Case Number: ITA 2162/DEL/2022
Appellant: Ramacivil India Construction, New Delhi
Respondent: ACIT, Circle 19(1), New Delhi
Assessment Year: 2019-20
Date Filed: September 5, 2022
Order Type: Final Tribunal Order
Date of Order: June 21, 2023
Pronounced On: June 21, 2023
Summary:
This case involves Ramacivil India Construction, a company based in New Delhi, which filed an appeal against the Assistant Commissioner of Income Tax (ACIT), Circle 19(1), New Delhi. The primary issue revolves around the disallowance of EPF and ESI payments due to delays in deposits beyond the due dates stipulated in the respective Acts.
Ramacivil India Construction, located at BP-22, West Patel Nagar, New Delhi, filed its return of income for the assessment year 2019-20. The return was processed under section 143(1) of the Income-tax Act, 1961, by the Deputy Commissioner of Income Tax (DCIT), CPC, Bangalore on March 31, 2021. The assessment order disallowed an amount of Rs. 27,08,027 on account of late payment of EPF and ESI contributions.
Aggrieved by the assessment order, Ramacivil India Construction filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the disallowance made by the Assessing Officer (AO), leading the assessee to file a further appeal before the Income Tax Appellate Tribunal (ITAT).
The assessee, represented by Ms. Himanshi Mittal, CA, contended that the delay in payment of EPF and ESI was due to technical reasons such as online payment issues and non-availability of staff. The assessee argued that the delay should be condoned, and the disallowance should be reversed.
The Department, represented by Ms. Beenu, Sr. DR, argued that the issue of delayed deposit of EPF and ESI has been decided in favor of the Revenue by the Hon’ble Supreme Court of India in the case of Checkmate Services Pvt. Ltd. vs. CIT-1 (Civil Appeal No. 2833 of 2016), wherein it was held that delayed deposits beyond the due dates stipulated in the respective Acts are not allowable.
The Tribunal, comprising Shri Shamim Yahya, Accountant Member, and Shri Yogesh Kumar U.S., Judicial Member, reviewed the submissions and the material on record. The Tribunal noted that the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT-1 had clearly ruled that delayed deposits of EPF and ESI contributions beyond the stipulated period prescribed in the respective Acts are not allowable.
The Supreme Court held that the distinction between an employer’s contribution, which is its primary liability under law, and the employer’s liability to deposit amounts received from employees, is crucial. The latter retains its character as income (albeit deemed), which must be deposited on or before the due date specified in the relevant law. The Court emphasized that allowing deductions for delayed deposits would defeat the purpose of timely compliance.
Following the Supreme Court’s ruling, the Tribunal found no merit in the grounds of appeal of the assessee. The Tribunal upheld the CIT(A)’s order confirming the disallowance on account of delayed deposits of EPF and ESI contributions. Consequently, the appeal filed by the assessee was dismissed.
Order Pronounced: June 21, 2023
Judges: Shri Shamim Yahya (Accountant Member), Shri Yogesh Kumar U.S. (Judicial Member)
The detailed order underscores the importance of adhering to statutory deadlines for depositing employee contributions to EPF and ESI, as delays can lead to disallowances, impacting the financial liability of the employer.
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