Commissioner of Income Tax vs Lakhani Rubber Udyog Ltd.

Satish Kumar Mittal, J.—The instant appeal filed by the Revenue u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), is directed against the order dated March 22, 2007, passed by the Income Tax Appellate Tribunal, Delhi Bench "B" New Delhi (hereinafter referred to as "the ITAT"), in ITA No. 2995/DEL/06 in the case of the respondent for the assessment year 2001-02 by raising the following substantial questions of law:

(i) Whether, on the facts and in the circumstances of the case, the hon''ble Income Tax Appellate Tribunal erred in law in confirming the order of the learned Commissioner of Income Tax (Appeals) who deleted the disallowance made u/s 43B in respect of ESI which were not deposited by the assessee ?

(ii) Whether, on the facts and in the circumstances of the case, the hon''ble Income Tax Appellate Tribunal erred in confirming the orders of the learned Commissioner of Income Tax (Appeals) who deleted the disallowance made u/s 2(24)(x) read with Section 36(1)(va) of the Income Tax Act, 1961, on account of late payment of employees'' contribution to provident fund without appreciating the fact that payments were made beyond due dates ?

(iii) Whether, on the facts and in the circumstances of the case, the hon''ble Income Tax Appellate Tribunal was right in law in confirming the order of the learned Commissioner of Income Tax (Appeals) who deleted the disallowance made by the Assessing Officer on account of late payment of employer''s contribution in terms of the second proviso to Section 43B read with Section 36(1)(iv). Reliance is placed on the decisions of the hon''ble Kerala High Court in the case of Commissioner of Income Tax Vs. G.T.N. Textiles Ltd., , Commissioner of Income Tax Vs. Jairam and Sons, , Commissioner of Income Tax Vs. South India Corporation Ltd.,

(iv) Whether, on the facts and in the circumstances of the case, the hon''ble Income Tax Appellate Tribunal erred in law in observing that due date as defined in Explanation to Section 36(1) (va) includes grace period also, allowed as per the Provident Fund and ESI Acts?

The brief facts of the case are that, vide order passed u/s 154 of the Act, the Assessing Officer, while rectifying his earlier order, disallowed Rs. 46,59,304 on account of provident fund being paid after due dates and Rs. 57,184 on account of ESI contribution not paid within due date. Consequently, the said amount was added in the taxable income of the assessee. On appeal by the assessee, the Commissioner of Income Tax (Appeals) deleted the said addition on the ground that the issues were debatable and that all the payments have been made within grace period, while observing as under:

In appeal, the Commissioner of Income Tax (Appeals) allowed the deduction observing as under:

I have carefully considered the submissions of the learned authorised representative and perused the order of rectification u/s 154 of the Act. I am in conformity with the contentions of the learned authorised representative. Since the issue is debatable and therefore is not rectifiable u/s 154 of the Act. Moreover, as per the details described by the Assessing Officer in his certificatory order, all the payment to provident fund and ESI have been paid within the grace period of five days under the relevant statutory Acts. Therefore, the ratio of the Madras High Court (supra) relied upon by the learned authorised representative is well placed. However, it has been also held in the case of Commissioner of Income Tax Vs. Salem Co-operative Spinning Mills Ltd., that provident fund dues paid within the grace period allowed under the relevant statute are deductible. Further, as admitted by the Assessing Officer himself, the circular issued under the Provident Fund Act allows the payments to be made in the grace period, which the appellant-company has made. In view of the above judgments, the disallowances of Rs. 46,59,304 and Rs. 57,184 were unwarranted and uncalled for and, therefore, stand deleted.

The learned authorised representative for the assessee relied on the following case law:

(1) Commissioner of Income Tax Vs. Shri Ganapathy Mills Company Limited, .

(2) (2006) 100 ITD 199 .

(3)A.P.L (India) P. Ltd. v. Deputy CIT [2005] 97 TTJ 187 .

(4) (2006) 151 TAXMAN 24 .

(5) CIT v. Madurai District Co-operative Spinning Mills Ltd. [2003] 131 Tax 513 (Mad).

(6) (2006) 101 ITD 437 .

(7) Asst. CIT v. Maharashtra Metal Powers Ltd. [2006] 105 TTJ 361.

(8) (2005) 93 TTJ 144 .

(9) Commissioner of Income Tax Vs. Salem Co-operative Spinning Mills Ltd., .

After considering the rival submissions and going through the above rulings relied upon by the learned authorised representative, we confirm the order of the learned Commissioner of Income Tax (Appeals) as the payments have been made during the grace period.

Feeling aggrieved against the abovesaid order, the Revenue filed an appeal before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal while following various decisions cited by the assessee, dismissed the appeal of the Commissioner of Income Tax by holding that the payments have been made within grace period, therefore, the addition could not have been made by the Assessing Officer while exercising the power u/s 154 of the Act in the garb of rectification of his earlier order.

After hearing learned Counsel for the appellant and going through the impugned order, we are of the opinion that the aforesaid questions of law do not arise from the order of the Income Tax Appellate Tribunal. The only question which is arising from the order of the Income Tax Appellate Tribunal is whether the Assessing Officer has gone beyond his jurisdiction u/s 154 of the Act while rectifying its earlier order. The appellate authority as well as the Income Tax Appellate Tribunal have rightly come to the conclusion that the Assessing Officer has gone beyond the jurisdiction u/s 154 of the Act while changing his earlier order on the merits, which, in our opinion, does not amount to rectifying the mistake apparent on the record. Even the Assessing Officer himself has admitted in his order that the provident fund amount was deposited by the assessee within the grace period provided under the circular. In spite of that fact, the Assessing Officer changed the order on the merits in the garb of rectification.

Therefore, we do not find any merit in this appeal nor any substantial question of law is arising in this appeal.

Dismissed.