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Facts
The assessee appealed an order sustaining the disallowance of delayed deposits of PF and ESI contributions. The addition was made by the AO through an intimation under Section 143(1)(a) of the Income Tax Act, 1961.
Held
The Tribunal held that the Assessing Officer should not have resorted to Section 143(1)(a) for a highly debatable issue like the disallowance of delayed PF and ESI contributions. Instead, Section 143(3) should have been used.
Key Issues
Whether the disallowance of delayed PF and ESI contributions could be made by way of intimation under Section 143(1)(a) when the issue was highly debatable.
Sections Cited
143(1)(a), 143(3), 36(1)(va), 2(24)(x)
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Income Tax Appellate Tribunal, DELHI BENCHES: G : NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
Assessment Year: 2017-18 Servokon Systems Ltd., Vs ITO, C-13, Radhu Palace Road, Ward-23(1), Laxmi Nagar, Delhi. Delhi – 110 002. PAN: AABCS2570D (Appellant) (Respondent) Assessee by : Shri Wahaj Ahmad Khan, Advocate Revenue by : Shri Dheeraj Kumar Jaiswal, Sr. DR Date of Hearing : 02.07.2025 Date of Pronouncement : 09.07.2025 ORDER PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 24.07.2024 of the Ld. Commissioner of Income-tax (Appeals) for AY 2017-18.
At the time of hearing, it was pointed out that the core issue involved is that the addition by way of disallowance of the delayed deposits of PF and ESI contributions was made by the AO and sustained by the First Appellate Authority arising out of intimation u/s 143(1)(a) of the Income-tax Act, 1961. An additional ground has been raised before us that such a disallowance could not have been made by way of intimation u/s 143(1)(a) of the Act and for the sake of convenience the ground is reproduced:- “1. That the order of Ld. Deputy commissioner central circle 10 are bad in law and without jurisdiction under the following facts and circumstances of the case: i. That Ld. deputy commissioner of income tax CPC is bad in-law and without jurisdiction to make an addition u/s 143(l)(a) under the facts and circumstances that ‘delayed’ Employee PF Contribution payment in hands of assessee under provisions of Income Tax Act (PGBP/Business Head) as the same was a highly debatable issue on the date of issuing intimation u/s 143(1)(a) i.e. dated 17/12/2019 for which Ld. Deputy Commissioner has no jurisdiction.”
Considering the ground to be completely legal, it can be disposed of on admitted facts. The ground is admitted.
The ld. AR has relied on the decision of the Hon’ble Chhattisgarh High Court at Bilaspur, in Raj Kumar Bothra vs. DCIT, TAXC No.56 of 2025, judgement dated 08.05.2025 wherein, after taking note of the decision of the Hon’ble Supreme Court in Checkmate Services P. Ltd. vs. CIT,448 ITR 518 (SC), the Hon’ble High Court has held in paras 16 to 18 as follows:- “16. 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.
Concluding, 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 ld. DR has not been able to cite any decision of the Hon’ble Jurisdictional High Court on the contrary. It was submitted that issue is sub- judice before Hon’ble Delhi High Court.
In the light of the aforesaid, we allow the additional ground, however, with the liberty to the Revenue that in case the issue is decided by any subsequent decision of the Hon’ble jurisdictional High Court or the Hon’ble Supreme Court, then the Revenue may consider filing a Miscellaneous Application for restoration of the issues and decision on merits. The appeal is allowed with the aforesaid conditions.