TMI Blog2023 (3) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... er under Section 36(1)(va) of the Act. On the other hand, delay in payment of employer s contribution is visited with deferment of deduction on payment basis u/s 43B of the Act and is therefore not lost totally. Therefore, as per the above decision, the additions made by Revenue authorities were fully justified. We are of the view that the decisions cited by the learned Counsel for the assessee proceed on the assumption that the disallowance of employees share of PF and ESI paid beyond the due dates under relevant law has been made only under section 143(1)(a)(iv) of the Act, while in the intimation under section 143(1)(a) of the Act, no such basis has been given and therefore the disallowance can be justified even in terms of section 143(1)(a)(ii) of the Act. - Decided against assessee. - ITA No. 1142/Bang/2022 - - - Dated:- 18-1-2023 - Shri Chandra Poojari, Accountant Member For the Assessee : Shri I. Dinesh, Advocate For the Revenue : Shri Ganesh R. Ghale, Standing Counsel ORDER PER: CHANDRA POOJARI, A.M. This appeal by the assessee is directed against the order of the CIT(A)/NFAC, Delhi dated 26.10.2022 for the assessment year 2019-20. 2. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallow the belated contribution of employee's towards PF ESI on the following counts; (a) Sub-clause (i) of Sec.143(1)(a) on account of arithmetical error; (b) Sub-clause (ii) of Sec.143(1)(a) on account of incorrect claim which is apparent from any information in the return; (c) Sub-clause (iv) of Sec.143(1)(a) on account of disallowance of expenditure indicated in the audit report but not taken into account in computing total income; 3.3 It is submitted that the scope of section 143(1) is very limited and narrow: (a) Adjustment under sub-clause (i) of Sec.143(1)(a) is unambiguous and clearly states that such an adjustment can only be made on account of arithmetical error; which is not the case on hand. Therefore, the proposal to disallow the aforesaid sum u/s.143(1)(a)(i) doesn't arise. (b) Sec.143(1)(a)(ii) reads as under; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; What amounts to incorrect claim is also inserted vide Explanation to Sec.143(1) which is as under; Explanation. For the purposes of this sub-section, (a) an incorrect claim apparent from any information in the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income as per Sec.2(24)(x) includes any sum received from the employees as contributions to PF/ESI. Therefore, the receipt of such sum in the form of contribution from employees towards PF/ESI is treated as income of the Appellant employer. The enabling provision vide sub-clause (iv) came into force only w.e.f.01.04.2021 and as such the power to make such adjustment by AO, CPC is vested only w.e.f.01.04.2021. Therefore, adjustment prior to A.Y.2020-21 on account of increase in income is not in accordance with law. 3.7 Moreover, the tax audit report is not a certificate and therefore, the findings in the audit report are not conclusive. From A.Y.2020-21, the law entails the Assessee to furnish audit report one month prior to the due date of filing of ROI u/s.139(1). All the details in the audit report need not necessarily be accepted by the Assessee while filing his ROI. Therefore, the disallowance on this count doesn't stand in the eyes of law. 3.8 It is pertinent to note that the above Explanation to Sec.143(1) specifically states that the incorrect claim ought to be based on an entry in the return of income. Rule 12 of the IT Rules states that ROI shall not be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al submissions an perused the materials available on record. The main contention of ld. AR is that the AO precluded from making any additions or disallowance u/s 143(1) of the Act other than the amount disclosed by assessee in audit report filed u/s 44AB of the Act. According to him, the assessee has disclosed these details in audit report filed u/s 44AB of the Act along with return of income as Annexure G as answers to question No.26 u/s 44AB of the Act report showing the amount not paid on or before the due date of respective Act was at Rs.69,833/-, which was duly disallowed by the assessee itself. Hence, no further disallowance could be made. 5.1. On the contrary, ld. DR brought to my notice that the Annexure E which is relating to the answer to question No.20(b) in tax audit report showing the details of contribution received from employees for various funds as referred tin section 36(1)(va) of the Act that amount belatedly paid at Rs.13,48,410/- same was disallowed by AO u/s 143(1) of the Act and to be confirmed. In my opinion, the disallowance made by the AO is to be restricted to the expenditure of ESI PF not paid within the due date of relevant provisions of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. . The term `due date for the purposes of this clause has been defined in Explanation 1 to this provision to mean: `the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. Thus, it is axiomatic that deposit of the employees share of the relevant funds before the due date under the respective Acts is sine qua non for claiming the deduction. Au Contraire, if the contribution of the employees to the relevant funds is not deposited by the employer before the due date under the respective etc., then the deduction u/s.36(1)(va) is lost notwithstanding the fact that the share of the employees had already crystallized as income of the employer u/s.2(24)(x) of the Act. 5. Adverting to the facts of the case, it is seen that the assessee claimed the deduction for the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employee s account in the relevant fund before the date stipulated under the respective Acts. The hitherto view taken by some of the Hon ble High Courts in allowing deduction even where the amount was deposited in the employee s account before the time allowed u/s.139(1), ergo, got overturned. The net effect of this Apex Court judgment is that the deduction u/s.36(1)(va) can be allowed only if the employees share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts and further that the due date u/s.139(1) of the Act is alien for this purpose. 5.2 The coordinate bench of Bangalore in the case of Automac Diesels cited (supra) has decided the issue as follows: On the rejoinder submitted by the ld.DR, the adjustments u/s 143(1)(a) of the Act can be made and in the section, it is very clear that which type of adjustments can he made. He also relied on judgment of the Hon'ble Madras High Court in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs. Deputy Commissioner of Income-tax reported in (2022) 138 taxmann.com 571, wherein he also relied on the decision of the coordinate bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, as follows: Scope of the Power of Rectification 12. As stated above, in this case we are concerned with the application under section 254(2) of the 1961 Act. As stated above, the expression rectification of mistake from the record occurs in section 154. It also finds place in section 254(2). The purpose behind enactment of section 254(2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. In the present case, the Tribunal in its Order dated 10.9.2003 allowing the Rectification Application has given a finding that Samtel Color Ltd. (supra) was cited before it by the assessee but through oversight it had missed out the said judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assessee for enhanced depreciation under section 43A. One of the important reasons for giving the power of rectification to the Tribunal is to see that no prejudice is caused to either of the parties app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the audit report filed u/s 44 AB of the Act as not paid in respect of employees share of contribution of PF/ESI within due date stipulated in the respective Act and there is no error committed by the AO in making such disallowance. Accordingly, we direct the AO to make such disallowance disclosed by assessee in his report filed u/s 44AB of the Act column no.20(b) as well as referred in Annexure E and 26(A) Annexure G, if the assessee has made no suo motu disallowance by itself. Accordingly, I direct the AO to limit the disallowance to that extent. Ordered accordingly. ITA No.1079/Bang/2022 (AY 2019-20): 6. On similar lines as adjudicated in the case of ITA No.995/Bang/2022 for the AY 2020-21, this appeal is also remitted back to the file of AO with direction to limit the disallowance to that extent. Ordered accordingly. 7. In the result, both the appeals filed by different assessees are partly allowed for statistical purposes. 6. As discussed above, the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT in Civil Appeal No. 2833/2016 vide judgement dated 12th October, 2022 decided the issue on allowability/ treatment of delayed pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of employee's contribution towards PF by invoking section 143(1)(iv)(a). The Tribunal held that the said disallowance was based on observations made by tax auditor in audit report which stated that payments of employee contribution were made by assessee after due date specified under respective acts as judicial decisions have taken the view that said disallowance would not come into play when payment was made well before due date of filing income tax return under section 139(1) and therefore information provided in tax audit report would cease to be relevant and no disallowance can be made during assessment proceedings under section 143(1)(iv)(a). 8. The decision was rendered by the ITAT Mumbai Bench in the case of Kalpesh Synthetics (P) Ltd. (supra) on 27.4.2022 prior to the decision of the Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd., (supra) and therefore not applicable. The decision rendered by ITAT Mumbai Bench in the case of M/s. P. R. Packaging Services, follows the decision in the case of Kalpesh Synthetics (supra). In paragraph 5 of the order, a reference has been made to the decision of the Hon ble Supreme Court in the case of Checkmate Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the view that the decisions cited by the learned Counsel for the assessee proceed on the assumption that the disallowance of employees share of PF and ESI paid beyond the due dates under relevant law has been made only under section 143(1)(a)(iv) of the Act, while in the intimation under section 143(1)(a) of the Act, no such basis has been given and therefore the disallowance can be justified even in terms of section 143(1)(a)(ii) of the Act. 9. Further the decision of the Cuttack Bench of ITAT in the case of Nirkar Security Consultancy Services (P) Ltd. in ITA No. 98/2022 dated 17.10.2022 have no bearing on the present issue where the Tribunal observed that as per the assessee in certain months the employee s contribution to PF ESI has been paid within the grace period provided in the respective Acts and also in certain cases salary has been paid belatedly, consequently, there was a delay in payment of employees contribution to PF ESI. Hence, the issue was restored by the Tribunal to the file of the AO for re-examination. Further, with regard to the claim of assessee that delayed contribution of PF ESI in respect of employees contribution to be allowed as deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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