Your Delayed EPF, ESIC Payments are because of EPF, ESIC Site Downtime? ITAT Understands.

In a recent judgment, the ITAT Indore addressed a prevalent issue many taxpayers face: technical glitches.

In the case of Devendra Singh Chauhan vs ITO, the core issue revolved around the disallowance of delayed deposits of Employee Contribution. This delay resulted because of the non-working status of the EPF and Employee State Insurance Corporation (ESIC) site.

For any taxpayer, such technical issues can be a significant hindrance. In this case, the ITAT observed that the delays in depositing employee contributions towards the Employees Provident Fund (EPF) and the ESIC were genuinely because of the ESIC site's downtime. This downtime prevented the generation of necessary online forms, leading to the delay.

What's crucial for you to note is the tribunal's stance.

They emphasized that these delays, caused by external factors like site downtimes, shouldn't be attributed to the taxpayer.

As a result, the ITAT deleted the additions made by the Centralized Processing Center (CPC) and later confirmed by the Commissioner of Income Tax (Appeals).

However, you should differentiate between the delays caused by uncontrollable factors and those where the taxpayer is at fault.

In this case, ITAT sustained a specific delay that the taxpayer acknowledged.

This judgment underscores the importance of technological infrastructure in fulfilling statutory responsibilities.

The judgement also highlights the need for regulatory bodies to show flexibility and understanding when uncontrollable external factors affect compliance.

So, if you ever find yourself in a similar situation, remember this case.

It serves as a reminder that while you should always aim for timely compliance, there are instances where challenges beyond your control might arise. In such cases, the law does consider these nuances.

Court Name : ITAT Indore

Parties : Devendra Singh Chauhan Vs ITO 

Decision Date : 25 July 2023

Judgement ref : ITA No. 202/Ind/2022

O R D E R

Per Vijay Pal Rao, JM:

This appeal by the assessee is directed against the order dated

05.07.2021 of Commissioner of Income Tax (Appeals)-National Faceless

Appeal Centre, Delhi for Assessment Year 2018-19.

2. At the outset, we note that this appeal was filed electronically on

01.09.2021 within the period of limitation and subsequently the appeal

was also filed physically on 18th August 2022. Accordingly when the

appeal was filed electronically within the period of limitation the same is

treated as within the limitation.

3. The assessee has raised following grounds of appeal:

“That on the facts and circumstances of the case the Ld CIT(A) is in

erred to not deleted the addition of Rs. 2,15,634/- on account of

delayed payment of employees contribution towards ESIC and PF

and not considered the payment made by the assessee before the

due date of Income Tax Return.

That the Ld CIT(A) is also not considered the Jurisdictional ITAT order

in which the same is allowed. Further in order the CIT (A) has

mentioned that MP High court is disallowed the same but in factual

position there is no clearance on this issue in the order mentioned by

the authorities. The CIT(A) is also not considered the decision of

Hon'ble Supreme Court in which the same is allowed.

That the Ld COT (A) is considered the explanation inserted in the

finance Act 2021 as retrospective but the same is to be considered as

prospective in nature and applicable from 2022- 23 not for the

assessment year 2018-2019.

Interest charged u/s 234A,234B and 234-C is arbitrary, illegal and

bad-in-law on the facts and the circumstances of the case.

The Appellant craves, to leave, to add, to alter or amend any grounds

of appeal at the time of or before final hearing of this appeal..”

4. The only issue arises in this appeal is regarding disallowance of

employees contribution to EPF due to delay in payment. Ld. AR of the

assesse has submitted that the delay in making payment towards

employees contribution to EPF for the month of June 2017 up to due date

of 15th July 2017 but actual payment made on 17th July 2017 was beyond

the control of the assesse as it is compulsory to make online payment for

PF for which the assesse is first required to generate ECR and then

proceed for payment. The Ld. AR has submitted that in the Month of July

2017 site of the EPFO for generating ECR was not working properly and

assesse was not able to generate the required form ECR for making

payment online and ultimately the assesse succeed only on 17th July 2017

and accordingly payment was made on the same date. He has further

submitted that even otherwise on 15 & 16 July 2017 was the Government

holidays being Saturday and Sunday and banks of the assesse did not

allow to make any Government payment on holidays and allowed the

payment of Government dues only on next working day. Thus, the Ld. AR

has submitted that the delay of payment of Rs.1,88,760/- of two days

was beyond the control of the assesse.

5. He has further submitted that the payments towards employees

contribution of ESIC for the month of May was on 16.06.2017 as against

the due date on 15.06.2017 due to the problem of the non-working of the

ESIC-site. Therefore, there was only one day delay in payment of

Employees Contribution on ESIC for the month of May as paid on 16th

June 2017 and the said delay was due to non-working of the ESIC site for

generating challan which is required for online payment. Ld. AR has

submitted that the site was not properly working and assesse was not able

to generate challan form and ultimately the assesse was successful only

on 16th June 2017 to generate the same and accordingly the payment was

made on the same date. Thus, the Ld. AR has submitted this delay of one

day was also not in the control of the assesse but due to the reason which

were beyond the control of the assesse.

6. The Ld. AR has then submitted that 3rd disallowance was made on

account of ESIC payment for month of June 2017 due date for which was

15th July 2017 however the assesse made the payment of 21st July 2017

and therefore, he has fairly submitted that there is a delay in respect of

the payment of Rs.18,704/- towards employees contribution to ESIC for

the month of June 2017.

7. On the other hand, Ld. DR has submitted that once there is a delay

in making payment to the respective account of EPF and ESIC the amount

is liable to be disallowed u/s 36(1)(va) of the Act. He has relied upon the

order of the Ld. CIT(A).

8. We have considered rival submission as well as relevant material on

record. As regards the delay in payment of employee’s contribution to EPF

for the month of June 2017 is concerned the assesse made the payment of

Rs.1,88,760/- on 17th July 2017 against the due date of 15th July 2017.

The assesse has explained the delay due to technical glitch and nonfunctioning of the EPF site for generating ECR required for making online

payment. Further the payment could not be made through bank due to

Saturday and Sunday on 15th & 16th of July 2017 respectively and the

assessee has finally made the payment on 17th July 2017 when he was

able to generate the ECR from the EPF site. The assesse has filed a copy of

the communication which shows that the EPFO site was having problems

of proper functioning even during the month of June, 2017. Thus, it is

clear that the delay of two days in making payment of the employees

contribution to EPF was beyond the control of the assesse and further if

the limitation expires on closed holidays it would be considered as expired

on the next working day. The online payment are not possible due to

various reasons including non-availability of internet services in the area

as shutdown due to maintenance or the order of the authorities and delay

cause by such instances cannot be attributable to the assesse. Similarly

when the EPFO site was not working properly and assesse was not able to

generate the ECR which is required for making payment online then the

cause of delay is certainly beyond the control of the assesse for which the

assesse cannot be penalized. Accordingly in the facts and circumstances

of the case when the assesse has explained the delay of two days which is

beyond the control of the assesse then the payment of employees

contribution to the EPF of Rs.1,88,760/- is to be considered as within

time and the addition made by the CPC and confirmed by the Ld. CIT(A)

on this account is deleted.

9. The other disallowance was made regarding the Employees

Contribution to ESIC for the month of May 2017, the due date of payment

was 15th June 2017 and payment was actual made by the assessee on

16.6.2017. The Ld. AR of the assesse has explained delay of one day due

to non-functioning of ESIC site and consequently the assessee was not

able to generate required challan for making online payment and finally

the assesse was able to generate required challan and made payment on

16.6.2017. Therefore, the delay of one day due to the problem in

functioning of the ESIC site has been explained as beyond the control of

the assesse. Considering instances of the non-functioning of the ESIC and

EPF site we are of the considered opinion that the delay of one day due to

the problem in non-functioning of the site cannot be attributable to the

assesse and consequently the addition made by the CPC and confirmed by

the Ld. CIT(A) of Rs. 8,170/- towards Employees Contribution to ESIC for

the month of May is deleted.

10. The third addition was made on account of the employee’s

contribution to ESIC for the month of June, 2017 which was paid by the

assesse on 21st July 2017 against the due date on 15th July 2017. Since

ld. AR of the assesse fairly concluded that there is a delay in making this

payment on the part of the assesse therefore, the addition of Rs. 18,704/-

towards employee’s contribution to ESIC for the month of June, 2017 is

sustained.

11. In the result, appeal of assessee is partly allowed.

Order in pronounced in Open Court on 25/ 07/2023.

Sd/- Sd/-

(B.M. BIYANI) (VIJAY PAL RAO)

Accountant Member Judicial Member

Indore, 25 .07.2023