.2025, respectively, and thereby, the Revenue has allowed the plea of the assessees therein to stand that in a highly debatable issue, the Assess....
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.....12.2021 is hereby set-aside. Consequently, the order dated 15.07.2024 passed by the CIT (Appeals) and the subsequent order dated 26.09.2024 passed by the ITAT are also set-aside. However, liberty is reserved in favour of the respondent/Revenue to proceed in accordance with law. 19. The substantial question of law is answered in favour of the appellant/assessee and against the respondent/Revenue." 7. The decision of the Hon'ble Chattisgarh High Court squarely applies to the facts of assessee's case. Thus, respectfully following the decision of the Hon'ble High Court of Chattisgarh (supra), we direct the Assessing Officer to delete the disallowance made u/s 36(1)(va) r.w.s. 2(24)(x) of the Act for the assessment years 2017-18 & 2019-20. Ground nos. 3 and 2 in the appeals for the assessment years 2017-18 and 2019-20 respectively are allowed. 8. Since we have deleted the disallowance made u/s 36(1)(va) allowing ground nos. 3 & 2 of the appeals for AYs 2017-18 and 2019- 20, all other grounds raised by the assessee on merits in these two appeals are not adjudicated as the same would become academic at this stage. 9. In ground nos. 7 & 8 of the appeal for the AY 2017-18....