This case involves Vinod Malik, a resident of Faridabad, who filed an appeal against the decision of the National Faceless Appeal Centre (NFAC), Delhi, which was concerned with the disallowance of employees’ contributions to EPF and ESIC for the assessment year 2019-20.
The issue at the core of the appeal is the addition of Rs.5,70,838 back to the income of the appellant, which he claimed as deduction for employees’ contributions to EPF and ESIC. This amount was paid before the filing of the income tax return but was initially disallowed by the Central Processing Centre (CPC) in Faridabad, citing that it was deposited after the due dates prescribed by the respective acts.
The Tribunal examined whether the contributions paid by the employer for EPF and ESIC, albeit delayed, should still be allowed as deductions if paid before the income tax return is filed. The case was guided by precedents set by the Hon’ble Supreme Court and various High Courts, which have had divergent views on the matter. However, the recent judgment by the Supreme Court in Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I clarified the legal stance, thereby influencing the Tribunal’s decision.
The ITAT, led by Judicial Member Sh. C. N. Prasad and Accountant Member Dr. B. R. R. Kumar, allowed the appeal of Vinod Malik. The Tribunal noted procedural lapses in the way the CPC made the adjustments without proper intimation to the assessee, rendering the order unsustainably in law. Thus, the initial disallowance made by the CPC was overturned, allowing the deduction for the employer’s contributions to EPF and ESIC.
This case highlights the critical aspects of compliance with procedural requirements under tax laws and underscores the importance of adhering to the statutory provisions for claiming deductions. The decision is significant as it provides clarity on the treatment of delayed payments of EPF and ESIC contributions concerning the deductions under the Income Tax Act.
Order pronounced in the open court on November 25, 2022.
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