This case study explores the appeal by Hero Ecotech Limited against penalties imposed for late deposits of employee contributions to Provident Fund (PF) and Employee State Insurance (ESI), as outlined in ITA 1469/DEL/2021.
Hero Ecotech Limited, a manufacturer based in Ludhiana, faced adjustments added by the CPC for late PF and ESI deposits during the assessment year 2017-18. The company’s revised return reported an income significantly higher than initially stated, leading to additional scrutiny.
The appeal contested the CIT(A)’s decision, which upheld the penalties based on the late deposit of employee contributions. The company argued that these contributions, although delayed, were made before the statutory deadline for tax filing, citing precedents set by the Supreme Court and various High Courts that favor the taxpayer under similar circumstances.
The tribunal considered numerous judicial decisions and the amendments introduced by the Finance Act 2021. It concluded that the legislative changes effective from April 1, 2021, do not apply retroactively, thereby not affecting the assessment year 2017-18. This interpretation aligns with the company’s argument that penalties should not apply if contributions are made before the tax filing deadline.
The tribunal’s decision to side with Hero Ecotech reflects a broader judicial recognition of the practical challenges businesses face in managing statutory contributions and underscores the importance of legislative clarity in tax compliance.
Hero Ecotech Limited vs DCIT: Challenging Late Deposit Penalties for PF and ESI – ITA 1469/DEL/2021
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