Shivganga Drillers Pvt. Ltd. v. CPC, Bangalore

Case snapshot

Sections / provisions: 143(1)(a); 43B; 199(3) Sub Rule 3(i) of Rule 37BA

Questions before the Court / Tribunal

• Appeal against intimation u/s 143(1)(a) / 154 is maintainable; The amendment made by Finance Act, 2021 for disallowance of EPF & ESIC is applicable from the assessment 2021-22 and subsequent year.; From bare reading of sub section (3) of section 199 read with sub Rule 3(1) of Rule 37BA. make it unambiguously clear that the credit for TDS shall be allowed in the year in which the relevant income is taxable.
• 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

Shivganga Drillers Private Ltd. Vs. CPC, Income Tax, Indore Bangalore [PAN – AAJCS2458Q] (Appellant / Assessee) (Respondent/Revenue)

Appellant by : Shri Prakash Jain & Shreya Jain, A.Rs. Respondent by : Shri R.P. Maurya, Sr. D.R.

1. This appeal filed by the assessee is directed against the order dated 03.09.2021 of learned Commissioner of Income-Tax (Appeals)-NFAC [“Ld. CIT(A)”], which in turn arises out of the rectification-order dated 17.12.2018, passed by the learned CPC, Bangalore [“Ld. AO”] u/s 154 of the Income-tax Act, 1961 [“the Act”] for the Assessment-Year 2017-18.

2. The return of income filed by the assessee was processed by the Ld. AO through Intimation u/s 143(1) of the Act after making two adjustments, viz. (i) disallowance of Rs. 1,02,513/- on account of delayed

payment of employees’ contributions to Provident Fund / Employees State Insurance (“PF / ESI”), and (ii) disallowance of the credit of TDS of Rs. 60,49,627/-, claimed by the assessee. Against this Intimation u/s 143(1), the assessee submitted an application for rectification u/s 154 of the Act to the Ld. AO. The Ld. AO, however, passed order of rectification on 17.12.2018 whereby the application filed by the assessee was rejected. Being aggrieved by this order of rectification u/s 154, the assesse filed appeal to Ld. CIT(A). The Ld. CIT(A), however, dismissed the appeal of assessee in limine. Against the order of Ld. CIT(A), the assessee has filed this appeal and now before us.

Appellant / assessee submissions

4. In the Written-Submission, the assessee has submitted that this ground is general in nature. During hearing, the Ld. AR repeated this version and did not make further submission. Hence this Ground does not require any adjudication.

7. Before us, the Ld. AR submitted that the assessee has claimed the deduction of employee’s contribution to PF / ESI as well credit of TDS in the Return of Income and it is the Ld. AO who has disallowed both of these claims in the Intimation passed u/s 143(1), though both of these claims were very much allowable in accordance with the law. The Ld. AR went on submitting that under the scheme of the Act, the assessee has two remedies against the Intimation u/s 143(1), viz. (i) file rectification- application u/s 154, or (ii) file appeal u/s 246A. According to Ld. AR, the assessee filed a rectification-application u/s 154 which is not only one of the available remedy but also a simpler remedy and practically resorted to by many of the assessees, particularly in the matter of the two adjustments involved in the present appeal. Accordingly to Ld. AR, it is

8. Per contra, the Ld. DR submitted that the assessee has not filed any appeal against the Intimation u/s 143(1), which necessarily should have been filed. According to Ld. DR, the assessee filed rectification-application u/s 154 against the Intimation u/s 143(1) and thereafter carried the matter to Ld. CIT(A) when the rectification-application itself was rejected. The Ld. DR submitted that this route adopted by the assessee was not permissible in the issues involved and therefore the Ld. CIT(A) was justified in dismissing the appeal of assessee in limine. With these submissions, the Ld. DR prayed to uphold the order of Ld. CIT(A).

12. The Ld. AR submitted that the Ld. AO has made the disallowance without appreciating that though the assessee had not deposited the employees’ contributions to PF / ESI upto the due dates prescribed under the PF / ESI laws, yet the assessee had deposited the same to the respective funds within the time permitted u/s 43B of the Act i.e. upto the due date u/s 139(1) for filing the return of income and hence no disallowance is attracted in view of numerous decisions of Hon’ble High Courts favouring the assessee. Some of the decisions relied upon by Ld. AR are mentioned below:

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

9. We have considered the rival submissions of both sides and also perused the record. We are very much aware of the recent decision of ITAT, Jodhpur Bench in the case of Akbar Mohammad, Nagaur Vs. ACIT, CPC, Bangalore ITA No. 108 & 109/Jodh/2021 order dated 31.01.2012 in which the Hon’ble Co-ordinate Bench had resolved an identical controversy by holding as under:

14. We have considered the rival contentions and submission of both sides and also perused the relevant materials available on record. Before proceeding further we would like to mention that the assessee has deposited the impugned contributions to the PF / ESI, though after due date under PF / ESI law but within the time allowed u/s 43B i.e. upto the

20. We have considered submissions of both sides. We observe that the Ld. AR has rightly pressed section 199 before us. We also observe that the sub-section (3) of the said section 199 empowers the Board to make rules and exercising that authority, the Board has made Rule 37BA which provides as under:

Operative decision and relief

6. Facts qua this Ground are such that while passing Intimation u/s 143(1) of the Act, the Ld. AO made two adjustments, viz. (i) disallowance of Rs. 1,02,513/- on account of delayed payment of employees’ contributions to Provident Fund / Employees State Insurance (“PF / ESI”), and (ii) disallowance of the credit of TDS of Rs. 60,49,627/-. Though the assessee did not file any appeal against this Intimation u/s 143(1), an application for rectification u/s 154 of the Act was filed to the Ld. AO within the time permissible u/s 154 of the Act for seeking redressal of the grievances arising out of the two adjustments made by Ld. AO. However, the Ld. AO rejected the application filed by the assessee. Being aggrieved by rejection, the assessee filed appeal to Ld. CIT(A) and technically such appeal happened to be against the order of rectification u/s 154 and not against the original Intimation u/s 143(1). The Ld. CIT(A) dismissed the appeal of assessee in limine by observing in Para No. 5 to 6 of his order as under:

5.1 On perusal of these facts, it appears that the appellant is trying to take back door entry by filing an appeal against order u/s 154 for which the original cause of action has arisen at the stage of 143(1) itself. As per the provisions of the Act, the appellant could have filed an appeal against the intimation u/s 143(1) of the CPC dated 09.11.2018. However, the appellant has not filed an appeal against the intimation u/s 143(1). Thereafter, the appellant has filed a rectification application u/s 154 before the CPC. As per the rectification order u/s 154 dated 17.12.2018, the CPC has rejected the request of the appellant for rectification of mistake. There is no mistake apparent from record at the stage of 154 application. If, at all, the issue under consideration would arise only at the stage of intimation u/s 143(1). Therefore, the issue is not adjudicated herein. Accordingly, the grounds of appeal are dismissed.

16. Thus, in view of foregoing discussion, we observe that employees’ contributions to PF / ESI paid after due date under PF / ESI laws but within the time allowed u/s 43B i.e. upto the due date u/s 139(1) for filing of return is allowable as deduction in computing taxable income of business and the assesse had rightly claimed the same. Therefore the Ld. AO was not justified in disallowing the claim of the assessee. We therefore

24. In the result, the appeal of assessee is allowed for statistical purpose.

Ratio and legal principle

• The packaged judgment addresses Appeal against intimation u/s 143(1)(a) / 154 is maintainable; The amendment made by Finance Act, 2021 for disallowance of EPF & ESIC is applicable from the assessment 2021-22 and subsequent year.; From bare reading of sub section (3) of section 199 read with sub Rule 3(1) of Rule 37BA. make it unambiguously clear that the credit for TDS shall be allowed in the year in which the relevant income is taxable. 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 appeal against intimation u/s 143(1)(a) / 154 is maintainable; the amendment made by finance act, 2021 for disallowance of epf & esic is applicable from the assessment 2021-22 and subsequent year.; from bare reading of sub section (3) of section 199 read with sub rule 3(1) of rule 37ba. make it unambiguously clear that the credit for tds shall be allowed in the year in which the relevant income is taxable. 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.

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Section / provision impact

• 143(1)(a) - apply the exact version considered in the judgment.
• 43B - apply the exact version considered in the judgment.
• 199(3) Sub Rule 3(i) of Rule 37BA - apply the exact version considered in the judgment.

Case network

Similar issue / useful comparison

• Rajesh R. Hemrajani v. ITAT - Bombay High Court
• Pujya Sindhi Panchayat Trust v. ITO(E) - ITAT Mumbai
• Annamma Samkutty v. ITO - ITAT Pune

Different outcome / possible distinction

• Pr. CIT (Central)-4 v. DBM Geotechnics & Construction Pvt. Ltd. - Partly allowed
• Pr. CIT (Central)-1 v. Surendra L. Hiranandani - Dismissed

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