This document provides a detailed analysis of the Income Tax Appellate Tribunal’s final decision on the case between Krown Bakers (India) Pvt. Ltd. and ITO, Ward-14(4), New Delhi, concerning the assessment year 2019-20. The case number is ITA 2617/DEL/2022, presided over by Judicial Member Shri Saktijit Dey and Accountant Member Shri M. Balaganesh.
The appeal filed by the assessee, Krown Bakers (India) Pvt. Ltd., was directed against the order dated 14.10.2022 passed by the National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2019-20. The primary issue in this case was the disallowance of deduction claimed for delayed payment of employees’ contribution to Provident Fund (PF) and Employees’ State Insurance (ESI).
During the hearing on 09.05.2023, the Revenue was represented by Sh. Anuj Garg, Sr. DR. The assessee did not appear, and the Tribunal proceeded to adjudicate the appeal ex parte based on the materials on record and submissions made by the Departmental Representative.
The sole ground of appeal raised by the assessee was:
“Ld. CIT(A) has erred in confirming addition of Rs. 12,30,000/- made by the Ld. AO by invoking the provisions of section 68.”
In the return of income filed for the impugned assessment year, the Centralized Processing Centre (CPC) found that the employees’ contribution to PF and ESI was not paid within the due date prescribed under the relevant statutes governing such payments in terms of section 36(1)(va) of the Income-tax Act, 1961. Consequently, the CPC made an adjustment by adding back the unpaid contributions to the income of the assessee. The assessee’s application for rectification under section 154 of the Act was dismissed by the CPC, and the first appellate authority sustained the addition.
The assessee argued that the deduction should be allowed as the payment was made before the due date of filing the return under section 139(1) of the Act. However, the Revenue contended that the payment was not made within the prescribed time limit under the relevant statutes, relying on the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs CIT-I (Civil Appeal No. 2833 of 2016 and Ors., dated 12th October, 2022).
The Tribunal noted that there was no dispute about the fact that the assessee did not pay the employees’ contribution to PF and ESI within the prescribed time limit. The Tribunal further observed that the issue was already decided against the assessee by the Hon’ble Supreme Court in the Checkmate Services Pvt. Ltd. case, which held that delayed payments beyond the due date prescribed under the relevant statutes cannot be allowed as deductions.
The Tribunal dismissed the ground raised by the assessee and upheld the disallowance of the deduction claimed for delayed payment of employees’ contributions to PF and ESI.
Order pronounced in the open court on 16th May, 2023.
(M. BALAGANESH)
ACCOUNTANT MEMBER
(SAKTIJIT DEY)
JUDICIAL MEMBER
This case underscores the importance of adhering to the statutory timelines for payments of employees’ contributions to PF and ESI to claim deductions under the Income Tax Act. The decision reinforces the precedent set by the Hon’ble Supreme Court, ensuring that employers comply with their obligations under the relevant statutes.
The appellant, Krown Bakers (India) Pvt. Ltd., challenged the addition made by the CPC under section 36(1)(va) of the Income Tax Act, 1961, for the assessment year 2019-20. The CIT(A) dismissed the appeal, confirming the addition and disallowing the deduction claimed for the delayed payment of employees’ contributions to PF and ESI.
The appellant argued that the CIT(A)’s confirmation of the addition and disallowance of the deduction for the delayed payment of employees’ contributions was incorrect. They asserted that the CIT(A) did not address the substantive issues raised in the appeal on their merits.
The Tribunal observed that the CIT(A) dismissed the appeal based on an erroneous factual finding. The Tribunal found no material evidence from the Revenue to support the claim that the appellant had not requested the adjustment of tax liability from the received consideration. Consequently, the Tribunal decided to remand the case back to the CIT(A) for a decision on its merits.
The Tribunal’s decision in the case of Krown Bakers (India) Pvt. Ltd. vs ITO, Ward-14(4), New Delhi, reaffirms the importance of addressing the substantive merits of a case rather than relying on procedural assumptions. The restoration of the case to the CIT(A) for a fresh decision ensures a fair and just resolution based on accurate facts.
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