This document provides a detailed analysis of the Income Tax Appellate Tribunal’s final decision on the case between Randhir Rana, Ballabhgarh and ITO, Ward-2(1), Faridabad, concerning the assessment year 2020-21. The case number is ITA 2660/DEL/2022, presided over by Accountant Member Sh. Anil Chaturvedi.
The appeal filed by the assessee, Randhir Rana, was directed against the order dated 28.09.2022 passed by the Commissioner of Income Tax (Appeals), Delhi, pertaining to the assessment year 2020-21. The primary issue in this case was the disallowance of delayed payment of employees’ contributions to provident fund (PF) and employees’ state insurance (ESI) under Section 36(1)(va) of the Income Tax Act, 1961.
During the hearing on 15.12.2022, the Revenue was represented by Shri Om Prakash, Sr. D.R., and the assessee was represented by Shri Vijay Kumar Gupta, Adv. The Tribunal proceeded to adjudicate the appeal based on the materials on record and submissions made by both parties.
The assessee raised several grounds of appeal, primarily challenging the disallowance of delayed deposit of employees’ contributions to PF and ESI. The grounds included:
In this case, the assessee, a proprietor of M/s. Rase Engineering Works, Faridabad, electronically filed his return of income for A.Y. 2020-21 declaring total income at Rs. 44,27,160/-. The intimation order issued under Section 143(1) of the Act computed the total income at Rs. 48,64,420/- by disallowing Rs. 4,37,262/- on account of delayed payment of employees’ contributions to PF and ESI. The assessee argued that though there was a delay in the payment of PF and ESI dues, the payments were made before the due date of filing the return of income, relying on judicial decisions supporting his claim.
The assessee argued that the disallowance was unjustified since the amounts were deposited before the due date of filing the return of income. He relied on various judicial decisions, including those from the Delhi High Court, to support his claim. The Revenue, on the other hand, contended that the Hon’ble Supreme Court’s decision in the case of Checkmate Services Pvt. Ltd. vs. CIT (2022) 448 ITR 518 (SC) was applicable, and therefore the disallowance was justified.
The Tribunal noted that it is undisputed that the PF and ESI contributions were deposited after the due date prescribed under the respective statutes but before the due date of filing the return of income. The Tribunal referred to the Supreme Court’s decision in the case of Checkmate Services Pvt. Ltd., which held that the contribution by employees to the relevant funds is the employer’s income under Section 2(24)(x) of the Act, and the deduction can only be allowed if such amounts are deposited in the employees’ accounts before the due date stipulated under the respective Acts.
The Tribunal upheld the order of the lower authorities, stating that the disallowance under Section 36(1)(va) of the Act was justified as per the Supreme Court’s decision in Checkmate Services Pvt. Ltd. The appeal of the assessee was dismissed.
Order pronounced in the open court on 19th January, 2023.
(ANIL CHATURVEDI)
ACCOUNTANT MEMBER
This case underscores the importance of adhering to the due dates prescribed under the respective statutes for depositing employees’ contributions to PF and ESI. The Tribunal’s decision to uphold the disallowance highlights the necessity for employers to ensure timely deposit of these contributions to avoid disallowances under Section 36(1)(va) of the Income Tax Act.
The appellant, Randhir Rana, challenged the disallowance of delayed payments of employees’ contributions to PF and ESI on the grounds that the payments were made before the due date of filing the return of income and that the issue was debatable.
The appellant contended that the disallowance was not justified since the payments were made before the due date of filing the return of income. He relied on judicial decisions from the jurisdictional High Court supporting his claim. The Revenue argued that the Supreme Court’s decision in Checkmate Services Pvt. Ltd. was applicable, justifying the disallowance.
The Tribunal found that the Supreme Court’s decision in Checkmate Services Pvt. Ltd. was applicable and that the disallowance under Section 36(1)(va) was justified since the contributions were not deposited by the due date stipulated under the respective Acts.
The Tribunal’s decision in the case of Randhir Rana vs. ITO, Ward-2(1), Faridabad, reaffirms the principle that the due dates prescribed under the respective statutes must be adhered to for depositing employees’ contributions to PF and ESI. The disallowance was upheld, emphasizing the importance of timely compliance with statutory deadlines.
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