2022 (12) TMI 1383 - AT - Income Tax

Delayed employees contribution in regard to PF/ESI - HELD THAT - We uphold that the addition can be made in respect of the employees contribution in regard to PF/ESI which has not been deposited within the stipulated date as per the respective Act since in the case on hand the assessee has not deposited the employees contribution within the due date as per the respective Act. Therefore the disallowance can be made as per section 36(1)(va) r.w.s. 2(24)(x) of the Act. Hence respectfully following the judgment in the case of Checkmate Services (P.) Ltd. 2022 (10) TMI 617 - SUPREME COURT the arguments of the assessee is not acceptable. Disallowance/addition to be made u/s 143(1)(a) - As decided in AA520 VEERAPPAMPALAYAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED - 2021 (4) TMI 1169 - MADRAS HIGH COURT scope of an intimation under section 143(1)(a) of the Act extends to the making of adjustments based upon errors apparent from the return of income and patent from the record Thus to say that the scope of incorrect claim should be circumscribed and restricted by the Explanation which employs the term entry would in my view not be correct and the provision must be given full and unfettered play. The explanation cannot curtail or restrict the main thrust or scope of the provision and due weightage as well as meaning has to be attributed to the purposes of section 143(1)(a).- Decided against assessee.

Summary

Issues:
1. Rectification of order due to belated remittance of PF/ESI.
2. Treatment of employees' contributions to PF/ESI.
3. Disallowance under section 36(1)(va) r.w.s. 2(24)(x) of the Act.
4. Validity of disallowance under section 143(1)(a) of the Act.

Issue 1: Rectification of order due to belated remittance of PF/ESI:
The Appellate Tribunal allowed the Miscellaneous Petition filed by the revenue, citing a mistake in the order passed regarding belated remittance of PF/ESI, which was rectified based on the recent decision of the Hon'ble Supreme Court in the case of Checkmate Services (P.) Ltd. vs. CIT-1. The order passed by the bench was recalled, and the case proceeded to be heard on merits.

Issue 2: Treatment of employees' contributions to PF/ESI:
The Appellate Tribunal considered the latest decision of the Hon'ble Supreme Court in the Checkmate Services case, clarifying that Section 43B(b) does not cover employees' contributions to PF/ESI. The contributions need to be deposited within the due date as per relevant employees' welfare legislation failing which it would be treated as 'income in the hands of the employer' u/s.2(24)(x) of the Act. The order of lower authorities was to be restored based on this decision.

Issue 3: Disallowance under section 36(1)(va) r.w.s. 2(24)(x) of the Act:
In line with the decision of the Hon'ble Supreme Court, the Appellate Tribunal upheld that the addition could be made for employees' contribution to PF/ESI not deposited within the stipulated date as per the respective Act. The disallowance was deemed acceptable under section 36(1)(va) r.w.s. 2(24)(x) of the Act, as the assessee had failed to deposit the employees' contribution on time.

Issue 4: Validity of disallowance under section 143(1)(a) of the Act:
The Appellate Tribunal rejected the argument that disallowance/addition cannot be made under section 143(1)(a) of the Act. Citing a similar decision by a coordinate bench and the judgment of the Hon'ble Madras High Court, it was held that such additions can be made under this section. The appeal of the assessee was dismissed based on these findings.

In conclusion, the Appellate Tribunal allowed the revenue's Miscellaneous Petition, upheld the treatment of employees' contributions to PF/ESI as 'income in the hands of the employer,' and accepted the disallowance under section 36(1)(va) r.w.s. 2(24)(x) of the Act. Additionally, the Tribunal deemed it valid to make disallowances/additions under section 143(1)(a) of the Act, leading to the dismissal of the appeal by the assessee.