The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) has restored the matter of income tax addition of Rs. 3.7 crores on payment of ESI/ PF due to auditor’s misreporting.
The assessee, engaged in management recruitment services, had initially reported a total income of Rs. 13,59,700 for the assessment year 2017-18, later revised to Rs. 14,35,120. The case was selected for scrutiny, and the Assessing Officer (AO) subsequently added Rs. 3,73,04,580 to the assessee’s income due to the delayed deposit of these contributions.
The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision, asserting that the contributions were deposited after the due date specified under the respective statutes, despite being paid before the filing of the tax return. The CIT(A) relied on the Supreme Court’s judgment in the Checkmate case, which ruled the distinct due dates under Sections 36(1)(va) and 43B of the Income Tax Act.
The assessee appealed to the ITAT, arguing that the disallowance was primarily due to misreporting by the auditor. According to the assessee, the tax audit report (Form 3CA-CD) consolidated the payment dates, overlooking over 700 individual challans that showed timely payments.
The assessee contended that only Rs. 47,59,430 of the total amount was actually deposited beyond the stipulated date. Moreover, the assessee highlighted that similar disallowances made in the previous assessment year (2016-17) were substantially reduced by the CIT(A) after considering additional evidence.
Due to the COVID-19 pandemic, the assessee claimed inadequate representation during the appellate proceedings and requested the ITAT to remand the case back to the CIT(A) for a fresh review of the detailed evidence, including challans and payment timelines.
The bench noted the primary contention of the assessee before the tribunal that the addition has been made on the basis of certain misreportings by the Auditor, in the Audit Report. The assessee had given a separate chart giving details of over 700 Challans with respect to PF/ESI payment, in order to demonstrate that most of the deposits had been made by the assessee within the due stipulated date, however, the detailed information/data submitted by the assessee was omitted to be considered by the Tax Authorities.
After considering the arguments, the bench of Ramit Kochar (Accountant member) and Siddhartha Nautiyal (Judicial member) agreed that the case warranted a re-examination and restored the matter to the CIT(A) for de novo consideration. The CIT(A) was instructed to re-assess the disallowance, taking into account the detailed submissions and evidence provided by the assessee.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
