Case Number: ITA 3035/DEL/2022
Appellant: College Shoes, Delhi
Respondent: DCIT, Circle-49(1), New Delhi
Assessment Year: 2020-21
Case Filed On: 2022-12-28
Order Type: Final Tribunal Order
Date of Order: 2023-06-20
Pronounced On: 2023-06-20
In the case of College Shoes vs. DCIT, Circle-49(1), New Delhi, the appellant, College Shoes, challenged the disallowance under Section 36(1)(va) of the Income-tax Act for the assessment year 2020-21. The case was heard by the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘B’ on 20th June 2023, with the final order pronounced on the same day.
The appeal arose from the order passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), dated 28th November 2022. The appellant was represented by Shri R.K. Kapoor, CA, while the respondent was represented by Shri N.K. Bansal, Sr. DR. The primary grievance of the appellant was the disallowance of employees’ contribution to Provident Fund/ESIC under Section 36(1)(va) r.w.s. 43B of the Act amounting to Rs. 23,73,348.
The appellant’s counsel argued that the disallowance was based on incorrect information provided in the Tax Audit Report. The Tax Auditor inadvertently copied the information from another client, and the provisions of PF/ESIC were not applicable to the appellant as it had not incurred any employee costs nor any contributions to ESI/PF. The appellant contended that these expenses were not claimed in the return of income, and thus, the disallowance was erroneous.
The appellant further argued that it operated on a franchisee basis, and all employee-related expenses were borne by the principal as per the franchisee agreement. This clerical mistake occurred during data uploading on the income tax portal and was not reported by the statutory auditors. The appellant’s profit and loss account did not claim any employee-related expenses.
The ITAT bench, comprising Shri Chandra Mohan Garg (Judicial Member) and Shri Pradip Kumar Kedia (Accountant Member), decided to remit the issue back to the designated Assessing Officer (AO). The tribunal directed the AO to examine the appellant’s contentions and delete the disallowance if satisfied that the appellant had not incurred any expenses on account of such contributions and had not claimed any expenditure towards PF/ESIC.
The tribunal’s order stated: ‘In the light of the submissions made, we consider it expedient to restore the matter back to the file of the designated AO. The assessee shall be at liberty to adduce evidences on facts and law in this regard before the AO. The AO shall delete the disallowance when it is satisfied that assessee has not incurred any expense on account of such contribution and has not claimed any expenditure towards PF/ESIC. Needless to say, a reasonable opportunity shall be given to the assessee while determining the issue.’
The appeal was allowed for statistical purposes, meaning the matter was sent back to the AO for reevaluation.
The ITAT’s decision emphasizes the importance of accurate information in tax filings and the need for thorough verification of facts before making disallowances. It ensures that the appellant is given a fair opportunity to present evidence and correct any errors in their filings.
Order Pronounced: In the open court on 20th June 2023.
Bench: Shri Chandra Mohan Garg, Judicial Member and Shri Pradip Kumar Kedia, Accountant Member
Copy forwarded to:
Date of Hearing: 20th June 2023
Date of Order: 20th June 2023
The appellant, College Shoes, filed an application on 28th December 2022 against the order dated 28th November 2022 by the NFAC, challenging the disallowance of employees’ contribution to Provident Fund/ESIC under Section 36(1)(va) for the assessment year 2020-21.
The tribunal considered the appellant’s arguments and decided to remit the issues back to the AO for verification and fresh adjudication, ensuring that the appellant is given an adequate opportunity to present their case.
The tribunal’s decision underscores the importance of due process and fairness in tax assessments, allowing taxpayers to correct errors and provide necessary documentation to substantiate their claims.
Overall, the ITAT’s order serves as a reminder of the importance of accurate and fair assessment procedures in tax matters, ensuring that all parties are given a fair chance to present their case and that decisions are made based on thorough verification and consideration of all relevant facts.
College Shoes vs. DCIT, Circle-49(1), Disallowance under Section 36(1)(va) for AY 2020-21
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform