In a recent ruling, the Surat Bench of the Income Tax Appellate Tribunal ( ITAT ) held that the disallowance made by the Central Processing Centre (CPC) on account of delayed Provident Fund (PF) and Employee State Insurance (ESI) payments was adequate and should be allowed. The tribunal added that it cannot be excused unless there is a valid reason for such delay.
The assessee filed its AY 2019-20 income tax return on 30.09.2019. The Central Processing Centre ordered a disallowance of ₹1 lakh under Section 36(1)(va) of the Income Tax Act 1961 for delayed ESI and EPF payments. The company appealed to CIT(A), but the appeal was dismissed, citing the Supreme Court’s ruling in Checkmate Services Pvt. Ltd. vs. CIT.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
In the appeal on such a dismissal order in front of the ITAT, the assessee’s authorised representative(AR) submitted that in the assessment year 2019-20 and its previous year, they could not pay their EPF contribution within the time frame mentioned in the PF Act due to technical glitches in the PF portal.
Thе АR explаined thаt раyment delаys for severаl mоnths in 2018 аnd 2019 were duе to а technicаl glitch thаt prevented chаllаn generаtion, which wаs rеportеd to thе PF officе. Thеy noted thе аssessee hаd sufficient bаnk bаlаnce during thеse mоnths to mаke thе раyments. Тo suррort thеir cаse, thе АR cited thе IТAТ Jаbаlpur Bench ruling in Pheоnix Рoultry vs. ACIТ.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The Departmental Representative(DR) of Revenue supported the order of CIT(A), citing the Supreme Court’s decision in Checkmate Services Pvt. Ltd. vs. CIT.
After hearing both sides and evaluating the decisions relied upon by the parties, the ITAT held that there was no dispute that employees delayed paying ESI and EPF contributions after the due dates. The AR also admitted this fact and stated that delays ranged from 3 to 34 days for various months.
The Tribunal held that in the case of Phoenix Poultry, relied upon by the counsel for the assessee, contributions were deposited with a grace period allowed under the respective Acts. In some cases, the deposits were delayed due to the EPF’s E-Portal technical difficulties. In the present case, however, there were delays from 3 to 34 days in various months. There was an inconsistent pattern.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The tribunal upheld the question of how the portal could glitch for one month and not glitch for the next two months. The claim of delay only due to technical glitches was not satisfactory enough, further in examining the Supreme Court’s decision in the case of Checkmate Services Pvt. The tribunal found that the employee’s contribution towards PF and ESI cannot be allowed if deposited after the due dates under those Acts but before the return filing. The Tribunal held that this decision by the Supreme Court was binding on all courts within the territory of India as provided in Article 141 of the Constitution.
The two member bench of ITAT consisting of Pawan Singh (Judicial Member) and Bijayananda Pruseth (Accountant Member) held that the decision of the Supreme Court in the case of Checkmate Services Pvt. Ltd, is to be followed. The bench found that the Surat Bench of ITAT had dismissed a similar appeal in the case Shri Raghukul Textprints Pvt, Ltd. vs. DCIT and held the addition of 1Lakh made by the CPC along with the order of the CIT(A) to be adequate. As a result, the appeal made by the assessee was dismissed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
