This article provides a comprehensive review of the proceedings and judgment of the Income Tax Appellate Tribunal (ITAT) Delhi in the case of ITA No. 1855/DEL/2020, where Rukmini Polytubes Pvt Ltd, New Delhi, appealed against the disallowance of TDS on delayed payment of employees’ contribution to PF & ESI, assessed by DCIT CPC, Bangalore for the assessment year 2018-19.
Rukmini Polytubes Pvt Ltd, the appellant, filed its income tax return for the assessment year 2018-19, declaring a total income of Rs.24,92,370/-. The DCIT CPC, Bangalore, in the intimation under section 143(1) of the Income Tax Act, 1961, determined the total income of the appellant at Rs.33,40,680/-. This included an addition of Rs.1,82,543/- for delayed payment of employees’ contribution to PF & ESI.
The case was heard by the Delhi ‘SMC-1’ Bench of the Income Tax Appellate Tribunal, with Shri R.K. Panda, Accountant Member, presiding. The final order was pronounced on October 13, 2021, addressing the procedural and substantive issues surrounding the TDS disallowance.
Rukmini Polytubes Pvt Ltd appealed to the Commissioner of Income-tax (Appeals) [CIT(A)], contesting the disallowance of Rs.1,82,543/- under section 43B of the Income Tax Act. The CIT(A) sustained the addition based on the Auditor’s Report in Form No.3CD.
The appellant then appealed to the ITAT, challenging the CIT(A)’s decision. The primary grievances of the appellant were:
The appellant argued that the Tax Auditor in his report under section 43B in Item No.26 wrongly mentioned that certain items were not paid on or before the due date. They contended that this was a clerical mistake and that the payments were actually made before the due date of filing the return of income under section 139(1).
The Departmental Representative (DR), Shri Rajesh Kumar Dhanesta, argued that the appellant had failed to make the deposits on account of employees’ contribution to PF & ESI before the specified dates as mentioned in the Statute. He supported the CIT(A)’s decision to sustain the addition made by the CPC, emphasizing that the provisions of section 43B did not apply to the belated payment of employees’ contribution.
The ITAT examined the arguments and evidence presented by both sides. The tribunal noted that the adjustment of Rs.1,82,543/- under section 43B(b) was made by the CPC on account of belated payment of PF and ESI, payment of Bonus, and GST. The tribunal observed that the Tax Auditor’s report had erroneously reported these payments under the wrong head.
The tribunal highlighted the importance of proper service of notices for ensuring fair play and justice. It found that the CIT(A) did not verify whether the notices were actually served on the appellant at the given address.
The ITAT held that the CIT(A) should have decided the appeal on the merits of the case. The tribunal emphasized that the CIT(A) did not provide a reasonable opportunity for the appellant to present its case, especially considering the significance of the issues involved.
In the interest of justice and fair play, the ITAT restored the appeal to the file of the Assessing Officer (AO) with a direction to verify the details of the payments. The ITAT instructed the AO to delete the addition if the payments were made before the specified date. The tribunal’s decision reinforces the principle that due process and fair hearing are essential components of justice.
Order pronounced in the open court on October 13, 2021.
Signed by:
Shri R.K. Panda, Accountant Member
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