Top Stories No Disallowance on payments towards PF and ESI made before due date of filing Income Tax Return u/s 139(1) of Act: ITAT [Read Order] By Aparna. M – On March 28, 2024 5:24 pm – 2 mins read The Mumbai bench Income Tax Appellate Tribunal (ITAT) held that there was no disallowance on   payment towards the Provident Fund and Employee State Insurance (ESI) made before the due date of filing Income Tax Return under Section 139(1) of the Income Tax Act, 1961. During the assessment proceedings of  assessee Coronation Cigar Co the AO disallowed the PF and ESI made before the due date of filing income tax return under Section 139(1) of the Income Tax Act. Aggrieved by the order assesee filed an appeal before the CIT(Appeal).

The CIT(A) dismissed the appeal filed by the assessee . Thereafter the assessee filed an appeal before the tribunal. During the appeal proceedings counsel appearing for the assessee submitted that in this case, is an audit report which is prepared by a third party, i.e. an independent tax auditor, and a lapse in the tax audit report, as indeed in this case, cannot be put against the assessee for the purpose of a disallowance under section 143(1). Therefore the counsel point out that as long as the payments towards provident fund dues are made before the due date of filing of the income tax return under section 139(1), even beyond the permissible time limit under the relevant statute under which payment is made, the payments so made are deductible in the computation of business income.

Tejinder Pal Singh, Counsel for Revenue argued when the income tax return itself points out that there are payments beyond the due date which are clearly inadmissible under the statutory provisions. After analyzing the submission of both parties, the two member  bench of Vikas Awasthy (Judicial Member) and Pramod Kumar (Vice President)held that disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1) of Income Tax Act. Therefore the bench  directed the Assessing Officer to delete the disallowances, on account of, what is termed as, delayed payments of PF and ESI contributions.