The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the disallowance under Section 143 (1)(a) of the Income Tax Act because of the late deposit of the employee’s share of PF/ESI contribution to the relevant fund.
Assessee Sushil Kumar Gupta’s return was processed by the CPC and an order under section 143(1) was passed wherein the disallowance invoking the provisions of Section 143(1)(a)(iv) of the Income Tax Act was made for the fault of the assessee not to pay the employees’ contribution to PF/ESI before the prescribed due date under the relevant statue. Against the said intimation and disallowance so made under section 36(1)(va) read with Section 143(1)(a)(iv) of the Income Tax Act.
As per the Commissioner of Income Tax (CIT(A)), the employees’ contribution could be allowed as a deduction only where it had been paid within the prescribed due date under the relevant welfare funds and this was the position of law and had always been the case, as apparent from the clarification brought in by the amendment to the provisions which apply retrospectively.
The legislature, for the disallowance under sub-clause (iv) of section 143(1)(a), Income Tax Act had used the expression `indicated in the audit report’. The word `indicated’ was wider in amplitude than the word `reported’, which enveloped both direct and indirect reporting.
Even if there was some indication of disallowance in the audit report, which was short of direct reporting of the disallowance, the case would get covered within the purview of the provision warranting the disallowance. However, the indication must be clear and not vague. If the indication in the audit report gives a clear picture of the violation of a provision, there could be no escape from disallowance.’
Ajay Jain appeared on behalf of the assessee and Akashdeep, on behalf of the revenue.
The two-member Bench of A.D. Jain, (Vice President) and Vikram Singh Yadav, (Accountant Member) dismissed the appeal filed by the assessee referring to the decision in ‘Emson Tools Mfg. Corp. Ltd. vs. DCIT, Ludhiana. The bench further held that the Commissioner of Income Tax Appeals was justified in sustaining the adjustment under Section 143(1)(a) of the Income Tax Act by means of disallowance made for late deposit of employees’ share of PF/ESI contribution to the relevant funds beyond the date prescribed under the respective Acts.
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