MEERA SANJAY PATIL,NERUL (EAST), NAVI MUMBAI vs. ADDL/JCIT (A)-1, VISAKHAPATANAM

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ITA 3693/MUM/2026Status: DisposedITAT Mumbai09 September 2026AY 2020-2111 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the disallowance under section 143(1) was valid as per the Supreme Court's decision in Checkmate Services, which clarified that employees' PF/ESI contributions are deductible only if deposited by the due date under the respective welfare statutes. The subsequent amendment by the Finance Act, 2026, was not retrospective for the assessment years in question.

What were the facts?

The assessee's return was processed under section 143(1) where the CPC disallowed employees' PF/ESI contributions paid after the due date under the respective acts but before the return filing due date. The CIT(A) dismissed the appeal, relying on the Supreme Court's decision in Checkmate Services.

What were the issues?

Whether employees' PF/ESI contributions paid after the statutory due date but before the return filing due date are allowable as a deduction. Whether a subsequent amendment to the Income Tax Act has retrospective effect.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 36(1)(va),Section 2(24)(x),Section 43B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI

Before: SHRI ANIKESH BANERJEE & SMT RATNA DASGUPTA

For Appellant: Shri Nikhil Natekar CA
For Respondent: Ms. Jayshree Thakur (Sr. DR)
Hearing: 01/09/2026Pronounced: 09/09/2026

PER RATNA DASGPUTA, AM

The captioned appeals are by the assessee filed against two separate orders, both dated 31/05/2024, passed by the Ld.

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Additional/Joint Commissioner of Appeals, [in short, JCIT(A)] under section 250 of the Income-tax Act [in short, "the Act"], on the following grounds:-

i. The Finance Bill 2026 has introduced a curative amendment to the provisions of the Income Tax Act, 1961, whereby the allowability of employees' contribution to Provident Fund and ESIC has been expressly liberalized by substituting allowance of expenses even the money is deposited from the "due date prescribed under the respective PF/ESIC Act" with the "due date of filing of return of income prescribed under the Income Tax Act, 1961," such amendment being curative in nature and has retrospective effect. ii. Amendment to section 29 allowing deduction of Employees' Contribution paid before due date of filing of return is curative and clarificatory in nature - No substantive change in law - Retrospective application warranted. iii. Disallowance of employees' PF/ESI contribution under section 36(1)(va) through adjustment under section 143(1) by CPC is beyond jurisdiction since the return was processed prior to the Supreme Court ruling in Checkmate Services Pvt. Ltd. and the issue was debatable at that time. iv. The CIT(A) is not justified in not allowing adjustment made by CPC while processing return under section 143(1) in respect of disallowance on account of delay in making payment towards contribution to provident fund and ESIC fund under 36(1) (va) read with section 2(24)(x)

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of the income tax act based on mere audit report, where no disallowances are reported by the auditor. v. The CIT(A) has erred in disallowing payments of Employee's Contribution to Provident fund of an amount of Rs. 16,38,930/- under section 36(1)(va) of the Income Tax Act, 1961 which was paid to the concerned authorities before the due date of filing of returns. The CPC, without considering the judicial precedents and circumstances of the case has made additional on mechanical basis and such addition is void and against principles of natural justice. 1.1 Identical grounds have been raised for A.Y. 2020-21, with changes only in the quantum of disallowance.

2.

Since both the appeals arise from identical facts & involve common issues, they are being disposed of by a common order for the sake of convenience. ITA 3583/Mum/2026 for (A.Y. 2018-19) is taken as the lead case, and the decision rendered herein shall apply mutatis mutandis to the other appeal for A.Y. 2020- 21.

3.

ITA No. 3583 / Mum / 2026 – A.Y. 2018-19 The brief facts of the case are that the appellant, an individual, filed her return of income for A.Y. 2018-19 on 23/09/2018 under section 139(1) of the Act, declaring total income of Rs. 18,07,438/-, along with tax audit report under section 44AB of the Act. While

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processing the return u/s 143(1) of the Act, the Centralized Processing Centre (CPC) disallowed a sum of Rs. 16,38,930/- u/s 36(1)(va) r.w.s. 2(24)(x) on the ground that the Employees' contribution to Provident Fund and ESIC, though paid before the due date of filing the return of income, was remitted after the due date prescribed under the respective welfare legislations. Aggrieved, the assessee carried the matter in appeal before the Ld. JCIT(A) who dismissed the appeal, relying, inter alia, on the decision of the Hon'ble Apex Court in the case of M/s Checkmate Services Pvt. Ltd. rendered on 12/10/2022. It is against this order that the assessee is in appeal before this Tribunal.

4.

Before us, the Ld. AR on behalf of the assessee argued that disallowance of Employees' contribution to Provident Fund / ESI u/s 36(1)(va) of the Act through adjustment u/s 143(1) was beyond the jurisdiction of CPC. Such disallowance, as stated, was unwarranted as it was based merely on the Audit Report where no disallowances were reported by the Auditor. Otherwise also, it was his contention that the impugned amount had been paid to the concerned authorities before the due date of filing of return, and Revenue could not have relied on the decision in Checkmate (supra) since the return was processed prior to the Supreme Court ruling in that case. In addition to these arguments which were taken up before the Ld. JCIT(A), the Ld. AR placed on record certain

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additional facts, provisions and judicial precedents for consideration of this Tribunal in the form of a 'without prejudice' submission. Relevant extract from the said submission is reproduced hereunder for the sake of clarity:-

“12. By the Finance Act, 2026, section 29(1)(e) of the Income-tax Act, 2025 has been amended, with effect from 01.04.2026, to provide that the "due date" for crediting employees' contribution shall stand aligned with the due date for filing the return of i.e., the same test that income under section 263(1) of the Income-tax Act, 2025 section 43B applies to employer's contribution. The comparative text of the erstwhile and amended provisions is set out below: Section 36(1)(va), Income-tax Act, 1961 (as it stood; corresponds to s.29(1)(e), Income-tax Act, 2025 pre-amendment) Section 36(1)(va), Income-tax Act, Section 29(1)(e), Income-tax 1961 (as it stood; corresponds to s. Act, 2025 (as amended by the 29(1)(e), Income-tax Act, 2025 pre- Finance Act, 2026, w.e.f. 01.04.2026) amendment Deduction of employees' contribution Deduction allowed "if it is allowed only "if such sum is credited by credited by the assessee to the the assessee to the employee's account account of the employee in the in the relevant fund or funds on or relevant fund or funds, on or before the due date" "due date" being before the due date of filing of the date prescribed under the relevant return of income under section welfare Act/rule/order/standing 263(1) for the tax year" - i.e., order/contract of service. Explanation 2 the section 43B-type return- clarifies that section 43B does not filing due date, on par with employer's contribution. apply, and is deemed never to have applied, in determining this "due date." 13. It is respectfully submitted that the Memorandum explaining the provisions of the Finance Bill, 2026 describes this change as part of the "rationalisation" of the due date for crediting employees' contribution, undertaken to remove timing disputes and to bring parity with the treatment already available to employer's contribution

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- the very parity that Checkmate Services (supra) had held did not exist under the 1961 Act. 14. It is submitted, with respect, that where a subsequent amendment (a) removes an anomaly or unintended hardship in a provision, (b) equates the treatment of two closely analogous items of the same character (employer's and employees' welfare-fund contributions) that Parliament itself intended to treat alike in substance, and (c) is described in the legislative Memorandum as one of "rationalisation", such an amendment falls squarely within the class of amendments that the Hon'ble Supreme Court has, on more than one occasion, treated as curative and clarificatory in nature, and therefore entitled to retrospective operation notwithstanding an express prospective appointed date. Reliance is placed on the following authorities:

(a) CIT v. Alom Extrusions Ltd., (2009) 319 ITR 306 (SC) - holding the Finance Act, 2003 omission of the second proviso to section 43B, and the consequent uniformity brought about in the first proviso between statutory dues and welfare-fund contributions, to be curative and retrospective from 01.04.1988, notwithstanding the express appointed date of 01.04.2004, because the amendment removed an unintended hardship and made the provision workable. (b) Allied Motors (P.) Ltd. v. CIT, (1997) 224 ITR 677 (SC)- holding that a proviso inserted to remedy unintended consequences and supply an obvious omission is to be read retrospectively so as to give the provision a reasonable interpretation, even where the amending Act specifies a later date of effect. c) CIT v. Calcutta Export Co., (2018) 404 ITR 654 (SC) holding, in the context of section 40(a)(ia), that a provision intended to ensure compliance, and not to penalise disproportionately, must be interpreted liberally and equitably, and that a curative amendment removing an unintended

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hardship applies retrospectively from the date of insertion of the provision it amends. (d) CIT v. Vatika Township (P.) Ltd., (2015) 1 SCC 1-laying down the tests distinguishing clarificatory/curative (retrospective) amendments from substantive (prospective) amendments, including that an amendment removing an unintended hardship to the assessee, and not creating a fresh charge or obligation, is ordinarily treated as declaratory of the law as it was always intended to be.

15.

Applying these tests to the amendment to section 29(1)(e): (i) the amendment does not impose any new levy, obligation or disability on the Appellant it operates only to relax a condition for allowance of a deduction, and thus benefits the assessee; (ii) it does not disturb any vested right of the Revenue, since no assessment has attained finality on this issue in the Appellant's case, the present appeal itself being pending; (iii) it corrects the very anomaly that Checkmate Services (supra) itself acknowledged as flowing from the 1988 legislative scheme namely, that employees' contribution, unlike employer's contribution, received no benefit of the return-filing due date even where the delay was marginal and the amount stood credited, with statutory interest/damages already having been paid under the respective welfare legislation, before the return was filed; and (iv) the Memorandum's own language of "rationalisation" signals a legislative recognition that the pre-amendment position (as upheld in Checkmate Services) caused disproportionate hardship of the kind that Allied Motors, Alom Extrusions and Calcutta Export Co. (supra) treat as the hallmark of a curative amendment.

16.

It is accordingly submitted, in the alternative and without prejudice to Submission I, that the benefit of the amended due date under section 29(1)(e) of the Income-tax Act, 2025 being curative of an acknowledged hardship may be read back so as to inform the disposal of the present appeal, particularly since the Appellant, on facts, has admittedly deposited the entire employees' contribution to

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PF and ESIC before the due date of filing the return of income under section 139(1) of the Act, 1961 for A.Y. 2019-20.” 4.1 Per contra, the Ld. Departmental Representative (DR) relied heavily on the order of the Ld. JCIT(A) and especially on the decision of the Hon'ble Supreme Court in M/s Checkmate Services (Supra).

5.

We have considered the rival submissions of both the parties in the light of the material placed on record. At the outset itself, we admit the additional submission made by the Ld. AR since the same is basically a legal issue, and all necessary material to adjudicate the same are already available on record. The Ld. Departmental Representative (DR) did not raise any objection to the admission as above.

5.1 We will first take up the grounds earlier raised by the assessee. A plain reading of section 143(1)(a) shows that adjustments under this provision can be made under any of the circumstances provided in clauses (i) to (vi) of the section. Clauses (ii) and (iv) are relevant in the present context, and allow necessary adjustments wherever:-

 an incorrect claim is made, if such incorrect claim is apparent from any information in the return;

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 disallowance of expenditure (or increase in income) is indicated in the audit report but not taken into account in computing the total income in the return.

But, without prejudice to the above, the impugned issue before us now stands settled by the decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (2022) reported in 143 taxmann.com 178 (SC). There it was categorically held that the Employees' contribution towards ESI / PF is allowable as deduction only if the same is deposited within the due dates prescribed under the respective welfare statutes, particularly in respect of the period prior to the statutory amendments w.e.f A.Y. 2021-22. A clear distinction was drawn between Employer's contribution covered by section 43B which is generally deductible within the period permitted by section 43B, and Employees' contribution covered by section 36(1)(va) r.w.s 2(24)(x) which must be deposited by the due date under the relevant PF/ESI law. There is nothing in this order which expressly limits its ruling prospectively, the judgment only declaring the law as it existed from the time the particular provision came into force. In view of this, the assessee's stand on these grounds are devoid of any merits.

5.2. Coming down to the second limb of the assessee's submission made before this Tribunal for the first time, we are admitting the

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same since it is a legal ground, based on material adjudication of which does not require any extraneous material that is not available before us. The Ld. DR did not object to this admission. The Ld. AR has drawn our notice to Finance Act, 2026 which has substituted section 29(1)(e) of the Income-tax Act, 2025, so as to now provide deduction where the Employees’ contribution is credited to the relevant fund on or before the due date of filing the return of income under section 263(1) for the tax year. The Finance Act, 2026 is effective from 01/04/2026, whereas we are dealing with A.Y. 2018- 19. The said Act has not amended section 36(1)(va) of the 1961 Act retrospectively for earlier assessment years. For the earlier years Supreme Court's decision in Checkmate Services still stands. Therefore, the Ld. AR's reliance on changes made vide the Finance Act, 2026 cannot help the present case of the assessee.

6.

Similar issue, including that of disallowance of Employees’ contribution to PF/ESI u/s 143(1)(a) of the Act had come up before the Co-ordinate Bench of ITAT, Mumbai, in Ajay Saindas Mehra v. ITO (ITA 3670/Mum/2026) for A.Y.s 2019-20, 2020-21 & 2022-23. The Tribunal unequivocally held that Employees' contribution to PF/ESI is deductible only if it is deposited within the due date prescribed under the relevant PF/ESI legislation.

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7.

Respectfully following the decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (supra), which was followed by the Mumbai Bench of ITAT in Ajay Saindas Mehra v. ITO (supra), the grounds raised by the assessee are hereby dismissed.

8.

In the result, appeals of the assessee bearing ITA No. 3583 for A.Y. 2018-19 & ITA No. 3693 for A.Y. 2020-21 stand dismissed.

Order pronounced in the open Court on 09/09/2026

Sd/- Sd/- (ANIKESH BANERJEE) (RATNA DASGPUTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 09/09/2026 Z.U., P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER,

//True Copy// (Assistant Registrar) ITAT, Mumbai

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