Payment within Due Date cannot be disallowed as delay due to Technical Glitches on EPFO Portal: ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled that the Assessing Officer (AO) erred in making an addition on account of the delayed deposit of the employee's contribution to the Provident Fund (PF) when the delay was caused solely by technical glitches on the EPFO portal, as the payment was initiated and debited within the stipulated due date.

FIL India Business & Research Services Pvt. Ltd. (assessee) filed an appeal against the final assessment order for the Assessment Year (AY) 2020-21. Among the grounds of appeal, the assessee challenged the addition of ₹ 2,21,19,425 on account of the deposit of the employee's contribution to PF after the due date under the PF Act.

The assessee company argued that a Coordinate Bench of the ITAT in a prior appeal for the same AY, against an intimation order under Section 143(1) of the Income Tax Act, had already deleted this disallowance. The assessee claimed that the prior order, which was not challenged further by the Revenue, had attained finality.

In the prior order, the Coordinate Bench

observed that the assessee made the payment for September 2019, which was debited from its bank account on October 10, 2019, five days before the specified due date of October 15, 2019.

However, the payment was reversed and credited back to the assessee's account on October 15, 2019, due to "technical glitches on the EPFO portal/EPFO's SBI Account". The final transfer and realization in the EPFO's bank account occurred on October 17, 2019.

In the final assessment order, the AO had relied on the Hon'ble Supreme Court judgment in the case of Checkmate Services (Pvt.) Ltd. vs. CIT, which states that no deduction is allowable if payment is not made within the prescribed time limit. Aggrieved by the AO’s order after DRP directions, the assessee filed an appeal before the ITAT.

The two-member bench, comprising Satbeer Singh Godara (Judicial Member) and Manish Agarwal (Accountant Member), held that the ratio of the Checkmate Services case was not applicable in this instance. The tribunal distinguished from the judgment that this delay was due to technical glitches which were beyond the assessee’s control.

The tribunal also observed that the department did not challenge the earlier order of the coordinate bench and hence the order had attained finality.

The Tribunal observed that the payment on the part of the assessee was made and debited in its bank account within the stipulated due date, the subsequent delay in crediting the EPFO's account due to technical glitches was beyond the assessee's control.

Considering the fact that the Coordinate Bench's previous order had not been challenged, the Tribunal deleted the disallowance of ₹2,21,19,425. The appeal of the assessee was partly allowed.

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