2023 (3) TMI 729 - AT - Income Tax

Employee’s contribution towards provident fund and ESIC which was paid beyond the period prescribed - disallowance in terms of section 143(1) - As argued 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) - HELD THAT:- 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.

Debatable issue - As decided in Checkmate Services Private Ltd [2022 (10) TMI 617 - SUPREME COURT] 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 not part of assessee-employer's income, thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction.

As recently Pune ITAT in the case of Cemetile Industries [2022 (12) TMI 354 - ITAT PUNE] 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. 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.

Respectfully following the decision of Checkmate Services Private Ltd [2022 (10) TMI 617 - SUPREME COURT] and Harrisons Malayalam Ltd [2023 (1) TMI 137 - SC ORDER] and in the light of our observations, we hereby dismiss the assessee’s appeal.