TMI Blog2023 (4) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same doesn t support the case of the assessee. Disallowance made by CPC while processing the return of income and specially in the context of 143(1)(a)(iv) - we find that the matter is squarely covered by the decision Cemetile Industries Ors [ 2022 (12) TMI 354 - ITAT PUNE] - CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made for late deposit of employees share of PF/ESI contribution to the relevant funds beyond the date prescribed under the respective Acts. Appeal of the assessee is dismissed. - ITA NO. 1/Chd/2022 - - - Dated:- 16-3-2023 - Shri. Sudhanshu Srivastava, JM And Shri. Vikram Singh Yadav, AM For the Assessee : Shri Sarabjit Garg, CA For the Revenue : Smt. Tarundeep Kaur, Sr. DR ORDER PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT(A), NFAC, Delhi dt. 04/08/2021 wherein the limited issue relates to sustenance of disallowance of employees contribution towards PF/ESI under section 36(1)(va) of the Act pertaining to A.Y. 2018-19 2. Briefly the facts of the case are that the assessee filed its return of income declaring tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Income Tax Act, and which has been upheld by the Hon ble Supreme Court. It was submitted that the idea behind introduction of Section 36(1)(va) was that the employees contribution is held in trust by the employer and to prevent its misuse, it has to be allowed as deduction only where the payment is made by due date under the relevant statue. It was submitted that the assessee appreciates the concern of legislature and despite financial constraints, wants to pay at least employees contribution by due date under the relevant statue, as this is the amount held by him under trust. However despite his best efforts, the assessee was not able to deposit the same, as no corresponding enabling mechanism has been made in the EPF Scheme and ESI Regulation by the executive as also reproduced in the order of the Hon ble Supreme Court at para 6 and 7 in case of Checkmate Services P. Ltd. Ors. Vs. CIT Ors.(supra) which provide for payment of employee s contribution and employer contribution together and do not allow separate and independent payment of employer and employee contribution. It was submitted that this aspect of the lack of enabling mechanism for making separate payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors.(supra) which has set-aside the decision of the Hon ble Karnataka High Court Essae Teraoka (P.) Ltd and various other High Courts where the employees contribution were equated with employer contribution and benefit of section 43B were provided to the assessee. He accordingly submitted that the appeal so filed by the assessee deserves to be dismissed and the order of the Ld. CIT(A), NFAC be confirmed. 6. We have considered the rival submissions and perused the material available on the record. We find that the matter is squarely covered by the decision of Hon ble Supreme Court in case of Checkmate Services P. Ltd. Ors. Vs. CIT Ors.(supra) wherein after taking into consideration the relevant provisions of the Act as well as the provisions of relevant welfare ESI/PF schemes, it was held that the contribution by the employees to the relevant funds is the employer s income under section 2(24)(x), but the deduction for the same can be allowed under section 36(1)(va) only if such sum is deposited in the employee s account in the relevant fund before the date stipulated under the respective Act and as rightly pointed out by the DR that the ratio laid down by the Hon ble Karnat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employee s share as having the same character as that of the employer s share, becoming deductible u/s 36(1)(iv) read in the hue of section 43B(b). Recently, the Hon ble Supreme Court in Checkmate Services P. Ltd. Ors. VS. CIT Ors. (2022) 448 ITR 518 (SC) has threadbare considered this issue and drawn a distinction between the parameters for allowing deduction of employer s share and employees share in the relevant funds. It has been held that the contribution by the employees to the relevant funds is the employer s income u/s.2(24)(x), but the deduction for the same can be allowed only if such amount is deposited in 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation in the return has not been generally used in the provision. Rather, it has been specifically defined in Explanation (a) to section 143(1) as under: `Explanation. For the purposes of this sub-section, (a) an incorrect claim apparent from any information in the return shall mean a claim, on the basis of an entry, in the return, (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; 9. Clause (i) of Explanation (a) refers to a situation in which there is a claim of income or expenditure at two places in the return of income and there is inconsistency in them. For example, if deduction is claimed under a specific section for a sum of Rs.100/- in the Profit and loss account accompanying the return, but in the computation of income, the amount has been taken as Rs.110/-, leading to inconsiste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 36(1)(va), the actual payment is delayed and deposited on 20.7.2017. The legislature, for the disallowance under sub-clause (iv) of section 143(1)(a), has used the expression `indicated in the audit report . The word `indicated is wider in amplitude than the word `reported , which envelopes both the direct and indirect reporting. Even if there is some indication of disallowance in the audit report, which is short of direct reporting of the disallowance, the case gets covered within the purview of the provision warranting the disallowance. However, the indication must be clear and not vague. If the indication in the audit report gives a clear picture of the violation of a provision, there can be no escape from disallowance. Turning to the facts of the case, it is clear from the mandate of section 36(1)(va) that the employees share in the relevant funds must be deposited before the due date under the respective Acts. If the audit report mentions the due date of payment and also the actual date of payment with specific reference in column no. 20(b) having heading: `Details of contributions received from employees for various funds as referred to in section 36(1)(va) , it is an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. Right now, there is no case of `increase in income because the AO did not make adjustment for non-offering of income of the `Sums received from employees , but made the adjustment for `disallowance of expenditure with the remarks that `Amounts debited to the profit and loss account, to the extent disallowance under section 36 due to non-fulfillment of conditions specified in relevant clauses . Thus, it is evident that it is a case of `disallowance of expenditure and not `increase of income . Further, the entire challenge by the assessee throughout has been to the disallowance of expenditure made by the AO. It set up a case before the authorities below, including the ld. CIT(A), taking shelter of section 43B of the Act by arguing that the disallowance cannot be made because such payment was made before the due date u/s.139(1) of the Act. As such, the contention of adjustment u/s 143(1)(a)(iv) due to `increase in income is jettisoned. 12. Another argument point was put forth on behalf of the assessee that the assessee did not claim any deduction in the Profit and loss account of the amount under consideration and hence no disallowance should have been made. This arg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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