TINNA RUBBER AND INFRASTRUCTURE LTD,DELHI vs. DCIT,CIRCLE-25(1), DELHI

Admittedly, return of the income filed by the appellant/assessee was processed by the Assessing Officer and an intimation order dated 16.12.2021 was issued exercising power under Section 143(1)(a) Act of 1961, wherein, claims for deduction of delayed deposit of employees' share of contribution towards Employees State Insurance and Provident Fund of Rs.28,21,065/-

In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer’s obligation to deposit the amounts retained by it or deducted by it from the employee’s income, unless the condition that it is deposited on or before the due date, is correct and justified. The nonobstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities

As such, their Lordships of the Supreme Court, in the above judgment rendered on 12.10.2022, settled the issues authoritatively and also clarified the legal position. In the instant case, at the time of passing of the intimation order under Section 143(1)(a) of the Act of 1961 on 16.12.2021, the decision of Supreme Court in Checkmate Service Pvt. Ltd (supra) was not available in view of the divergent view amongst the various High Courts, as it was rendered on 12.10.2022. 9. At this stage, it would be appropriate and beneficial to notice the nature of powers under sub-section (1) of Section 143 as against sub-sections (2) and (3) of the Act of 1961. The power under sub- section (1) of Section 143 of the Act of 1961 is summary in nature designed to cause adjustment which is apparent from the return while that under sub-sections (2) and (3) is to scrutinize the return and cause deeper probe to arrive at correct determination of the liability {See : Circle 10, Para 17}.

Further, in Section 143(1)(a) of the Act of 1961, the procedure to process the return in a given case is provided. Section 143 (1)(a) is produced hereunder reference:

In the matter of Kvaverner John Brown Engg. (India) Pvt. Ltd. (supra), their Lordships of the Supreme Court observed that when there are conflicting judgments on interpretation of Section 80-O of the Act of 1961 prima facie adjustments contemplated under Section 143 (1) (a) is not applicable and observed as under :

Similarly, in the matter of Rajesh Jhaveri Stock Brokers Pvt (supra), their Lordships of the Supreme Court held explicitly that the Assessing Officer had no authority to make adjustments or ITA Nos.816 & 817/Del/2025

What were permissible under the first proviso to section 143(1)(a) to be adjusted were, (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction allowance or relief, which was prima facie admissible on the basis of information available in the return but not claimed in the return and similarly (iii) those claims which were on the basis of the information available in the return, prima facie inadmissible, were to be rectified/ allowed/disallowed. What was permissible was correction of errors apparent on the basis of the documents accompanying the return. The Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the Assessing Officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief.”

Coming back to the facts of the present case, while following the principles of law laid down in above stated judgments of the Supreme Court for exercise of power and juri iction under Section 143 (1) (a) of the Act of 1961, it is quite vivid that on the date of issuance of intimation order by the Assessing Officer i.e. on 16.12.2021 under Section 143(1)(a) of the Act of 1961, the issue as to whether the delayed deposit of employees' share of contribution towards Employees State Insurance and Employees Provident Fund, though deposited by the assessee beyond the due date prescribed under the relevant Acts, but before the due date of filing of the return of income under Section 139 (1) of the Act of 1961, could be held as the income of the appellant/assessee under Section 36(1)(va) read with Section 2(24)(x) of the Act of 1961 or not or whether it is subject to the provisions contained in Section 43-B of the of the Act of 1961, was highly debatable, which was pending consideration before the Supreme Court in Checkmate Services Pvt Ltd (supra) and subsequently, it was resolved by the Supreme Court by the judgment dated 12.10.2022. Furthermore, the assessee in its audit report had only furnished the details of delayed deposit in Column 20 (b) of the Form No.3CB and had not shown the same as disallowance. Therefore, the Assessing Officer has committed a grave legal error in processing the return of the assessee under Section 143(1)(a) of the Act of 1961, in light of principles of law laid down by their Lordships of Supreme Court in the matters of Kvaverner John Brown Engg. (India) Pvt. Ltd (supra) and Rajesh Jhaveri Stock Brokers Pvt (supra).

Furthermore, the orders passed in Satpal Singh Sandhu (supra) and Parv Buildcon (Supra) by the ITAT holding that Section 143 (1) (a) of the Act of 1961 cannot be resorted to in case of highly debatable issue were challenged by the Revenue before this Court by filing two appeals and ultimately, both the appeals vide Tax No.149/2024 (DCIT Vs. Parv Buildon) and TAX No.15/2024 (DCIT Vs. Satpal Singh Sandhu), were withdrawn by the Revenue by orders dated 10.02.2025 and 21.05.2025, respectively, and thereby, the Revenue has allowed the plea of the assessees therein to stand that in a highly debatable issue, the Assessing Officer ought not to have resorted to Section 143 (1)(a) of the Act of 1961. Therefore, the Revenue cannot be allowed to take a different stand before different forums as it may lead to uncertainty and chaos.

In the instant case, the ITAT has committed a grave legal error by relying upon the decision rendered by this Court in M/s. BPS Infrastructure (supra), wherein, this Court has dismissed the appeal preferred by the assessee as barred by limitation summarily without formulating any substantial question of law and as such the substantial question of law formulated herein in this appeal was neither involved, formulated and answered in M/s. BPS Infrastructure (supra).

Furthermore, the submission of the Revenue that the judgment passed in Checkmate Services Pvt Ltd (supra) would have retrospective effect, as held in Ramesh Prasad Verma (supra), P.V. George (supra) and in R.R. Kishore's case (supra), is no longer a dispute and well settled as the law declared by a Court will have a retrospective effect if not otherwise stated to be so specifically. However, the retrospective effect of the decision rendered by the Supreme Court in Checkmate Services Pvt Ltd. (supra) is not an issue involved in present case, as the question involved herein was quite different as to whether Section 143 (1) (a) of the Act of 1961 can be resorted to when there is highly debatable issue. Therefore, the case laws relied upon by the Revenue are not applicable to the facts of the present case.

Concludingly, we are of the considered opinion that the Assessing Officer should not have resorted to the provisions contained under Section 143(1)(a) of the Act of 1961 and instead could have resorted to the provisions under Section 143(3) of the Act of 1961, as on the date of issuance of intimation order dated 16.12.2021 by the Assessing Officer, exercising power under Section 143(1)(a) of the Act of 1961, the subject issue was highly debatable and ultimately, that issue was resolved by their Lordships in the matter of Checkmate Services Pvt Ltd (supra) on a later date.

As a fallout and consequence of above-stated discussion, the prima facie disallowance of impugned contribution towards ESI and EPF under Section 36(1)(va) read with Section 2(24)(x) of the Act of 1961 made by the Assessing Officer under Section 143(1)(a) by order dated 16.12.2021 is hereby set-aside. Consequently, the order dated 15.07.2024 passed by the CIT (Appeals) and the subsequent order dated 26.09.2024 passed by the ITAT are also set-aside. However, liberty is reserved in favour of the respondent/Revenue to proceed in accordance with law.

The substantial question of law is answered in favour of the appellant/assessee and against the respondent/Revenue.”

Faced with this situation, the Revenue vehemently argues that the hon’ble apex court’s landmark decision in Checkmate Services Pvt. Ltd. Vs. CIT [2022] 143 taxmann.com 278(SC) has already held that such ESI/PF contribution ought to be credited in the prescribed account on or before the due date in the relevant statute than that of filing section 139(1) return. It could hardly dispute that the hon’ble high court hereinabove has already considered the same and decided the instant issue against the department. We thus adopt their lordships detailed discussion mutatis mutandis to deleted the impugned ESI/PF disallowance of Rs.18,14,176/- in very terms. The assessee’s instant sole substantive grievance as well as main appeal ITA No. 816/Del/2025 succeed therefore.

We are now left with assessee’s latter appeal ITA No. 817/Del/2025 for assessment year 2018-19. Learned counsel submitted very fairly that the CPC’s processing herein had in fact disallowed the assessee’s identical ESI/PF contribution in section 143(1) processing whereas it has invoked its lower appeal remedy against section 143(3) assessment order dated 05.08.2021. That being the case, we hereby permit the assessee to withdraw its instant latter appeal ITA No. 817/Del/2025 with liberty to file a fresh case against the above section 143(1) processing as per law and delay caused involving the entire intervening period as on date shall be deemed to have been condoned. Ordered accordingly. This assessee’s latter appeal ITA No. 817/Del/2025 is dismissed as withdrawn in above terms subject to all just exceptions. 6. To sum up, the assessee’s appeal ITA No.816/Del/2025 is allowed and ITA No.817/Del/2025 is dismissed. A copy of this common order be placed in the respective case files. Order pronounced in the open court on 31st July, 2025 (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER