TMI Blog2023 (7) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... the said expenditure and, therefore, it cannot be treated as concealment of income or furnishing of inaccurate particulars of income. This penalty also does not sustain. Disallowance u/s 36(1)(va) for delay in depositing employees Provident Fund , the same does not sustain as the issue at the time of assessment proceedings was a debatable issue and certain decisions of Hon ble High Courts were in favour of the assessee. Therefore, this cannot be treated as concealment of income or furnishing of inaccurate particulars of income. The penalty on this disallowance also does not sustain. Appeal of the assessee is allowed. - ITA No. 586/Ahd/2022 - - - Dated:- 7-6-2023 - Ms. Suchitra Kamble, Judicial Member For the Appellant : None For the Respondent : Shri Purushottam Kumar, Sr. DR O R D E R This appeal is filed by the Assessee against order dated 12.10.2022 passed by the CIT(A)-11, Ahmedabad for the Assessment Year 2015-16. 2. The Assessee has raised the following grounds of appeal :- 1.1 That on the facts and in the circumstances and as per law the learned CIT(A) erred in sustaining the penalty of Rs.5,20,951/- under section 271(1)(c) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g expenses and addition of Rs.10,69,021/- thereby disallowing the claim under Section 36(1)(va) read with Section 2(24)(x) of the Act as employee s contribution credited in employees account of respective funds. The Assessing Officer further made addition of Rs.87,436/- thereby disallowing the payment specified in Section 40A(3) of the Act. Subsequently, the Assessing Officer issued notice under Section 274 read with Section 271(1)(c) of the Act. The Assessing Officer imposed penalty of Rs.5,20,951/- in respect of all the additions for concealment of income. 4. Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. At the time of hearing none appeared on behalf of the assessee, but vide letter dated 26.05.2023, the assessee has submitted written submissions and requested that the appeal be decided on the written submissions itself. The said written submissions are taken on record and we are proceeding on the basis of the same. 6. The written submissions filed by the assessee are as under :- 1.1 Appellant is assessed to tax in Individual capacity. He is in engaged in the business of 'Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Submission 2.1 At the outset, your attention is invited to the fact that learned AO have levied the penalty under s. 271(1)(c) of the Act solely on the sole ground that in the quantum appeal filed by the appellant, against the additions in respect of which penalty were initiated, were sustained by the first and second appellate authority. It is well settled law that Penalty proceedings are distinct from assessment proceedings and merely because additions / disallowance has been made in the assessment proceedings and sustained by the appellate authorities does not automatically empower the A.O. to levy penalty under s. 271(1)(c) of the Act. As per the provisions of section 271(1)(c) of the Act, penalty is levied for either concealment of income or for providing inaccurate particulars of income. From the perusal of the penalty order it is clear that learned A.O. failed to bring on record to substantiate his claim that appellant had provided inaccurate particulars of income. As per the penalty order, learned A.O. have levied the penalty solely on the ground that appellate authorities sustained the additions made to the returned income as per the assessment order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred case, to the facts of the present case, it is undisputed that expenditure, in respect of which penalty has been initiated, are otherwise genuine expenditure and during the assessment proceedings appellant had furnished the details of the same with explanations. Appellant had substantiated the bona fides of his case in respect of all the additions / disallowance made by the A.O. as per the assessment order. Hence, as per the facts of the case and as per settled law by Honourable SC, appellant had not provided inaccurate particulars of income so as to make him liable to penalty under s. 271(1)(c) of the Act in respect of additions/ disallowance made to the returned income as per the assessment order. 2.2 Ground No. 1.1 2.2.1 Penalty in respect of Additions of Rs. 5,62,893 on the ground of difference between contract receipts as per books of accounts and as per 26AS statement- Reg 2.2.2 During the year, gross contract receipts of the appellant, as per the as per books of accounts was Rs.27,09,34,481. As per the findings of the learned A.O. during the course of assessment proceedings, receipts as reported in 26AS statement was Rs.27,14,97,374. Hence, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position of penalty under s. 271(1)(c) of the Act. Penalty in respect of disallowance of expenditure under s. 40A(3) of the Act is, therefore, not sustainable as per law. 2.3.4 Appellant relies on ratio laid down by various courts as under: ITAT, Pune Bench - Income tax Officer Vs. Karad Janata Sahakari Bank Ltd. [93ITR(Trib)0079] 2.4 Ground No. 1.3 2.4.1 Penalty in respect of disallowance of Rs.10,69,021 under s. 36(1)(va) of the Act- Reg 2.4.2 During the year, there were delay in deposit of Provident Fund Amount of which Rs.10,69,021 were related to the employee s contribution. Learned A.O. disallowed the same as per the provisions of s. 36(1)(va) r.w.s. 2(24)(x) of the Act. Details of delay in payment are as under; September 2014 Due date of deposit Amount of Employees Contribution to P.F Date of Payment Amount paid(Rs) Remark 15/10/2014 14,52,531 13/10/2014 905718 Allowed 25/11/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , penalty under s. 271(1)(c) is not sustainable as per settled legal propositions. 2.4.4 Whether, delay in deposit of employees contribution to PF and ESI are allowable or not, when same is delayed but deposited before due date of return u/s. 139(1), is a controversial issue and certain courts and tribunals have opined in favour of the assessee holding that if payment is made before due date of return of income under s. 139(1) same is allowable as per the provisions of section 43B of the Act. Due to divergent views of different courts and tribunals of the country, on the issue, Finance Act, 2021 clarified the position of law by inserting explanation 2 to section 36(1)(va) clarifying the position of law that provisions of section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the due date under said clause. 2.4.5 There are series of decisions of different High Courts holding that payment of employees contribution in regard to PF ESI if made before the due date of filing return of income under section 139(1) of the Act, same is allowable as deduction as per the provisions of section 43B of the Act. Some of the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty under section 271(1)(c) of the Act shall not be levied in the case of debatable issues. Appellant relies on the decision of jurisdictional courts as under : Accura Enterprise Pvt. Ltd. Vs. Deputy Commissioner of Income-tax 65 CCH 0351 Ahd Trib Date : Jul 20,2022 Gujarat State Road Corporation Vs. Assistant Commissioner of Income-tax 32 CCH 0209 Ahd Trib 2.4.8 Considering the facts of the case and settled law, as discussed above, your honour is requested to direct the assessing officer to delete the penalty under s. 271(1)(c) in respect of disallowance under s. 36(1)(va) of the Act. 3. In nutshell :- (i) Penalty in respect of additions on the ground of difference between receipts disclosed as per books of accounts and receipts as reported in 26AS statement is not sustainable considering the nature of business and quantum of difference; (ii) Penalty in respect of disallowance of expenditure under s. 40A(3)is not sustainable as expenditure was otherwise genuine and as per settled law, penalty under s. 271(1)(c) can-not be levied in respect of disallowance of an item of expenditure; (iii) Penalty in respect of disallowance of employee s contr ..... 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