This document provides a detailed analysis of the Income Tax Appellate Tribunal’s final decision on the case between ITO, Ward-5, Rohtak and Rajbir L/H Shri Rajesh, Rohtak, concerning the assessment year 2017-18. The case number is ITA 2576/DEL/2022, presided over by Accountant Member Shri Shamim Yahya and Judicial Member Shri Challa Nagendra Prasad.
The appeal filed by the Revenue challenged the order dated 25.08.2022, passed by the National Faceless Appeal Centre (NFAC), Delhi. The case was filed on 2022-10-21, and the final order was pronounced on 2023-04-27. The main issue in this case was the addition of Rs. 1,71,70,670/- on account of late deposit of employees’ contribution to PF/ESI beyond the prescribed time limit provided in the respective Acts.
During the hearing on 26.04.2023, the Revenue was represented by Shri Shankar Gupta, Sr. DR, while the assessee was not represented by any counsel.
The Revenue argued that the CIT(A) erred in deleting the addition of Rs. 1,71,70,670/- made by the AO under Section 143(1) of the Income Tax Act on account of PF and ESI contributions paid by the employees beyond the time specified in the respective statutes but before the due date of filing of return of income under Section 139(1) of the Act.
The Tribunal carefully considered the submissions and reviewed the orders passed by the authorities below. The Tribunal found that the issue on merits is covered against the assessee by the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (2022) 143 taxmann.com 178.
The Tribunal observed that if employee contributions to provident fund and ESI are paid beyond the due date as prescribed under the relevant Act, then the same has to be added back to the income of the assessee. Respectfully following the precedent set by the Supreme Court in the case of Checkmate Services Pvt. Ltd., the Tribunal set aside the order of the CIT(A) and confirmed the order of the AO.
The Tribunal concluded that the appeal filed by the Revenue is allowed. The order of the CIT(A) was set aside, and the addition of Rs. 1,71,70,670/- made by the AO was confirmed.
Order pronounced in the open court on 27th April, 2023.
(CHALLA NAGENDRA PRASAD)
JUDICIAL MEMBER
(SHAMIM YAHYA)
ACCOUNTANT MEMBER
This case highlights the importance of adhering to the prescribed time limits for depositing employees’ contributions to PF/ESI. It underscores the necessity for employers to ensure timely deposits to avoid additions to their income and consequent tax liabilities.
The appellant, ITO, Ward-5, Rohtak, challenged the deletion of the addition made by the AO on account of late deposit of employees’ contribution to PF/ESI. The AO had added Rs. 1,71,70,670/- to the income of the assessee, Rajbir (deceased, represented by legal heir Shri Rajesh), for the assessment year 2017-18, citing late payment of these contributions beyond the due date specified in the respective Acts.
The Revenue argued that the CIT(A) was incorrect in deleting the addition made by the AO. They contended that as per the Supreme Court’s decision in Checkmate Services Pvt. Ltd., if employee contributions to PF/ESI are paid beyond the due date, they must be added back to the income of the assessee. Therefore, the Revenue maintained that the addition made by the AO was justified and should be upheld.
The assessee was not represented at the hearing, and no counterarguments were presented on their behalf.
The Tribunal observed that the issue was already settled by the Supreme Court in the case of Checkmate Services Pvt. Ltd. The Supreme Court had held that if employee contributions to provident fund and ESI are paid beyond the due date as prescribed under the relevant Acts, they must be added back to the income of the assessee. Therefore, the Tribunal found no merit in the CIT(A)’s decision to delete the addition made by the AO.
The Tribunal’s decision in the case of ITO, Ward-5, Rohtak vs Rajbir L/H Shri Rajesh, Rohtak, reaffirms the principle that late deposits of employees’ contributions to PF/ESI beyond the due date prescribed under the relevant Acts must be added back to the income of the assessee. The Tribunal’s directive to set aside the CIT(A)’s order and confirm the addition made by the AO underscores the necessity for employers to ensure timely deposits of these contributions to avoid adverse tax implications.
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