This case involves Krishan Pal, who appealed against the order of the CIT(A)-12, New Delhi, concerning the assessment year 2018-19. The appeal addressed the addition made by the DCIT CPC, Bangalore for late deposit of EPF and ESI contributions.
The appellant, Krishan Pal, filed his return of income for the assessment year 2018-19 on October 16, 2018, declaring a total taxable income of Rs. 12,69,680. The Central Processing Centre (CPC) in Bangalore, while processing the return under Section 143(1) of the Income Tax Act, 1961, disallowed an amount of Rs. 15,85,084 due to the late deposit of employees’ contributions to EPF and ESI.
The appellant’s counsel argued that the issue of disallowance of expenditure on account of delay in deposit of employees’ contribution to EPF and ESI is covered in favor of the appellant by various judicial precedents. The counsel relied on the judgment of the Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs Pro Interactive Service (India) Pvt. Ltd. (ITA No. 983/2018, dated September 10, 2018), which held that the legislative intent was to allow the expenditure when the payment is actually made, even if paid after the due date but before filing the income tax return.
The ITAT Delhi Bench noted that the issue is squarely covered by the judgment of the Hon’ble Jurisdictional High Court in the case of PCIT vs Pro Interactive Service (India) Pvt. Ltd., which clarified that belated payment of EPF and ESI contributions cannot be treated as deemed income of the employer under Section 2(24)(x) of the Act. The Tribunal directed the Assessing Officer to delete the disallowance, thereby allowing the grounds raised by the appellant.
On July 27, 2022, the ITAT Delhi Bench, comprising Judicial Member Shri Kul Bharat and Accountant Member Shri Pradip Kumar Kedia, pronounced the order, allowing the appeal of Krishan Pal. The Tribunal directed the deletion of the disallowance made on account of the late deposit of EPF and ESI contributions.
This case highlights the importance of judicial precedents in tax assessments and clarifies the treatment of belated payments towards EPF and ESI contributions. The decision reinforces that such payments, if made before filing the income tax return, qualify for deduction, ensuring a fair application of tax laws.
This ruling sets a precedent for handling similar cases involving the late deposit of EPF and ESI contributions. It underscores the necessity of considering judicial precedents and the legislative intent behind tax provisions, ensuring that taxpayers are not unduly penalized for procedural delays.
Case Summary of ITA 1657/DEL/2020: Krishan Pal vs DCIT CPC, Bangalore
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