In the case of Hari Om Anand and Son, Meerut (Appellant) vs. ACIT, Circle-1, Meerut (Respondent), ITA No. 1071/DEL/2021, the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘G’, New Delhi, pronounced its final order on May 17, 2022. The case pertained to the assessment year 2018-19 and involved the disallowance of employee’s contribution to Provident Fund (PF) and Employee State Insurance (ESI) on account of delayed deposits.
The appellant, Hari Om Anand and Son, filed the appeal feeling aggrieved by the order passed by the appellate authority, which confirmed the adjustment/disallowance made in the intimation issued under section 143(1) of the Income Tax Act, 1961. The disallowance amounted to Rs. 12,52,401 under section 36(1)(va) of the Act due to alleged delayed payment of ESI and EPF.
The appellant raised several grounds challenging the order, including:
The appellant’s representative argued that the contributions towards PF/ESIC, though delayed, were deposited with the appropriate authorities before the filing of the return of income. Therefore, no disallowance was warranted, citing various judicial decisions in support.
The Revenue supported the lower authorities’ orders and referenced the amendment brought by the Finance Act, 2021, which clarified that provisions of Section 43B shall not apply to sums received from employees under sub-clause (x) of Clause (24) of Section 2.
The Tribunal noted that the issue had been settled in favor of the assessee by various judicial pronouncements. The Hon’ble Delhi High Court in PCIT vs. Pro Interactive Service (India) Pvt. Ltd. held that belated payment of PF/ESI before the due date of filing the return of income does not attract disallowance.
The Tribunal also clarified that the amendment by the Finance Act, 2021, applied prospectively from April 1, 2021, and thus did not affect the assessment year under consideration (2018-19).
Consequently, the Tribunal allowed the appeal, setting aside the disallowance of Rs. 12,52,401 made by the CPC, Bangalore. The decision reaffirmed that the contributions deposited before the due date of filing the return of income were allowable.
In conclusion, the Tribunal ordered the appeals in favor of the respective assessees, including the appellant Hari Om Anand and Son, thereby allowing the deductions claimed on account of PF/ESI contributions.
The order was pronounced in the open court on May 17, 2022, by Shri Pradip Kumar Kedia, Accountant Member, and Shri Kul Bharat, Judicial Member.
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This case highlights the importance of timely deposit of employee contributions to PF/ESI and the judicial stance on such disallowances when contributions are made before the filing of the return of income.
Delay in Deposit of PF/ESI – Hari Om Anand and Son vs. ACIT (2018-19)
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