Understanding ITA No. 757/Del/2022: A Comprehensive Case Review

In a significant ruling dated February 24, 2023, the Income Tax Appellate Tribunal, Delhi Bench ‘B’, comprising esteemed members, Judicial Member Sh. Chandra Mohan Garg and Accountant Member Sh. Anil Chaturvedi, upheld the order of the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), dismissing the appeal filed by G.S Developers & Contractors Pvt. Ltd. against the order dated April 04, 2022, for the assessment year 2019-20.

Case Background

The appellant, a company engaged in the business of civil construction, contested the additions made to its taxable income pursuant to a processing done by CPC, Bangalore under section 143(1) of the Income Tax Act. The primary contention revolved around adjustments made on account of Profit on Sale of Fixed Assets, Service-tax adjustments, and delayed deposit of PF and ESIC contributions.

The appeal raised several grounds questioning the jurisdiction of CIT(A) in confirming the adjustments, especially focusing on the delayed deposit of employee’s share of Provident Fund and ESI under section 36(1)(v), which according to the appellant, was beyond the purview of section 143(1).

Deliberations and Judgement

The Tribunal, after careful consideration of the arguments presented by both sides, referred to the ruling of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT, which clarified the position regarding the treatment of employee contributions to PF and ESI. The apex court’s decision marked a pivotal point of reference, establishing that such deductions are permissible only if the amounts are deposited within the stipulated timeframe as per respective acts, irrespective of the provisions of section 139(1) of the IT Act.

Despite the appellant’s efforts to distinguish its case based on specific arguments around the assessment year 2019-20 and certain procedural aspects, the Tribunal did not find merit in the appeal. It was concluded that the disallowances made by the CIT(A), particularly regarding the delayed deposit of PF and ESI contributions, were in line with the judicial precedents and statutory provisions, leading to a dismissal of the appeal.

Conclusion

The case underscores the criticality of adherence to statutory deadlines for depositing employees’ contributions to eligible funds and the limited scope of appeal against procedural assessments under section 143(1). This ruling not only reaffirms the established legal stance but also serves as a cautionary tale for entities in similar lines of business, emphasizing the importance of compliance and timely procedural actions.