ITAT deletes EPF/ESI disallowance on account of one day delay in deposit due to public holiday/Sunday

The Income Tax Appellate Tribunal(ITAT) Delhi in the matter of M/s G.D. Foods and Manufacturing vs Assistant Director of Income Tax has opined that when the due date for depositing the contribution of ESIC & EPF falls on Sunday and gazetted holiday, the said delay of one day deserves to be condoned as per Section 10 of General Clauses Act.

Brief facts of the case are that, the assessee company received an intimation from ADIT, CPC, Bangalore, (hereinafter referred as A.O.) dated 09/07/2020 u/s 143(1) of the Act, wherein the business income has been increased by Rs. 26,44,255/- on account of disallowance of late payment of PF& ESI Rs. 26,42,189/- (Employee’s Contribution) and profit on sale of fixed asset of Rs. 2,066/-. Aggrieved by intimation dated 09/07/2020, the assessee preferred an Appeal before the CIT(A). The ld. CIT(A) vide order dated 22/12/2022 upheld the disallowance on account of late payment of ESI of Rs.6,64,200/- and PF of Rs. 19,77,986/- of Employees Contribution. Further, in so far as addition of Rs. 2,066/- on account of profit of sale of fixed asset the same has been remanded to the file of the A.O. for adjudicating the issue afresh. Aggrieved by the order of the ld. CIT(A) the assessee preferred the present appeal on the grounds mentioned above.

The Ld. Counsel for the assessee fairly submitted that the issue regarding allowabilty of late payment of ESIC/EPF contribution belatedly as prescribed under the respective ESI & PF Act has been settled by the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT-1 in Civil Appeal No. 2833 of 2016, vide order dated 12/10/2022 held that delayed deposit of the contribution EPF & ESIC beyond the stipulated period prescribed in the respective Acts are not allowable.

The Ld. Counsel submitted that the ld. CIT(A) committed an error in not accepting the plea of the assessee that the deposit of ESI contribution for the month of June and July, 2018 of Rs. 3,89,086/- and EPF contribution of Rs.15,47,915/- for the month of June and July, 2018 was delayed by one day, wherein the due date under the respective Acts falling either on Sunday or gazetted holiday therefore, the same is allowable. Further submitted that, the said delay is covered/condonable in view of Section 10 of General Clauses Act 1977 as well as Section 4 of the Limitation Act, 1963. The Ld. Counsel further submitted that except the said additions, other additions/disallowance made by the A.O. which has been upheld by the CIT(A) are not pressed in the present Appeal in view of the ratio laid down in the case of Checkmate Services (supra). The Ld. Counsel for the assessee taken us through the provisions of General Clauses Act and also various judicial pronouncements and submitted that the above mentioned disallowance deserves to be deleted.

Per contra, the Ld. Departmental Representative relied on the order of the CIT(A).

ITAT Order

We have heard both the parties and perused the material available on record. The only issue remains for consideration in the present Appeal that whether the contributions of ESIC and EPF made by the Assessee with one day delay is allowable when the due date for payment of ESIC and EPF contributions prescribed in the respective acts of ESI & PF falls on Sunday or gazetted holiday?.

It is not in dispute that the assessee had deposited ESI & EPF with one day delay and it is also not in dispute that the due date under the respective Acts falling either on Sunday or gazetted holiday.

Thus, in our opinion, considering the fact that the due date for depositing the contribution of ESIC & EPF falls on Sunday and gazetted holiday, the said delay of one day deserves to be condoned as per Section 10 of General Clauses Act. Further it is also observed that the assessee has no intention not to deposit the contribution of ESI & EPF well within the time, depositing the contribution very next day of Holiday proves the bona-fide of the Assessee. Therefore, in our opinion, the authorities have committed error in disallowing the deposit made with one day delay where the due date under respective acts falls either on Sunday or on gazetted holiday.

In view of the above discussion, we allow Ground No. 3 of the assessee and delete the disallowance of delay deposit of one day on account of public holiday/ Sunday on ESIC of Rs. 3,89,086/- and EPF of Rs. 15,47,915/-. Since the assessee has restricted Appeal to Ground No. 3 and the to the amount mentioned above, the Ground No. 1,2, 4 to 9 are dismissed as not pressed.

In the result, the Appeal of the assessee is partly allowed.

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