This case involves an appeal by Ved Parkash Nagar against the order of the Income Tax Officer, Ward-25, Faridabad, concerning disallowances related to late deposits of employee contributions to Provident Fund (PF) and Employee State Insurance (ESI) for the assessment year 2019-20.
Ved Parkash Nagar, a resident of Faridabad, filed his income tax return for the assessment year 2019-20, declaring a total income of Rs. 18,26,553. The return was processed under section 143(1) of the Income Tax Act, 1961, by the Central Processing Centre (CPC), Bangalore. An adjustment of Rs. 21,74,460 was made to the income, attributed to late deposit of employee contributions to PF and ESI.
Aggrieved by the CPC’s decision, Nagar appealed to the CIT(A), who upheld the addition. Subsequently, Nagar appealed to the Income Tax Appellate Tribunal (ITAT), Delhi, arguing that the addition was unjustified and that the payment had been made before the filing of the return. The case was heard through video conferencing due to pandemic restrictions.
The tribunal, led by Shri Kul Bharat, Judicial Member, noted that the issue was similar to that in the case of PCIT vs Pro Interactive Service (India) Pvt. Ltd., where the Delhi High Court ruled that belated payments of EPF and ESI should not be treated as deemed income of the employer. Following this precedent, the tribunal directed the Assessing Officer to delete the disallowance, thus allowing the appeal in favor of Ved Parkash Nagar.
This judgment is significant as it reiterates the position that payments related to employee welfare that are made before the filing of the income tax return should not attract punitive disallowances, aligning with the legislative intent to encourage compliance without undue penalization.
The tribunal’s decision in ITA No. 1521/DEL/2021 provides clarity on handling cases of belated deposits of employee contributions to welfare schemes. It underscores the importance of adhering to judicial precedents and ensuring fair treatment in tax assessments.
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