Employees' Contribution To PF Cannot Be Disallowed Merely On The Basis Of Auditor's Statement: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has deleted the addition made by the Centralised Processing Centre (CPC) towards employees' contributions to the Provident Fund (PF) based on the tax auditor's statement reporting the delay in employee contribution remittances.

The two-member bench of Aby T. Varkey (Judicial Member) and M. Balaganesh (Accountant Member) has observed that the action of the CPC Bangalore in disallowing the employees' contribution to the provident fund while processing the return under section 143(1) of the Income Tax Act was against the provisions of the Act as it would not fall within the ambit of prima facie adjustments.

The assessee/appellant has raised the issue of whether the CIT(A) was justified in upholding the action of the ADIT-CPC Bangalore in disallowing employee contributions to the Provident Fund based on the statement made in the Tax Audit Report while processing the return under Section 143(1).

The assessee had remitted the employee's contribution to the Provident Fund beyond the due date prescribed under the Provident Fund Act but had duly remitted it before the due date of filing the return of income under Section 139(1). The fact that the assessee made late remittances was reported by the tax auditor in the tax audit report.

The ITAT noted that the Tax Auditor had only mentioned the Provident Fund Act's due date for the remittance of the provident fund and the actual date of payment made by the assessee. The Tax Auditor had not even contemplated disallowing the employees' contributions to the Provident Fund wherever they were remitted beyond the due date prescribed under the Provident Fund Act. Hence, it is merely a recording of facts and a mere statement made by the tax auditor in his audit report.

The tribunal directed the Assessing Officer to delete the addition made in respect of employees' contributions to the Provident Fund.

Case Title: M/s P R Packaging Service Versus ACIT

Citation: ITA No.2376/Mum/2022

Date: 07/12/2022

Counsel For Appellant: K Gopal

Counsel For Respondent: Shambhu Yadav

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