In the realm of taxation and corporate compliance, the timely deposition of employees’ Provident Fund (PF) and Employee State Insurance (ESI) contributions stands as a cornerstone of lawful business operations. This document delves into the intricate details of the case ITA No.1494/DEL/2022, a pivotal legal proceeding between SBS International Private Limited, situated in Manesar, and the Deputy Commissioner of Income Tax, Circle-22(2), Delhi, concerning the assessment year 2019-20. The focus of this case was on the appeal filed by SBS International Pvt. Ltd. against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, New Delhi, which was ultimately dismissed, highlighting the rigorous standpoint of the judiciary on compliance with PF/ESI deposit guidelines.
The genesis of the dispute lies in the assessment proceedings for the year 2019-20, where the appellant, SBS International Private Limited, was confronted with disallowances made by the Assessing Officer (AO) under section 36(1)(va) of the Income Tax Act, 1961. The disallowances amounted to Rs. 11,62,222/- on the grounds of delayed deposit of the employees’ contribution towards PF/ESI. The contention revolved around the interpretation and application of law, specifically the amendments under the Finance Act, 2021, and whether these provisions could be applied retrospectively.
The appellant challenged the order passed by the Commissioner of Income-tax (Appeals), arguing that the order was erroneous and bad in law. The primary grievance was against the confirmation of the disallowance for delayed PF/ESI deposits. The appellant also contested the CIT(A)’s reliance on the amended provisions of section 36(1)(va) and section 43B, as per Finance Act, 2021, being applied retrospectively.
During the proceedings, the bench comprising SHRI CHANDRA MOHAN GARG, Judicial Member, and SHRI PRADIP KUMAR KEDIA, Accountant Member, expounded on several critical aspects. The absence of the assessee or any authorized representative at the hearing was noted, and the case was decided ex-parte qua the assessee. The bench remarked on the delayed filing of the appeal, acknowledging the extension granted by the Supreme Court amidst the pandemic, thereby accepting the appeal as filed within the extended timeline.
The tribunal, after meticulous examination of the submissions and precedents, upheld the disallowances made towards late PF/ESI deposits. The decisive factor was the judgment of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. vs CIT, which clarified the position regarding the taxability of belated employees’ contribution to Provident Fund/ESIC. This judgment, alongside other relevant rulings, reinforced the principle that compliance with PF/ESI deposit timelines is imperative and non-negotiable.
The case of SBS International Private Limited vs. DCIT Circle-22(2) serves as a significant precedent, underscoring the importance of adhering to statutory timelines for PF/ESI deposits. The dismissal of the appeal reiterates the judiciary’s strict stance on ensuring employees’ welfare through timely deposits, emphasizing that the legal framework surrounding corporate compliance is both stringent and sacrosanct. This case summary provides an extensive overview of the arguments, proceedings, and final judgment, offering valuable insights into the intricacies of compliance and legal adjudication in the corporate realm.
Assessment of Delayed PF/ESI Deposits: SBS International Private Limited vs. DCIT Circle-22(2)
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