In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Ranchi Bench has directed the Commissioner of Income Tax (Appeals) (CIT(A)) to reconsider the deduction claim under Section 36(1)(va) of the Income Tax Act, 1961, in light of the Supreme Court’s recent judgment.
Ranjeet Kumar Budhia, the appellant, filed an appeal challenging the decision of the CIT(A) in relation to the disallowance of Employee’s Provident Fund (EPF) and Employee’s State Insurance Corporation (ESIC) contributions.
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The case starts from the appellant’s return of income filed for the Assessment Year 2018-19, which was processed under Section 143(1) of the Income Tax Act. The assessment officer, DCIT-CPC Bengaluru, disallowed a sum of Rs.46,01,390 due to late deposit of employees’ contributions to EPF and ESIC under Section 36(1)(va).
The appellant filed a rectification application under Section 154 of the Act, arguing that the disallowance was incorrect. However, the rectification application was rejected by the assessing officer in June 2020.
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Subsequently, the appellant appealed before the CIT(A), who dismissed the appeal, upholding the assessing officer’s decision. The CIT(A) ruled that the deductions under Section 36(1)(va) could only be allowed if the contributions were deposited before the due date prescribed under the respective Acts, citing decisions from various High Courts on the matter.
The appellant, represented by Jagdish Khandelwal, argued that the CIT(A) had erred by invoking the amended provision of Section 36(1)(va) along with Section 43B, and applying it retrospectively. During the appeal proceedings before the ITAT, the appellant highlighted the Supreme Court’s recent ruling in the case of Checkmate Services Pvt. Ltd. vs. Commissioner of Income Tax-1 (Civil Appeal No. 2833 of 2016), which had not been considered by the CIT(A) while passing the order.
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After carefully considering the rival submissions, two member Bench comprising Partha Sarathi Chaudhury (Judicial Member) and Ratnesh Nandan Sahay( Accountant Member) found merit in the appellant’s arguments.
The Tribunal observed that the CIT(A) had overlooked the latest Supreme Court decision, which could potentially affect the outcome of the case. As a result, the ITAT remanded the matter back to the CIT(A) for reconsideration, with instructions to take into account the Supreme Court’s decision in the Checkmate Services case and pass a fresh order accordingly.
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The appeal was allowed for statistical purposes, providing a significant opportunity for reassessment based on the latest judicial guidance. The case emphasizes the importance of keeping abreast with recent judicial pronouncements while adjudicating matters of tax law.
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