P.R. Packaging Service v. ACIT

Case snapshot

Sections / provisions: 43B/CPC; 43B

Questions before the Court / Tribunal

• Section 43B/CPC adjustment for delayed employee PF/ESI contributions and scope of prima facie adjustment.
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

ITA No.2376/Mum/2022 (Assessment Year : 2019-20) M/s P R Packaging Service Vs. Assistant Commissioner of 1A, 1st Floor, Pushpam CHS Income Tax-25(3), Mumbai Ltd, K.D. Road, Vile Parle (West), Mumbai-400 056 PAN/GIR No.AAEEP6431E (Appellant) .. (Respondent)

Assessee by Shri K Gopal Revenue by Shri. Shambhu Yadav

This appeal in ITA No.2376/Mum/2022 for A.Y.2019-20 is preferred by the assessee against the order of the Commissioner of Income Tax, National Faceless Appeal Centre, Delhi (NFAC) (Ld.CIT in short), dated 22/07/2022. 2. Though the assessee has raised several grounds of appeal before us, the only effective issue to be decided in this appeal is as to whether the Ld.CIT(A) was justified in upholding the action of the ADIT-CPC Bangalore in making disallowance of employees contribution to Provident

Fund based on the statement made in the Tax Audit Report while processing the return under section 143(1) of the Act. 3. We have heard the rival submissions and perused the materials available on record. It is not in dispute that assessee had remitted the employees contribution to Provident Fund beyond the due date prescribed under the Provident Fund Act, but had duly remitted the same before the due date of filing the return of income under section 139(1) of the Act. This fact of remittance made by the assessee with delay had been reported by the Tax Auditor in the Tax Audit Report. The copy of the Tax Audit Report is placed on record by the Ld.AR before us together with its annexures. On perusal of the same, we find that the Tax Auditor had merely mentioned the due date for remittance of Provident Fund as per the Provident Fund Act and the actual date of payment made by the assessee. The Tax Auditor had not even contemplated to disallow the employees’ contribution to Provident Fund wherever it is remitted beyond the due date prescribed under the Provident Fund Act. Hence, it is merely recording of facts and a mere statement made by the Tax Auditor in his audit report. The Ld.CPC…

disallowance of expense or increase in income, but the same had not been carried out by the assessee while filing the return of income. As stated supra, the tax auditor had not stated in the instant case to disallow Employees Contribution to Provident Fund wherever it is remitted beyond the due date under the respective Act. Hence, in our considered opinion, the said action of the Ld.CPC Bangalore in disallowing the employees’ contribution to Provident Fund while processing the return under section 143(1) of the Act is against the provisions of the Act as it would not fall within the ambit of prima facie adjustments. Our view is further fortified by the co-ordinate bench decision of this Tribunal in the case of Kalpesh Synthetics Pvt Ltd vs DCIT reported in 195 ITD 142 (Mum). The relevant portion of the decision is reproduced below:-

Appellant / assessee submissions

The packaged judgment does not separately label the appellant's submissions in an independently extractable passage. No contention is inferred; read the full order.

Revenue / respondent submissions

The packaged judgment does not separately label the respondent's submissions in an independently extractable passage. No contention is inferred; read the full order.

Court / Tribunal analysis and reasoning

Fund based on the statement made in the Tax Audit Report while processing the return under section 143(1) of the Act. 3. We have heard the rival submissions and perused the materials available on record. It is not in dispute that assessee had remitted the employees contribution to Provident Fund beyond the due date prescribed under the Provident Fund Act, but had duly remitted the same before the due date of filing the return of income under section 139(1) of the Act. This fact of remittance made by the assessee with delay had been reported by the Tax Auditor in the Tax Audit Report. The copy of the Tax Audit Report is placed on record by the Ld.AR before us together with its annexures. On perusal of the same, we find that the Tax Auditor had merely mentioned the due date for remittance of Provident Fund as per the Provident Fund Act and the actual date of payment made by the assessee. The Tax Auditor had not even contemplated to disallow the employees’ contribution to Provident Fund wherever it is remitted beyond the due date prescribed under the Provident Fund Act. Hence, it is merely recording of facts and a mere statement made by the Tax Auditor in his audit report. The Ld.CPC…

disallowance of expense or increase in income, but the same had not been carried out by the assessee while filing the return of income. As stated supra, the tax auditor had not stated in the instant case to disallow Employees Contribution to Provident Fund wherever it is remitted beyond the due date under the respective Act. Hence, in our considered opinion, the said action of the Ld.CPC Bangalore in disallowing the employees’ contribution to Provident Fund while processing the return under section 143(1) of the Act is against the provisions of the Act as it would not fall within the ambit of prima facie adjustments. Our view is further fortified by the co-ordinate bench decision of this Tribunal in the case of Kalpesh Synthetics Pvt Ltd vs DCIT reported in 195 ITD 142 (Mum). The relevant portion of the decision is reproduced below:-

“6. Coming to the mechanism of application of section 143(1), we find that the first proviso to section 143(1) mandates that "no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode" and, under the second proviso to section 143(1), “the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustements shall be made”. The scope of permissible adjustments under section 143 (1)(a) now is thus much broader, and, as long as an adjustment fits the description under section 143(l)(a) (i) to (v), read with Explanation to section 143(1), such an adjustment, subject to compliance with first and second proviso to section 143(1), is indeed permissible. I however, important to take note of the fact that unlike the old scheme of 'prima facie adjustments' under sec 143(l)(a), the scheme of present section 143(1) does not involve a unilateral exercise. The very fact that an opportunity of the assessee being provided with an intimation of 'such adjustments' [as opposed under…

on such objections has to be essentially a judicious call, appropriate to facts and circumstances and in accordance with the law, and the Assessing Officer CPC has to set out the reasons for the same. Whether there is a provision for further hearing or not, once objections are raised before Assessing Officer CPC and the Assessing Officer CPC has to dispose of the objections before proceeding further in the matter, this is inherently a quasi judicial function that he is performing, and, in performing a quasi judicial function, he has to set out his specific reasons for doing so. Disposal of objections cannot be such an empty formality or meaningless ritual that he can do so without application of mind and without setting out his specific reasons for rejecting the same. Let us, in this light, set out the reasons for rejecting the objections. The Assessing Officer-CPC has used a standard reason to the effect that "As there has been no response/the response given is not acceptable, the adjustment(s) as mentioned below are being made to the total income as per provisions of section 143(l)(a)", and has not even struck off the portion inapplicable. To put a question to ourselves, can…

8. When the law enacted by the legislature has been construed in a particular manner by the Hon’ble jurisdictional High Court, it cannot be open to anyone in the jurisdiction of that Hon'ble High Court to read any other manner than as read by the Hon'ble jurisdictional High Court. The views expressed by the tax auditor in such a situation, cannot be reason enough to disregard the binding views of the Hon'ble jurisdictional Court. To that extent, the provisions of section 143(l)(a)(iv) must be read down. What essentially follows is the adjustments under section 143(1)(a) in respect of "disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return" is to be read as, for example, subject to the rider "except in a situation in which the audit report has taken a stand contrary to the law laid down by Hon'ble Courts above". That is where the quasi judicial exercise of dealing with the objections of the assessee against proposed adjustments under section 143(1), assumes critical importance in the processing of returns, also important to bear in mind the fact that what constitutes jurisdictional High Court will essentially…

Operative decision and relief

situation before us. We, therefore, see no need to deal with that aspect of the matter at this stage. 11. In a result, this appeal is allowed”

5. We are conscious of the fact that the issue on merits is decided against the assessee by the recent decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT reported in 143 taxmann.com 178 (SC) dated 12/10/2022. This decision was rendered in the context where assessment was framed under section 143(3) of the Act and not under section 143(1)(a). 6. Hence we direct the Ld.Assessing Officer to delete the addition made in respect of employees’ contribution to Provident Fund, in the facts and circumstances of the instant case. Accordingly, grounds 1 to 3 raised by the assessee are allowed. 7. Grounds 4, 5 & 6 raised by the assessee are with regard to the chargeability of interest under section 234A, 234B & 234C of the Act which are consequential in nature. The Ld.Assessing Officer is directed to recomputed the same in accordance with law. 8. Ground 7 raised by the assessee is general in nature and does not requie any specific adjudication. 9. In the result, the appeal of the assessee is allowed.

Ratio and legal principle

• The packaged judgment addresses Section 43B/CPC adjustment for delayed employee PF/ESI contributions and scope of prima facie adjustment. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with section 43b/cpc adjustment for delayed employee pf/esi contributions and scope of prima facie adjustment. Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

Does this case match your facts?

Section / provision impact

• 43B/CPC - apply the exact version considered in the judgment.
• 43B - apply the exact version considered in the judgment.

Case network

Similar issue / useful comparison

• Parth Developers vs. Pr. CIT - ITAT Indore
• PCIT v. Axis Bank Ltd - Court / Tribunal to be verified
• OERLIKON BALZERS COATING INDIA PRIVATE LIMITED VS. UNION OF INDIA & ANR - Court / Tribunal to be verified

Different outcome / possible distinction

• UCB India Pvt. Ltd. vs. ACIT - Quashed / set aside
• Ajay Parasmal Kothari v. ITO - Partly allowed

Full judgment and source control

Read / download packaged judgment record

Source class: Sanitized local full-judgment copy; official primary replacement pending · Repository status: Later-history status: verification on hold pending source confirmation