2025 (6) TMI 1471 - AT - Income Tax

Validity of Intimation passed u/s 143(1) - invocation of the provisions of section 43B of the Act - qualification in tax audit report - wrong mentioning of tax rate - non payment of GST before the due date of filing return u/s 139(1) - Computation of time - delayed deposit of employee s provident fund (PF) contribution - delay in PF deposit due to a holiday (Sunday) - disallowance made u/s 36(1)(va). Disallowance made under section 43B - HELD THAT - We are of the opinion that section 43B of the Act will be attracted only when the tax or duty or any other statutory liability has been claimed as a deduction but the said tax or duty or any other statutory liability has not been actually paid. When no deduction of GST by way of operating expenses has been claimed by the assessee company then question of disallowance of the same does not arise in the present case. It is worthwhile here to note that the section 43B of the Act deals with the allowing of certain deductions on certain expenses only when such expenses are paid by the assessee and not when they have been incurred as per the accounting method of the assessee. Thus section 43B of the Act states that certain deductions are to be allowed only on actual payment of the expenses for which the deduction is claimed. In the present case on going through the balance sheet we find that there is no GST amount payable as on 31.3.2018 and therefore the disallowance made u/s 43B of the Act based on incorrect tax audit report of a Chartered Accountant which is later on rectified by the auditor is unjustified. Accordingly we delete this disallowance made under section 43B of the Act amounting to Rs. 2, 60, 67, 039/- and allow this ground of appeal of the assessee. Disallowance made u/s 36(1)(va) - We find that if any Act or proceeding allowed to be done or taken in any Court or office on a certain day or within a prescribed period then if the Court or office is closed on that day or the last day of the prescribed period the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open. Therefore we find force in the argument of the assessee that on 15.10.2017 the office of the assessee company was closed being holiday for this reason the assessee company could not deposit the amount of PF on Sunday. This being so we are of the considered opinion that the deposit of provident fund on the very next day i.e. on 16.10.2017 being Monday is within the time as per law and therefore no disallowance is required to be made u/s 36(1)(va) of the Act and accordingly we allow this ground of appeal also. Erroneous claim of the basic tax rate - Lastly with regard to the grounds related to erroneous claim of the basic tax rate @ 30% instead of correct base rate of 25% in the original return not accepting the revised return the ld. A.R. of the assessee during the course of hearing before us did not press this ground of appeal and accordingly we dismiss this ground of appeal of the assessee as not pressed. Accordingly this ground of appeal is dismissed. In the result the appeal of the assessee is partly allowed.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the invoking of provisions of section 143(1) of the Income Tax Act, 1961 ("the Act") by the Central Processing Centre (CPC) without affording principles of natural justice was justified.

2. Whether the disallowance of Rs. 2,60,67,039/- under section 43B of the Act on account of alleged delayed GST remittance was legally sustainable, especially when such sum did not reflect in the financial statements.

3. Whether the disallowance of Rs. 18,89,018/- under section 36(1)(va) of the Act for delayed deposit of employee's provident fund (PF) contribution by one day was justified.

4. Whether the delay in PF deposit due to a holiday (Sunday) can be condoned under the General Clauses Act, 1897, thereby negating the disallowance under section 36(1)(va) of the Act.

5. Whether the CPC was justified in applying a base tax rate of 30% instead of the concessional 25% rate applicable to the assessee.

6. Whether the rejection of the rectified return filed by the assessee without providing a reasonable opportunity of hearing was valid.

7. Whether the levy of interest under sections 234B and 234C of the Act was correct in extent and rate.

8. Whether the assessee was entitled to refund of Rs. 86,12,900/- claimed in the rectification return along with interest under section 244A of the Act.

Issue-wise Detailed Analysis

1. Invocation of Section 143(1) and Principles of Natural Justice

The appellant contended that the CPC's invocation of section 143(1) violated principles of natural justice. However, the Tribunal did not dwell extensively on this ground, as the limited scrutiny and subsequent assessment under sections 143(3), 143(3A), and 143(3B) were completed with opportunity for submissions. The issue was not pressed further before the Tribunal, and thus no adverse finding was recorded.

2. Disallowance under Section 43B of Rs. 2,60,67,039/- on Account of GST

Legal Framework: Section 43B mandates that certain deductions for expenses or liabilities (such as taxes) are allowable only if actually paid before the due date of filing the return under section 139(1). The provision is intended to prevent accrual-based claims of deduction for unpaid statutory liabilities.

Facts and Evidence: The tax audit report initially filed showed a GST liability of Rs. 2,60,67,039/- as unpaid before the due date. However, the original and second revised audit reports showed nil GST payable under the relevant column (26(i)(B)(b) of Form 3CD). The financial statements for the year ending 31.3.2018 did not disclose any GST liability under current liabilities, nor was GST routed through the profit and loss account as an expense.

Court's Reasoning and Application: The Tribunal noted that the disallowance was based on an erroneous first revised audit report which was later rectified by the auditor. Since no deduction for GST was claimed (no expense recorded in P&L), section 43B could not be invoked. The Tribunal emphasized that section 43B applies only when the expense or liability is claimed as a deduction but not paid. Here, no such deduction was claimed, and the GST amount did not appear as a liability in the financial statements.

Conclusion: The disallowance of Rs. 2,60,67,039/- under section 43B was deleted as unjustified.

3. Disallowance under Section 36(1)(va) of Rs. 18,89,018/- for Delayed PF Deposit

Legal Framework: Section 36(1)(va) disallows deduction for employer's contribution to specified funds (such as PF) if not deposited within the prescribed time under the relevant statute.

Facts and Evidence: The PF contribution for September 2017 was deposited on 16.10.2017, one day after the due date of 15.10.2017. The delay was due to 15.10.2017 being a Sunday, a holiday. For the other 11 months, PF was deposited timely.

Court's Reasoning and Application: The Tribunal relied on section 10 of the General Clauses Act, 1897, which provides that if the last day for an act falls on a holiday or when the office is closed, the act done on the next working day is deemed timely. The Tribunal held that since the due date was a Sunday, the deposit on the following Monday was within time as per law. Accordingly, the disallowance under section 36(1)(va) was not warranted.

Treatment of Competing Arguments: The revenue contended that any delay, even by one day, disallows deduction. The Tribunal rejected this strict interpretation in light of the General Clauses Act, emphasizing practical and legal considerations.

Conclusion: The disallowance of Rs. 18,89,018/- under section 36(1)(va) was deleted.

4. Tax Rate Applied: 30% vs. 25%

The assessee initially filed the return with a basic tax rate of 30% instead of the concessional 25%. The Assessing Officer accepted the returned income without adjusting the tax rate. The CIT(A) held that since the assessee's turnover exceeded Rs. 50 crores, the concessional rate of 25% was not applicable.

During the Tribunal hearing, the assessee did not press this ground, and the Tribunal accordingly dismissed it as not pressed.

5. Rejection of Rectified Return without Opportunity

This ground was raised by the assessee, contending that the CPC rejected the rectified return without providing a reasonable opportunity. The issue was not elaborated upon by the Tribunal, and no relief was granted on this ground.

6. Levy of Interest under Sections 234B and 234C

The assessee challenged the levy of interest as excessive and not properly quantified. The Tribunal did not specifically address this ground in detail, and no modification was made to the interest levied.

7. Entitlement to Refund of Rs. 86,12,900/- with Interest

The assessee claimed refund based on the rectified return. Since the rectified return was not accepted, and the ground regarding tax rate was not pressed, the Tribunal did not grant refund or interest relief.

Significant Holdings

"Section 43B of the Act will be attracted only when the tax or duty or any other statutory liability has been claimed as a deduction but the said tax or duty or any other statutory liability has not been actually paid. When no deduction of GST by way of operating expenses has been claimed by the assessee company, then question of disallowance of the same does not arise in the present case."

"Section 10 of the General Clauses Act, 1897, provides that if the Court or office is closed on the last day of the prescribed period, the act done on the next day on which the office is open shall be deemed to be done in due time. Therefore, deposit of provident fund on the next working day after a holiday is within the time as per law."

The Tribunal concluded that the disallowance under section 43B of Rs. 2,60,67,039/- was unjustified and deleted it. Similarly, the disallowance under section 36(1)(va) of Rs. 18,89,018/- was deleted as the delay was excused under the General Clauses Act. The ground relating to tax rate was dismissed as not pressed. Other grounds were either not pressed or not allowed.