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Judgment
PER KRINWANT SAHAY AM
Appeal in this case has been filed by the assessee against the order dated 24.06.2024 passed by the Ld. CIT(A)/ NFAC, Delhi for the A.Y. 2018-19. Grounds of appeal are as under :-
“1.The appellant is a partnership firm engaged in the business of hospitality and is regularly assessed to income tax.
2.For Assessment Year 2018-19, the appellant filed its return of income declaring total income of Rs.1,84,12,160/- after fully and truly disclosing all particulars of income, including employees' contribution to Provident Fund (PF) and Employees State Insurance (ESI) in its books of account as well as in the Tax Audit Report.
3.During the course of assessment proceedings completed under section 143(3) of the Income-tax Act, 1961, the Assessing Officer made a disallowance of Rs. 16,01,764 under section 36(1)(va) read with section 2(24)(x) on account of alleged belated deposit of employees' contribution to PF/ESI
4.The said contributions, though deposited beyond the due dates prescribed under the respective welfare statutes, were deposited before the due date of filing the return of income under section 139(1). The claim was made on the basis of prevailing judicial precedents, including decisions of various High Courts, wherein such payments were held to be allowable if deposited before the due date of filing the return.
5.All primary facts relating to the said claim were fully disclosed by the appellant in the return of income, computation of income, and the Tax Audit Report. There was no concealment of income, suppression of facts, misrepresentation, or furnishing of inaccurate particulars.
6.The addition so made was confirmed by the learned Commissioner of Income Tax (Appeals) vide quantum appellate order dated 24.06.2024.”
During proceedings before us the Ld. Counsel of the assessee has filed a written submissions which is reproduced as under :-
“The present appeal is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, confirming the penalty of Rs. 11,08,676/- levied by the Assessing Officer under section 270A(8)/(9) of the Income-Tax Act, 1961 by treating the disallowance of employees' contribution towards PF/ESI as a case of "misreporting of income" as defined under section 270A(9). The appellant respectfully submits that the impugned orders are contrary to the facts of the case, the statutory provisions and the settled principles of law and are therefore liable to be set aside.
FACTS OF THE CASE
1.The appellant is a partnership firm engaged in the business of hospitality and is regularly assessed to income tax.
2.For Assessment Year 2018-19, the appellant filed its return of income declaring total income of Rs.1,84,12,160/-after fully and truly disclosing all particulars of income, including employees' contribution to Provident Fund (PF) and Employees State Insurance (ESI) in its books of account as well as in the Tax Audit Report.
3.The ITR has been proceed U/s 143(1)(a) in which the Centralized Processing Centre (CPC) has disallowed Rs. 16,01,764/- U/s 36(1)(va) read with section 2(24)(x) on account of late deposition of employees' contribution to PF/ESI after the due date of prescribed in the respective Acts. Again during the course of assessment proceedings completed under section 143(3) of the Income-tax Act, 1961, the Assessing Officer made a disallowance of Rs. 16,01,764 under section 36(1)(va) read with section 2(24)(x) on account of alleged belated deposit of employees' contribution to PF/ESI.
4.The said contributions, though deposited beyond the due dates prescribed under the respective welfare statutes, were deposited before the due date of filing the return of income under section 139(1). The claim was made on the basis of prevailing judicial precedents, including decisions of various High Courts, wherein such payments were held to be allowable if deposited before the due date of filing the return.
5.All primary facts relating to the said claim were fully disclosed by the appellant in the return of income, computation of income, and the Tax Audit Report. There was no concealment of income, suppression of facts, misrepresentation, or furnishing of inaccurate particulars.
6.The addition so made was confirmed by the learned Commissioner of Income Tax (Appeals) vide quantum appellate order dated 24.06.2024.
7.Subsequently, the Assessing Officer initiated penalty proceedings under section 270A of the Act and levied a penalty of Rs. 11,08,676 by applying section 270A(9), alleging "misreporting of income" on the sole basis of the aforesaid disallowance.
8.The appellant preferred an appeal before the learned CIT(A) against the penalty order. Detailed written submissions were filed explaining that the issue was purely a legal and debatable issue, that all facts were duly disclosed, and that the provisions of section 270A(9) were not attracted.
9.The learned CIT(A), however, vide DIN: ITBA/APL/S/250/2025-26/1084785713(1) order dated 14.01.2026 passed under section 250 of the Act, dismissed the appeal and upheld the penalty, primarily relying upon the judgment of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd., holding that the appellant had misreported income under section 270A(9).
10.The appellant respectfully submits that the impugned order of the learned CIT(A) is contrary to law and facts, as it proceeds on an erroneous assumption that a legal disallowance automatically amounts to misreporting of income, ignoring the settled principles governing levy of penalty.
11.Being aggrieved by the order of the learned CIT(A), the appellant pre the present appeal before the Hon'ble Income Tax Appellate Tribunal.”
The Ld. Counsel also made arguments before the bench on the line of the written submission he has filed.
Per contra the Ld. DR relied on the orders of the authorities below.
We have considered the findings given by the AO and the Ld. CIT(A) in their respective orders. We find that in this case penalty has been levied on the assessee u/s.270A(9) of the Act on the basis of misrepresenting the income by the assessee. The Ld. Counsel of the assessee has argued that the disallowance by the AO has been made towards the employees contribution of PF and ESI. The assessee has made all the payments before the due date of filing of the return and everything was brought on record by the assessee itself. So mere rejection of assessee’s claim on technical basis without bringing anything substantial to prove that either the assessee misrepresented or suppressed facts about its income, as per the Ld. Counsel penalty u/s. 270A(9) cannot be levied.
In support of his arguments he has filed many case laws some of which are as under :-
“1.Bombay High Court in case of CIT vs. Dalmia Dyechem Industries ITA No. 1396/2013
2.Delhi High Court in case of CIT vs. MTNL Ltd. 2011-ITRV-HC-DEL-231
3.CIT v. H. Abdul Bakshi & Bios. (1986) 160 ITR 94 (AP)(FB)
4.Vishwakarma Industries v. CIT (1982) 135 ITR 652 (P&H;) (FB)
5.CIT v. Indian Metals and Ferro alloys Ltd,
6.Commissioner of Income Tax V.Sood Harvestor [2008] 304 ITR 279(P&H)
7.Poysha Goyal vs. ACIT [2015-ITRV-ITATDEL-012] ITA No. 1721/Del/2013
8.CIT vs. Jain Export Private Ltd. ITA No.235/2013
9.Harish Narinder Salve Vs. ACIT Circle 37(1)
10.CIT vs. Reliance Petro Products Pvt. Ltd. - 322 ITR 158 (SC)
11.Adinath Vasantrao Wandhekar Vs ITO, Panvel 2.5
12.Mitsu Industries Ltd. vs. DCIT [2015-ITRV-HC-GUJ-015]
We have considered all case laws brought on record and the arguments of the Ld. Counsel of the assessee and the Ld. DR during proceedings before us. We are of this considered view that all facts were brought on record by the assessee itself and anything new has not been brought on record by the AO and the Ld. CIT(A). Therefore, it cannot be claimed by the revenue that the assessee has either suppressed its or misrepresented facts about its income. Keeping in view various case laws brought on record by the ld. Counsel of the assessee as mentioned above. Assessee’s appeal on this issue is allowed.
In the result, the appeal filed by the assessee is allowed.