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2016 (8) TMI 738 - ITAT MUMBAI

2016 (8) TMI 738 - ITAT MUMBAI - TMI - Penalty levied u/s 271(1)(c) - violation of provisions of Section 43B - non payment of employer contribution towards PF/ESIC within time stipulated under the approved installment scheme - Held that:- The assessee came out with explanation which was a bonafide explanation which satisfied the mandate of Section 271(1)(c) of the Act and hence penalty u/s 271(1)(c) of the Act against the assessee is not exigible in this case subject to verification of the plea .....

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thorities before the A.O. approving installment scheme with reference to employer contribution of ₹ 27,84,655/- towards PF/ESIC dues and the A.O. shall verify the same as per our directions as setout above and thereafter delete the penalty levied u/s 271(1)(c) of the Act after being satisfied that the assessee has duly paid the said employer contribution of ₹ 27,84,655/- towards PF/ESIC within time stipulated under the approved installment scheme. - Decided in favour of assessee. - I .....

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he appellate proceedings before the learned CIT(A) arising from the penalty order dated 26th March, 2012 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 271(1)(c) of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) reads as under:- 1. The Hon'ble Commissioner of Income Tax (Appeal) - 22 [The CIT (A .....

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s that the imposing penalty to be deleted. 3. The brief facts of the case are that the assessee company filed return of income for the captioned assessment year on 28-11-2003 declaring a loss of ₹ 3,37,20,850/- . 4. During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act, it was observed by the AO that the assessee has debited an amount of ₹ 6,22,02,224/- towards payment and provisions for employees. The A.O. called for the details of expenses compr .....

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n as to why the balance amount of ₹ 27,84,655/- should not be disallowed as the same was not paid before the due date of filing of return u/s 139(1) of the Act and is thus hit by the provisions of Section 43B of the Act , the assessee submitted that the company went into BIFR in the year 1992 and the Scheme of Revival was announced in the year 1996 and due to the precarious financial condition of the assessee , the assessee took permission of PF and ESIC authorities to pay the dues in inst .....

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to why penalty u/s 271(1)(c) of the Act should not be levied. The A.O. observed that the contentions of the assessee have no merit. The assessee has not furnished the full facts with regard to the disallowance u/s 43B of the Act either in the audit report in Form 3CD or in the statement of computation of income filed with the Revenue. It is only when the assessee was asked , the assessee came out with explanation. The A.O. observed that the assessee could not furnish any evidence in respect of .....

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given was bona fide and was not an afterthought, thus in the opinion of the AO, the assessee has failed to furnish the explanation as are required as per mandate of Section 271(1)(c) of the Act to come out of clutches of penalty leviable. The A.O. relied on the following decisions:- 1. K.P. Madhusudan v. CIT, (2001)251 ITR 99 (SC) 2. Raghuvir Soni v. ACIT, (2002) 258 ITR 239 (Rajasthan HC) 3. UOI v. Dharmendra Textiles (2008) 174 Taxman 571(SC) The AO distinguished the reliance placed by the as .....

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d. CIT(A) . 5. Before the learned CIT(A) , the assessee made the following submissions:- The appellant was registered under BIFR in 1992 and scheme of revival was announced in 1996. The appellant's financial condition was precarious. In the circumstances the appellant had taken approval from the PF and ESIC Authorities to pay the dues under the respective laws in installments. The PF and ESIC Authorities had granted necessary permissions and permitted the appellant to pay the dues in install .....

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ate particulars of income. The factum of installments being granted by the PF and ESIC Authorities is not in dispute. The only issue is whether the employers contribution towards PF and ESIC can be said to be due and payable when installments have been granted by the Authorities under the respective statute. The AO has invoked the provisions of s. 43B for the reason that deduction is available only if the PF and ESIC is paid. The appellants contention is that the provisions of s. 43B can be invo .....

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nstructions P. Ltd. 2961TR 18 (Mad). The ld. CIT(A) rejected the contention of the assessee as the assessee has not paid the dues amounting to ₹ 27,84,655/- to the PF/ESIC before the due date of filing of return of income u/s 139(1) of the Act, hence the said expense cannot be allowed as deduction. With respect to the contention of the assessee that the company has become sick and it was registered with BIFR in 1992 and the approval has been obtained from PF/ESIC authorities but the same d .....

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d any material to show that it paid the above dues amounting to ₹ 27,84,655/- within the due date granted under the installment scheme approved by the PF/ESIC authorities. The assessee placed reliance in the case of Reliance Petroproducts Private Ltd., 322 ITR 158 and CIT v. MSK Constructions P. Ltd., 296 ITR 18 (Mad.) but the facts are different and hence distinguishable. The ld. CIT(A) accordingly upheld the action of the A.O. as in his opinion the assessee has not only furnished inaccur .....

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that the A.O. levied the penalty u/s 271(1)(c) of the Act on delay in deposit of employer contribution of PF/ESIC amounting to ₹ 27,84,655/- as the assessee has not deposited the money before the due date of filing the return of income . The ld. Counsel submitted that the assessee has been declared as a sick company in 1992 and scheme of revival was declared in 1996. The ld. Counsel submitted that since the financial condition of the assessee was precarious , the assessee obtained approval .....

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Hon ble High Court of Punjab and Haryana in the case of CIT v. National Institute of Technical Teacher Training of Research, [2014] 50 taxmann.com 107 (Punjab & Haryana). 8. The ld. D.R., on the other hand, supported the orders of the authorities below. 9. We have considered the rival contentions and also perused the material available on record including case laws relied upon by both the parties. We have observed that assessee was a sick company which was registered with BIFR in 1992 and sc .....

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roval from the PF and ESIC authorities to pay the afore-stated dues under installments scheme and the assessee has duly complied with the terms and conditions of the installment scheme approved by the PF/ESIC authorities and hence no amount was due for payment by the assessee in view of the approved installment scheme. The additions were made to the income of the assessee u/s 43B of the Act by the Revenue as the assessee could not produce the evidence that it has complied with the installment sc .....

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ESIC aggregating to ₹ 27,84,655/- is concerned. The Revenue has levied penalty u/s 271(1)(c) of the Act on the ground that the assessee has not added the said amount of ₹ 27,84,655/- on account of non-payment of employer contribution towards PF/ESIC before the due date of filing of return u/s 139(1) of the Act to income of the assessee as per the clear provisions of section 43B of the Act. The assessee has come out with the explanation that the assessee was under the bonafide belief .....

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ranted approval of installment scheme for payment of PF/ESIC dues and Section 43B is applicable if PF/ESIC is payable and is not paid before the due date of filing of return of income as stipulated u/s 139(1) of the Act while in the instant case there was no dues payable to PF/ESIC authorities in view of approved installment scheme was the explanation of the assessee. The assessee has come forward with the explanation that it has obtained the approval of the PF/ESIC authorities to pay the employ .....

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y was granted installment scheme to pay employer contribution towards PF/ESIC by PF/ESIC authorities which it stated to have complied with and hence since no amount was due to be payable before the filing of return of income u/s 139(1) of the Act on account of employer contribution towards PF/ESIC in view of the approved installments scheme by PF/ESIC authorities, the assessee did not visualize that any amount is due for payment under PF/ESIC laws and hence Section 43B of the Act which contempla .....

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