Introduction

Income Tax Appellate Tribunal (ITAT), Delhi, in a recent judgment dated 08 May 2023, dismissed the appeal filed by Kamal Dixit, against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2018-19, marking a significant verdict in the realm of income tax law.

Case Background

Kamal Dixit, the appellant, residing at 240, VPO-Bhainsra Wali, Ballabgarh, Faridabad, Haryana, challenged the assessment order passed under section 143(1) of the Income-tax Act, 1961, by the AO, Ward-2, Sonepat. The contention revolved around the dismissal of the appeal concerning the disallowance made on account of employee’s contributions to Provident Fund (PF) and Employee State Insurance (ESI).

Facts of the Case

The appeal, ITA No.846/Del/2022, was delayed by 189 days. However, due to the relaxation provided by the Hon’ble Supreme Court in light of the Covid-19 pandemic, the delay was condoned. During the proceedings, no one appeared on behalf of Kamal Dixit, thereby leading to the disposal of the appeal based solely on the hearing of the ld. DR and available records.

Legal Arguments and Judgment

The core issue deliberated was the justification behind the CIT(A)’s confirmation of the disallowance regarding the employee’s contributions to PF and ESI. The Tribunal referred to the landmark decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd vs CIT, which highlighted the distinct nature of employer’s contributions and employees’ contributions towards welfare funds. It was emphasized that the non-compliance with depositing these contributions within the prescribed timelines as per respective acts could not be rectified by making deposits before the filing of the income tax return under section 139(1) of the Act.

Upholding the principles laid down by the Supreme Court, the Tribunal observed that the assessee’s claim for deduction towards employee’s contributions made after the due dates prescribed under respective laws was not tenable. The judgment underscored the paramount importance of adhering to statutory timelines for depositing such contributions to avail deductions under the Income-tax Act.

Conclusion

The decision rendered by ITAT, Delhi in the case of Kamal Dixit vs. AO, Ward-2, Sonepat, is a reiteration of the strict stance taken by the judiciary on the compliance with statutory obligations concerning employee welfare fund contributions. The dismissal of the appeal serves as a crucial reminder to all assessees about the importance of timely compliance with contribution deposit deadlines to ensure eligibility for rightful deductions under the income tax law.

Final Thoughts

The case of ITA No.846/Del/2022 stands as a testament to the legal principles governing the treatment of employee contributions towards welfare funds under the Income-tax Act. This judgment is expected to have wide-ranging implications on how such contributions are viewed and treated for the purposes of taxation, thereby guiding future judgments in similar contexts.

Detailed Insight on the Dismissal of ITA No.846/DEL/2022 Assessment Year 2018-19