This article provides an in-depth look at the proceedings and final judgment in ITA No. 1865/DEL/2020, involving Gagan Saxena and the Assistant Commissioner of Income Tax (ACIT) Circle-22(2), New Delhi. The case was filed on November 18, 2020, and the final order was pronounced on November 16, 2021.
Gagan Saxena, an individual engaged in the business of supplying manpower, filed his income tax return for the Assessment Year 2018-19 on October 26, 2018, declaring a total income of Rs.18,25,292/-. The Centralized Processing Center (CPC) in Bangalore processed the return and issued an intimation under Section 143(1) of the Income Tax Act on May 17, 2019, adding Rs.9,34,630/- to the declared income on account of late deposit of PF/ESI contributions.
The appellant contested the disallowance, arguing that the contributions were deposited before the due date for filing the income tax return under Section 139(1). The appeal was heard by the Delhi Bench of the Income Tax Appellate Tribunal (ITAT), with Shri R.K. Panda, Accountant Member, presiding.
The appellant’s representative, Shri Priyanshu Goyal, CA, argued that various High Courts, including the jurisdictional Delhi High Court, had held that no disallowance should be made if employees’ contributions to PF and ESI are deposited before the due date for filing the income tax return. He cited several judicial precedents, including the Delhi High Court’s decision in PCIT vs. Pro Interactive Service (India) Pvt. Ltd. and CIT vs. AIMIL Ltd., to support his claim.
The respondent, represented by Shri Om Prakash, Sr. DR, supported the order of the CIT(A), arguing that the disallowance was justified as the contributions were not deposited by the due dates prescribed under the respective PF and ESI Acts.
The ITAT examined the facts of the case and the legal arguments presented by both sides. The tribunal noted that the Delhi High Court, in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd., had held that the legislative intent was to ensure that the amount paid is allowed as an expenditure only when payment is actually made. The court further held that the legislative intent was not to treat belated payment of PF and ESI contributions as deemed income of the employer.
Based on the judicial precedents and the facts of the case, the ITAT ruled in favor of the appellant. The tribunal held that no disallowance under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act could be made if the employees’ contributions to PF and ESI were deposited before the due date for filing the income tax return. Consequently, the ITAT set aside the order of the CIT(A) and allowed the grounds raised by the appellant.
The final order, pronounced on November 16, 2021, reads:
In the result, the appeal filed by the assessee is allowed. Pronounced in the open court on 16.11.2021.
Signed by:
Shri R.K. Panda, Accountant Member
This judgment provides significant clarity on the treatment of belated PF/ESI contributions, ensuring that contributions made before the due date for filing returns are allowed as expenditures.
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