Belated deposit of ESI/EPF: ITAT allows exemption under section 154 of Income Tax Act [Read Order]

Two member bench of ITAT Raipur granted the assessee’s right to file application for exemption under section 154 of Income Tax Act claiming deduction for delayed deposit of employees share of contribution towards ESI/EPF. The present appeal filed by the assessee, Parv Buildcon company is directed against the order passed by the Commissioner of Income-Tax ( Appeals ), National Faceless Appeal Center ( NFAC ), Delhi The assessee company had filed its return of income for A.Y. 2018-19 declaring an income of Rs.84,31,610/-. Assessee’s claim for deduction of delayed deposit of employees share of contribution towards ESI/PF of Rs.24,72,236/- was disallowed by the Centralized Processing Centre ( CPC ). Thereafter, the assessee filed an application under section 154 of the Act, which, however, was rejected by the CPC. The assessee assailed the order passed by the CPC under section 154 of the Income Tax Act before the CIT ( Appeals ) but without success. To avail deduction under section 36(1)(va) the employer must remit the employee's contribution to the employee's PF account as per the EPFO Act 1952 i.e, within 15 days from the close of the month in which employees earned their salary. However, the same has not been made by the appellant. Since the appellant has not remitted the employees' contribution to PF within the due date under the EPF Act, the Assessing Officer was right in disallowing the deduction claimed under section 36(1)(va) of the IT Act. The appellant furnished the copies of challans for remittance of EPF and claimed in the written submissions that such sums have been remitted before the due date of filing of the return and hence, are allowable as deduction. The appellant has also relied on several judicial pronouncements in this regard. However, these decisions have been rendered prior to the Hon'ble Supreme Court settling this matter finally with the decisions quoted in the subsequent paragraphs. The assessee’s chartered accountant in his audit report filed furnished details of the delayed deposits by the assessee-employer of the employees share of contributions towards ESI & EPF, As the aforementioned amounts received by the assessee employer as employees share of contribution towards ESI & EPF were deposited by him beyond the stipulated time period prescribed under the said relevant Acts, therefore, the A.O while processing his return of income under section 143(1) of the Act, had held the same as the income of the assessee under section 36(1)(va) r.w.s. 2(24)(x) of the Act. The assessee contended that the addition of charges by the Assessing Officer could not have been made in the garb of a prima facie adjustment under section.143(1)(a) of theIncome Tax Act. Elaborating on his aforesaid contention, the assessee claimed that the chartered accountant as per the mandate of law had of his audit report only furnished details of the employees shares of contribution as referred to in Section 36(1)(va), i.e the respective amounts between. dates of deposit. It was submitted that the A.O merely on the basis of the aforesaid details provided by the auditor could not have made an addition of the same to the assessee’s returned income under section 143(1)(a) of the Act. The assessee further argued that even otherwise, on the date when the return of income of the assessee was processed under section 143(1) of the Act, the issue as to whether or not the delayed deposits of the employee’s share of contributions towards labour welfare funds, which were though deposited by the assessee-employer beyond the due date prescribed under the relevant Acts but before the “due date” of filing of the return of income under sub-section (1) of Section 139 of the Act, could be held as the income of the assessee u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act clearly fell beyond the realm of a prima-facie adjustment under section 143(1) of Income Tax Act. Revenue contended that as the assessee’s auditor had categorically qualified his audit report and furnished details of the delayed deposit of employees share of contributions towards ESI and EPF as referred in Section 36(1)(va) of the Act, therefore, no infirmity emerged from the order of the A.O, who while processing the return of income under section143(1) of the Income Tax Act. The two member bench of the ITAT comprising of Arun Khodpia ( Accountant Member ) and Ravish Sood ( Judicial Member ) held that “ in terms of our aforesaid observations, set-aside the order passed by the CIT ( Appeals ) wherein he had upheld the order passed by the CPC/A.O u/s. 154 of the Act, and thus, declined the assessee’s claim for deduction of delayed deposit of employees share of contribution towards ESI/PF and vacate the addition of Rs.24,72,236/ made by the A.O.” The appeal made by the assessee was allowed. The bench granted the assessee’s right to file application for exemption under section 154 of Income Tax Act claiming deduction for delayed deposit of employees share of contribution towards ESI/EPF. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Belated deposit of ESI/EPF: ITAT allows exemption under section 154 of Income Tax Act [Read Order]

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