Aggarwal Sweet Corner Pvt Ltd vs. ACIT Circle-1(2) – 2018-19 – Provident Fund and ESI Contributions Case
Case Number: ITA 1729/DEL/2020
Appellant: Aggarwal Sweet Corner Pvt Ltd, New Delhi
Respondent: ACIT Circle-1(2), New Delhi
Assessment Year: 2018-19
Case Filed On: 2020-10-19
Order Type: Final Tribunal Order
Date of Order: 2022-04-25
Pronounced On: 2022-04-25
Case Background
The case involved Aggarwal Sweet Corner Pvt Ltd, New Delhi (the appellant), contesting the addition of Rs. 87,65,323 by the Assessing Officer (AO) for delayed deposits of employees’ contributions to Provident Fund (PF) and Employee State Insurance (ESI). The addition was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The appellant filed an appeal to the Income Tax Appellate Tribunal (ITAT) against this decision.
Key Issues and Arguments
The main issue revolved around whether the delay in depositing employees’ contributions towards PF and ESI justified the additions made by the AO under Section 36(1)(va) of the Income Tax Act.
Appellant’s Arguments
The contributions, although delayed, were deposited before the filing of the income tax return.
The AO’s action of making aggregate additions was challenged based on the principles of natural justice and incorrect factual findings.
It was contended that the CIT(A) erred in confirming the additions and the charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act.
The appellant relied on judicial precedents, including the case of Azamgarh Steel & Power vs. CPC (ITA No.1626/Del/2020) and CIT vs. AIMIL Ltd. [2010] 188 Taxman 265 (Delhi).
Respondent’s Arguments
The AO and CIT(A)’s actions were justified as the contributions were deposited after the due date.
The respondent cited the Delhi Tribunal’s decision in the case of Vedvan Consultants Pvt. Ltd. vs. DCIT (ITA No.1312/Del/2020) and supported the application of the amendment brought by the Finance Act 2021.
Tribunal’s Analysis and Findings
The ITAT clubbed the appeals for the sake of brevity and convenience, as the issues were similar. The tribunal noted:
The issue of delayed PF and ESI contributions has been settled in favor of the assessee in various judicial pronouncements.
The Hon’ble Delhi High Court in PCIT vs. Pro Interactive Service (India) Pvt. Ltd. (ITA no. 983/2018) ruled that as long as the contributions are deposited before the filing of the return, no disallowance is warranted.
The amendment by the Finance Act 2021, stating that Section 43B does not apply to employee contributions, is effective from 1st April 2021 and is not applicable to the assessment year under consideration (2018-19).
Conclusion and Order
The ITAT ruled in favor of Aggarwal Sweet Corner Pvt Ltd. The tribunal found that the AO was not justified in denying the deductions for late deposits of PF and ESI contributions, as the payments were made before filing the income tax return. The appeals filed by the appellant were allowed.
Significance of the Case
This case underscores the importance of timely deposits of statutory dues like PF and ESI contributions. It also highlights the judiciary’s stance that delays in such deposits, if rectified before the filing of the income tax return, do not warrant disallowance of deductions.
References
Azamgarh Steel & Power vs. CPC (ITA No.1626/Del/2020)
CIT vs. AIMIL Ltd. [2010] 188 Taxman 265 (Delhi)
PCIT vs. Pro Interactive Service (India) Pvt. Ltd. (ITA no. 983/2018)
Order pronounced in the open court on 25.04.2022 by Judicial Member Astha Chandra and Accountant Member Anil Chaturvedi.
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