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2022 (11) TMI 1363 - AT - Income TaxDelayed Employees’ Contribution to PF / ESI u/s 43B r.w.s. 36(1)(va) as well as Sec.2(24)(x) - Adjustment u/s 143(1)(a)(iv) - CPC power of adjustment as Auditor had indicated the default in the Tax Audit Report - HELD THAT:- The amendment made w.e.f. 01.04.2021 by insertion of words ‘increase in income’ would have no impact on such disallowance since it is only a disallowance of expenditure and the revenue is very well entitled to make such an adjustment u/s 143(1)(a)(iv). The impugned adjustment,would also fall u/s 143(1)(a)(ii) since it is an incorrect claim which is apparent from any information in the return. The adjustment made by CPC flows from reporting made by Tax Auditor in Tax Audit Report in Form 3CD. As per statutory mandate, the assessee is required by law to get its accounts audited u/s 44AB if its turnover crosses threshold turnover. Purpose of the audit is to enable the revenue to make correct computation of assessee’s income. A proper audit would, inter-alia, ensure that the claims for deduction are correctly made. Report is required to be furnished by the assessee along with return of income to enable revenue to make correct computation of income. The reporting made therein could certainly be available to CPC to make the adjustment of defaults reported therein since the same would be apparent from information contained in the return. As contribution is first treated as income of the assessee and thereafter, the deduction of the same has to be claimed by the assessee. Therefore, the columns in the Profit & Loss Account in the return of income has to be filled in this manner only i.e., the contribution is to be first added to the income of the assessee and thereafter, the deduction of the same would be claimed by the assessee. In other words, the assessee would first add the same to its income and thereafter, it would claim deduction after crossing the hurdle of Sec.36(1)(va). Since the claim made by the assessee is inconsistent with the reporting made by Tax Auditor, it was an incorrect claim which CPC has rightly disallowed. Another argument is that the debatable issues could not be subject matter of adjustment u/s 143(1). However, so far as the revenue is concerned, this issue is not debatable for the revenue. The revenue has always maintained a position that the claim is allowable to assessee only when the contribution is deposited as per the mandate of Sec.36(1)(va) otherwise not. Therefore, it is incorrect to say that the issue is debatable one. The CHECKMATE SERVICES PVT LTD VS CIT-1 [2022 (10) TMI 617 - SUPREME COURT] held that allowability/treatment of ‘delayed’ Employee PF Contribution payment to be taxable in hands of assessee under provisions of Income Tax Act. Decided against assessee.
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