Introduction

The Income Tax Appellate Tribunal, Delhi Bench ‘G’, in a significant ruling, addressed the contentious issue surrounding the disallowance of employee contributions towards Provident Fund (PF) and Employee’s State Insurance (ESI) due to delays in depositing such contributions within the stipulated time frame as per the respective acts. The bench, comprising Shri Kul Bharat, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, delivered a consolidated order for various appeals, prominently highlighting the case of ITA No. 850/DEL/2022, filed by Rishi Prakash against the Deputy Commissioner of Income Tax (DCIT), Sonepat for the assessment year 2019-20.

Background

The bone of contention in this series of appeals was the disallowance of the employees’ contribution to PF/ESI on account of delay in deposits. The appellant, Rishi Prakash, alongside others, sought relief against the orders passed by the appellate authority, arguing that the contributions, though delayed, were deposited before the due date of filing the return of income, thereby adhering to the provisions of the Income Tax Act, 1961.

Judgement

The tribunal meticulously analyzed the submissions, precedents, and provisions under the Income Tax Act, allowing the appeal in favor of Rishi Prakash. It was observed that while there were delays in the deposit of the employees’ contributions towards PF/ESI, all contributions were indeed deposited before the filing of the return of income. The Tribunal, referencing various judicial pronouncements, including the landmark judgement in the case of ‘CIT vs. AIMIL Ltd.’, supported the appellant’s position. Furthermore, the bench specifically noted that amendments brought by the Finance Act, 2021, were not applicable to the assessment year in question, hence, not detracting from the appellant’s case.

Analysis

The ruling sheds light on the critical aspect of the timely deposit of employees’ contributions towards social security schemes like PF and ESI. By allowing the appeal, the Tribunal has underscored the principle of substantial compliance over technical defaults, reflecting a pro-assessee approach in matters where there is no revenue loss to the exchequer. The decision also provides clarity on the applicability of recent amendments in relation to past assessment years, offering relief to taxpayers worried about retrospective changes affecting their earlier compliances.

Conclusion

This judgment serves as a precedent for cases involving similar issues of delay in the deposit of employees’ contributions to PF/ESI. It emphasizes the importance of depositing such contributions before the due date of filing the return of income, reinforcing the notion that procedural lapses should not lead to substantive prejudices against the taxpayer, especially when the contributions are ultimately made within the allowed timeframe. The Tribunal’s decision in Rishi Prakash vs. DCIT, Sonepat, thus, echoes a balanced approach, harmonizing the tax laws with practical realities faced by taxpayers.

Rishi Prakash vs. DCIT, Sonepat: A Case Analysis on Employee’s Contribution to PF/ESI