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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-24, New Delhi [‘CIT(A)’ in short] dated 04.12.2025 arising from the assessment order dated 12.02.2016 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the Assessing Officer, DCIT, Circle 26(1), New Delhi for the A.Y. 2013-14.
The following grounds raised by the assessee, which reads as under:
1.“The Ld CIT(A) has erred both in law and in facts of the case in upholding the addition of Rs.10,43,978/- u/s 14A rwr 8D ignoring the fact that there is no exempt income and therefore, no disallowance can be made in above provision.
2.The Ld CIT(A) has erred both in law and in facts of the case in upholding the addition of Rs.8,19,424/- u/s 2(24)(x) of the Act ignoring the fact that the said payment made under Employees Provident Fund Act has been made within due date and therefore, no addition can be made under above provision.
3.The Ld CIT(A) has erred both in law and in facts of the case in upholding the addition of Rs.21,51,637/-on account of ad-hoc disallowance at the rate of 15 percent ignoring the fact that the no trading addition can be made without rejecting the books of account and the appellant denies of making any agreement on making such disallowance.
4.The appellant craves leave to add, Delete, modify amend the above grounds of appeal with the permission of the Hon’ble R appellate authority.”
Brief facts of the case are that the assessee is a private limited company and has been engaged in the business of civil contractors, resale of IMFL, construction material and has also been deriving income from rent, dealing in real estate and also running a hotel at Bhatinda (Punjab). The assessee had e-filed the return of income for the year under consideration on 13.09.2013 declaring income of Rs.14,81,62,180/- as noted by the AO in the impugned order of assessment. The AO has completed the impugned assessment by passing the order u/s 143(3) of the Act on assessed income of Rs.15,71,56,812/- after making various additions/disallowances aggregating Rs.89,94,332/- to the returned income.
Aggrieved assessee was in appeal before the ld. CIT(A), the ld. CIT(A) dismissed the appeal of the assessee by observing as under:
“5.4.2On perusal of the assessment order and tax audit report, it is undisputed that employee contribution to PF was deposited after the due dates prescribed under the respective statute for most months. The Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. vs. CIT (Civil Appeal No. 2833/2016) has conclusively held that employees contribution deposited after the due date under respective welfare legislation is not allowable, even if paid before filing of return u/s 139(1). After this judgment, there remains no scope to allow such delayed contributions.
5.4.3Regarding the appellant's claim for February 2013, even though the cheque was tendered on 20.03.2013, the cheque was cleared on 21.03.2013. Under the EPF Scheme, payment is considered made only when the amount is actually credited to the government account. The appellant has not produced any PF authority confirmation or other evidence to prove that the date of tendering the cheque is treated as the date of deposit under the specific PF law. The reliance on an old CBDT circular and treasury rules cannot override the statutory mandate and the Supreme Court judgment.
5.4.4Therefore, the AO's disallowance of Rs. 57,98,717/- is in accordance with law and requires no modification. Hence, Ground No. 3 stands DISMISSED.”
Being aggrieved by the order of ld. CIT(A), the assessee is now in appeal before us.
Before us, learned Counsel for the assessee stated that there is no exempt income, however, the AO has made disallowance under section 14A r.w.s 8D of the Act. On the issue of disallowance under section 36(1)(va) of the Act for delay of deposit of EPF, the ld. Counsel states that the date of the tender of cheque is before the due date which may be examined before disallowing the amount. On the third issue; the ld. Counsel for the assessee stated that the disallowance is made on ad hoc basis on various expenses of Rs.21,51,637/- @ 15% without rejecting the books of accounts.
Per contra, ld. DR relied on the order of the AO/CIT(A).
We have heard the rival submissions and perused the material available on record. On the first issue of disallowance of Rs.10,43,978/- under section 14A r.w.s 8D of the Act, we find that there is no exempt income declared by the assessee in its computation of income. Following the Hon’ble Delhi High Court’s decision in the cases of Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Delhi); PCIT v. IL & FS Energy Development Co. Ltd. (2017) 84 taxmann.com 186 (Delhi); PCIT v. Era Infrastructure (India) Ltd. (2022) 448 ITR 674 (Delhi); 2022 which held that section 14A cannot be invoked where no exempt income was received or receivable during the relevant previous year and that the amendment to section 14A vide the Finance Act, 2022 applies from AY 2022-23 onward and cannot be presumed retrospective merely because it uses 'for removal of doubts' language. Therefore, no disallowance is required to be made under section 14A of the Act. Ground No.1 is allowed.
The second issue is with regard to the EPF (Employees’ Contribution). We are of the considered view that the matter may be set aside to AO to examine whether the cheque was tendered on 23.02.2013 before the due date, as prescribed under the respective Act of PF and ESI. In the event the cheque is tendered on 23.02.2013, within the due date as provided in the relevant respective Act, the same may be allowed. We also find that this issue of disallowance is limited to a contribution made in Feb, 2013 of Rs.19,424/- only, otherwise the assessee has accepted the disallowance of balance amount In view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. vs. CIT (2022) 448 ITR 518 (SC). This ground is allowed for statistical purposes.
The third issue is with regard to the ad hoc disallowance of Rs.21,51,637/-; we are of the view that neither the Revenue nor the assessee has been able to completely justified the expenses or disallowance of the expenses respectively. In such facts, without creating the precedent, we in the interest of natural justice, hold that 2% of the said expense be considered as not for the purposes of business. Ground of the assessee is partly allowed.
In the result, appeal filed by the assessee in ITA No.3540/Del/2026 is partly allowed.