Case Number: ITA 2988/DEL/2022
Appellant: Sanjay Kumar, Gurgaon
Respondent: ITO, Ward-4(1), Gurgaon
Assessment Year: 2019-20
Result: Final Tribunal Order
Case Filed on: 2022-12-22
Date of Order: 2023-06-21
Pronounced on: 2023-06-21
This case involves Sanjay Kumar (Appellant) and the Income Tax Officer (ITO) (Respondent). The appellant filed an appeal against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), for the assessment year 2019-20. The primary issue in this case was the disallowance of Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI) contributions amounting to Rs. 73,18,988 by invoking Section 154 of the Income Tax Act, 1961.
The appellant argued that the disallowance made by the learned AO under Section 154 was beyond jurisdiction and powers, as the expenditure was allowed during the assessment under Section 143(1) of the Act. The appellant contended that such disallowance could not be considered an error apparent on the record to exercise rectification powers under Section 154, especially when there were conflicting judgments from various courts at the time of the rectification.
The tribunal, presided by Judicial Member Shri Anubhav Sharma and Accountant Member Shri Anil Chaturvedi, considered the submissions from both parties and reviewed the materials on record. The tribunal noted that the primary issue was not the merits of the addition but whether such an addition could be made under Section 154.
The tribunal found that the delay in filing the appeal was due to reasonable cause and decided to condone the delay, admitting the appeal for adjudication on merits.
The tribunal observed that the learned AO had accepted the return filed under Section 139 of the Act and issued intimation under Section 143(1). At the relevant time, there were conflicting views on the disallowance of employees’ contributions to EPF and ESI, and the appellant was benefited by the existing law in favor of the assessee. The tribunal noted that the learned AO’s subsequent rectification under Section 154 to disallow the contributions was not justified, as it could not be considered an error apparent on the record.
The Income Tax Appellate Tribunal (ITAT) allowed the appeal, concluding that the learned AO was not justified in invoking Section 154 to disallow the EPF and ESI contributions. The tribunal set aside the order of the learned CIT(A) and directed the learned AO to restore the original assessment.
In conclusion, the ITAT set aside the impugned order and allowed the appeal filed by Sanjay Kumar. The tribunal emphasized that the disallowance of EPF and ESI contributions could not be made under Section 154, as the issue was debatable and not an error apparent on the record. The order was pronounced on 21st June, 2023.
Order
The assessee has come in appeal against the order dated 07.11.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), for the assessment year 2019-20, arising out of the rectification order dated 27.07.2020 under Section 154 of the Income Tax Act, 1961, passed by the ADIT, CPC, Bengaluru.
Condonation of Delay
After considering the submissions of the parties, the tribunal condoned the delay and admitted the appeal for adjudication on merits.
Disallowance of EPF and ESI Contributions
The appellant argued that the disallowance made by the learned AO under Section 154 was beyond jurisdiction and powers. The learned AO’s subsequent rectification under Section 154 to disallow the contributions was not justified, as it could not be considered an error apparent on the record. The tribunal found that the appellant was benefited by the existing law in favor of the assessee at the relevant time, and the learned AO’s action to disallow the contributions was not justified.
Final Judgment
The tribunal set aside the impugned order and allowed the appeal filed by Sanjay Kumar, emphasizing that the disallowance of EPF and ESI contributions could not be made under Section 154, as the issue was debatable and not an error apparent on the record.
Order pronounced in open court on 21st June, 2023
Judicial Member: Shri Anubhav Sharma
Accountant Member: Shri Anil Chaturvedi
Dated: 21st June, 2023.
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Assistant Registrar, ITAT, New Delhi
Sanjay Kumar vs. ITO – Case Filed for EPF and ESI Contribution Disallowance – ITA No. 2988/DEL/2022
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