TMI Blog2022 (1) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is dismissed. Disallowance u/s 2(24)(x) r.w sec. 36(1)(va) - disallowance of the delayed deposit of the employee s contributions towards provident fund - amount was deposited before the due date of filing of its return of income as provided in Sec. 139(1) - HELD THAT:- We are of the considered view that the issue as to whether or not the employees contribution to welfare funds would fall within the scope and domain of Sec. 43B of the Act, is covered by the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Hindustan Organic Chemicals Ltd [ 2014 (7) TMI 477 - BOMBAY HIGH COURT] We are of the considered view that no distinction is to be drawn between the employers as well as employees contribution to PF and ESI as both are covered u/s 43B - We, thus, in terms of our aforesaid observations vacate the disallowance made by the A.O qua the delayed deposit of the employees contributions towards Provident Fund by the assessee company. The additional ground of appeal raised by the assessee is allowed in terms of our aforesaid observations. - ITA No. 1955/PUN/2017 - - - Dated:- 5-1-2022 - SHRI INTURI RAMA RAO, AM AND SHRI RAVISH SOOD, JM Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities, it was observed by the A.O, that the assessee had during the year on the basis of the excise duty that was fixed per machine paid a substantial amount of excise duty. Backed by the aforesaid fact, the A.O was of the view that it was beyond comprehension that the assessee in the absence of commensurate production would have by any stretch of prudence continued paying substantial amount of excise duty. Also, the A.O taking cognizance of the ledger accounts of the various purchases of packing material that was filed by the assessee with him, observed, that the same revealed lopsided purchases of packing stock, viz. aluminium file, inner boxes, lamination purchases etc. which were either wholly or primarily made at the fag end of the year i.e in the month of March, 2011. Also, the story qua the purchases of betel nut i.e a principal raw material used in manufacturing of pan masala was found to be no different, as out of the total purchases of ₹ 1.38 crore (approx.) made during the year the assessee had claimed to have purchased betel nut of ₹ 52.08 lacs in the month of March, 2011. It was further observed by the A.O that the assessee company as against its sales of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.03. 2011 6250000 5 8112000 Total 81762000 137280000 102794690 34485310 Quantifying the value of the suppressed production, the A.O taking the value @ ₹ 1/- per pouch determined the same at an amount of ₹ 3,44,85,310/-. Apart from that, the A.O taking cognizance of the fact that the assessee had delayed the deposit of employees provident fund contributions of ₹ 9,18,996/- i.e had deposited the said amount beyond the prescribed time period contemplated under the Provident Fund Act, therein triggered the provisions of Sec. 2(24)(x) r.w Sec. 36(1)(va) of the Act and disallowed the aforesaid amount of ₹ 9,18,996/. Accordingly, the A.O vide his order passed u/s 143(3), dated 30-3-2014 after making the aforesaid additions/disallowances assessed the income of the assessee company at ₹ 51,31,476/-. 4. Aggrieved, the assesse carried the matter in appeal before the CIT(A), who after deliberating at length on the addition of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view would had been channelized to facilitate the unaccounted sales of ₹ 12,67,70,182/- of M/s Sanket Industries Ltd. (supra). As regards the disallowance of the employee s contributions towards Provident Fund that was deposited by the assessee company beyond the specified due date as contemplated in the Provident Fund Act, the CIT(A) concurred with the view taken by the A.O that the delay in deposit of the said amount would trigger the disallowance of the same u/s 2(24)(x) r.w.s 36(1)(va) of the Act. Backed by his aforesaid observations the CIT(A) upheld the additions/ disallowances made by the A.O a/w further directions for taking appropriate remedial action in the hands of the assessee in the immediately preceding year i.e A.Y 2010-11 and dismissed the appeal. 5. The assesse, being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. As the assesse despite having been put to notice on various occasions about the hearing of the appeal has chosen not to comply with the same and put up any appearance before us, therefore, we are constrained to dispose off the appeal as per Rule 24 of the Appellate Tribunal Rules, 1963 i.e after perusing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was given sufficient opportunity by both the lower authorities to dispel the adverse inferences that were sought to be drawn on the basis of the material that was gathered in the course of the respective proceedings, which irrefutably evidenced suppressed production and unexplained investment towards purchases of raw material etc. by the assessee, however, the assessee company had failed to place on record any material which would have proved to the contrary. Backed by his aforesaid contention, it was submitted by the ld. D.R that the CIT(A) had proved to the hilt the suppressed production of the assessee that was channelized into the unaccounted sales of its sister concern , viz. M/s Sanket Industries Ltd. Backed by his aforesaid contention, it was submitted by the ld. D.R that no infirmity did emerge from the orders of the lower authorities who had rightly determined the suppressed production of the assessee company at ₹ 3.44 crores (supra). Insofar the disallowance of the delayed deposit of the employee s contributions towards provident fund was concerned, it was submitted by the learned D.R that as the said amounts were admittedly paid by the assessee beyond the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of commensurate production would have by any stretch of prudence continued paying substantial amount of excise duty. In fact, the ledger accounts of the various purchases of packing material and raw material that were filed by the assessee in the course of the assessment proceedings in itself raises serious doubts as regards its book results. Observations of the CIT(A) as regards the aforesaid serious infirmities qua the purchase of raw material and packing items, either of which was not found to be commensurate to the production of pan masala and pouches by the assessee company during the year, are for the sake of clarity culled out as under : i.) Aluminium File: Total purchase of ₹ 15,29,036/- were made during the year. The assessee company has started manufacturing of Gutkha in October, 2010 whereas the entire Aluminium file was purchased after 26.02.2011. It was not understood as to how the assessee company had packed Gutkha/Pan Masala during the period 16.10.2010 to 26.02.2011. It was also noticed that the assessee company did not have any opening stock of Aluminium file since the manufacturing activities was started from 26.02.2011. ii.) Betal nut: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no way commensurate to the production of pan masala and gutkha by the assessee company; the purchases of the raw material and packing items was lopsided and majority of the purchases of both the items were carried out at the fag end of the year i.e in the month of March, 2011; that though the assessee had paid fixed excise duty in respect of all the machines yet there was production much below the installed capacity of machines etc., were some of the manifold factors that did not inspire any confidence as regards the veracity of the book results of the assessee with the A.O, , for which reason he had rejected the books of accounts of the assessee company u/s 145(3) of the Act. In our considered view, the A.O in the totality of the facts of the case was fully justified in rejecting the books of accounts of the assessee company u/s 145(3) of the Act. We, thus, finding no infirmity in the rejection of the assessee s books of accounts by the A.O u/s 145(3) of the Act, uphold the same. 10. We shall now advert to the sustainability of the estimation of the suppressed production of the assessee company and the consequential addition that was made by the A.O after rejection of the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the lower authorities in our considered view had rightly adopted the production as per the installed capacity of the machines that was taken as a basis by the Central Excise Authorities, as a yardstick for computing the shortfall/suppressed production of the assessee company. At this stage, we may herein observe, that the lower authorities had rightly observed that it was beyond comprehension that the assessee would have continued paying substantial amount of excise duty, despite the fact that it did not have commensurate production. We, thus, are of the considered view that the lower authorities had rightly worked out the suppressed production of the assessee company at 3,44,85,310 pouches by adopting the deemed production on the basis of which excise duty was charged on it. In fact, as observed by us hereinabove, in case the assessee had any reason with him as to why the suppressed production was not to be determined on the aforesaid basis, as was specifically brought to his notice by the A.O, then, it was open for him to have come forth with an explanation as regards the same, which we are afraid he had not done. On the basis of the aforesaid facts, we are of a strong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal qua the aforesaid aspect dismissed the appeal filed by the revenue. Also, we find that a similar view had been arrived at by various other Hon ble High Courts, as under:- a. CIT Vs. Amil Ltd reported (2010) 321 ITR 508 (Delhi High Court) b. CIT Vs. Hemla Embroidery Mills (P) Ltd. (2014) 366 ITR 167 (P H) c. Bihar State Warehousing Corporation Ltd.Vs. CIT 386 ITR 410 (Patna) d. Sagun Foundary Pvt. Ltd Vs. CIT 145 DTR 265 (All) e. CIT Vs. Mark Auto Industries (2008) 358 ITR 43 (P H) f. CIt Vs. Jaipur Vidyut Vitran Nigam Ltd (2014) 363 ITR 307 (Raj) g. Essae Teraoka Pvt. Ltd Vs. DCIT (2014)366 ITR 408 (Kar) h. CIT Vs. Vijay Shree Ltd (2014) 43 Taxmann.com 396 (Cal) i. CIT Vs. Kichha Sugar Co Ltd (2013) 356 ITR 351 (Uttarakhand) In the backdrop of the aforesaid settled position of law, we are of the considered view that no distinction is to be drawn between the employers as well as employees contribution to PF and ESI as both are covered u/s 43B of the Act. We, thus, in terms of our aforesaid observations vacate the disallowance of ₹ 9,18,996/- made by the A.O qua the delayed deposit of the employees contributions towards Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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