Case Number: ITA 973/DEL/2021
Appellant: Novo Management Consulting Private Limited, New Delhi
Respondent: Income Tax Officer, New Delhi
Assessment Year: 2019-2020
Result: 2019-2020
Case Filed on: 2021-08-13
Order Type: Final Tribunal Order
Date of Order: 2022-09-20
Pronounced on: 2022-09-20
PAN: AAECN5211B
Assessee by: Shri Vivan Katyal, FCA
Revenue by: Shri Jeetender Chand, Sr. DR
This case pertains to the appeal filed by Novo Management Consulting Private Limited (hereinafter referred to as ‘the Assessee’) against the order dated 15.06.2021 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, which upheld the addition made by the Assessing Officer (AO) under Section 36(1)(va) of the Income Tax Act, 1961. The addition amounted to Rs. 4,90,570 on account of non-deposit of employee’s share of ESI and EPF before the due date.
The Assessee filed its return of income on 14.10.2019, declaring a total income of Rs. 2,35,09,620. The AO passed an order under Section 143(1), adjusting the total income to Rs. 2,40,00,190 after making an adjustment of Rs. 4,90,570 under Section 36(1)(va) for non-deposit of employee’s share of ESI and EPF before the due date.
The Assessee appealed against this order to the Commissioner of Income Tax (Appeals), who upheld the addition. The CIT(A) observed that the reliance on various case laws by the Assessee, including its own case, was no longer valid in light of the clarificatory amendment brought by the Finance Act, 2021.
The Assessee raised the following grounds of appeal:
On behalf of the Assessee, it was submitted that the amounts were deposited before the due date of filing the original return. Citing the provisions of Section 43B of the Income Tax Act, it was argued that even if there is a delay in depositing the employee share of ESI and EPF, it is allowable if the actual payment is made before the due date of filing the return of income for the relevant year. The Assessee’s counsel referred to several judicial precedents, including the judgment of the Hon’ble Supreme Court in CIT vs. Alom Extrusions Ltd (2009) 319 ITR 306 (SC) and various High Court rulings, to support their case.
On the other hand, the Departmental Representative (DR) argued that there was no error in the findings of the tax authorities below and relied on the judgment in CIT vs. Bharat Hotels Ltd (2019) 410 ITR 417 (Delhi) (HC).
The Tribunal, comprising Shri N. K. Billaiya (Accountant Member) and Shri Anubhav Sharma (Judicial Member), observed that the Assessee had deposited the contributions to the PF/ESI after the due date prescribed under the relevant provisions of the PF/ESI Act but within the time allowed under Section 43B, i.e., up to the due date under Section 139(1) for filing the income return.
Regarding the amendments made through the Finance Act, 2021, the Tribunal noted that the legislature specified these amendments to take effect from 01.04.2021. The Memorandum explaining the provisions in the Finance Bill, 2021, explicitly states that these amendments apply to the assessment year 2021-22 and subsequent assessment years. Therefore, these amendments do not apply to assessment years preceding 2021-22.
The Tribunal cited several ITAT bench decisions supporting this view, including ITAT Kolkata in Harendra Nath Biswas vs. DCIT, ITA No. 186/Kol/2021 for A.Y. 2019-20, ITAT Hyderabad in Salzgitter Hydraulics Private Limited vs. ITO, ITA No. 644/Hyd/2020 for A.Y. 2019-20, and ITAT Jodhpur in Akbar Mohammad vs. ACIT, CPC, Bangalore ITA No. 108 & 109 / Jodh / 2021 for A.Y. 2018-19 and 2019-20.
The Tribunal concluded that the legislative intent was not to treat belated payment of employee’s Provident Fund (EPF) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act. The amendments made by the Finance Act, 2021, are applicable prospectively from the assessment year 2021-22.
Thus, the Tribunal ruled in favor of the Assessee, allowing the appeal and directing the deletion of the impugned addition.
Order: The appeal of the Assessee is allowed, and the impugned addition is directed to be deleted.
Order pronounced in the open court on 20/09/2022.
-Sd/- (N. K. BILLAIYA, ACCOUNTANT MEMBER) -Sd/- (ANUBHAV SHARMA, JUDICIAL MEMBER)
Dated: 20/09/2022
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
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