FABSTRACT CLOTHING INDIA PVT LTD,UTTAR PRADESH vs. ACIT, CIR 7(1), DELHI

ITA 1492/DEL/2026Status: DisposedITAT Delhi15 July 2026AY 2017-184 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessment order under section 143(1) and the CIT(A)'s order were illegal. This was because the Supreme Court decision relied upon was delivered after the assessment order was passed, making the issue debatable at the time of assessment.

What were the facts?

The assessee's appeal challenges the disallowance of employer's contribution to ESI & PF. The CIT(A) confirmed this disallowance by following a Supreme Court judgment. The assessee argued the issue was debatable and prior decisions favored them.

What were the issues?

Whether the disallowance of employer's contribution to ESI & PF was justified when the assessment order was passed prior to a Supreme Court ruling on the matter, and the issue was debatable at that time.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI

Before: SHRI VIMAL KUMAR & BEFORE SMT. RENU JAUHRI

For Respondent: Shri Raghuveer Singh, Sr. DR

Hearing: 01.07.2026Pronounced: 15.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”, NEW DELHI BEFORE SHRI VIMAL KUMAR, JUDICIAL MEMBER AND BEFORE SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No. 1492/Del/2026, A.Y. 2017-18 Fabstract Clothing India P. Vs. The Assistant Ltd. Commissioner of Income M-169, IInd Floor, Tax, Greater Kailash-II, Circle 7(1), New Delhi 110048 ITO, CR Building, New Delhi- 110002 �थायीलेखासं./जीआइआरसं./PAN/GIR No: AAACF3387J Appellant .. Respondent Appellant by : Sh. Venketesh Chaurasia, Adv. Respondent by : Shri Raghuveer Singh, Sr. DR Date of Hearing 01.07.2026 Date of Pronouncement 15.07.2026

O R D E R PER VIMAL KUMAR, JM: The appeal filed by the assessee is against the order dated 14.01.2026 of the Ld. Additional / Joint Commissioner of Income Tax (Appeals)-5, Chennai [hereinafter referred to as “the A/JCIT(A)”] u/s 250 of the Income Tax Act,

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1961 (hereinafter referred to as “the Act”) arising out of assessment order dated 29.03.2019 u/s 154 of the Act for A.Y. 2017-18.

Ld. Authorized Representative for appellant/assessee submitted that Ld. CIT(A) erred in confirming disallowance of Rs. 14,65,005/- (Empoyer’s share Rs. 7,28,201/- and Employee’s share Rs. 5,90,338/-) on account of employers contribution for ESI & PF under section 53B of the Act. Ld. CIT(A) confirmed order u/s 143(1) of the Act dated 29.03.2019. Ld. CIT(A) had followed judgment in case of Checkmate Services P. ltd. Vs. Commissioner of Income- tax, Civil Appeal No. 2833 of 2016 dated 12.10.2022 ignoring that the issue under consideration was debatable and majority of the decisions were in favour of the assessee. Reliance was placed on ITA No. 2576/Del/2022, AY 2017-18 dated 24.06.2026.

Ld. Departmental Representative relied on impugned orders.

From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. AO passed order u/s 143(1) of the Act on 29.03.2019. Ld. CIT(A) vide order dated 14.01.2026 confirmed the order of ld. AO by following decision of Hon’ble Supreme Court in Checkmate Services P. ltd. Vs. Commissioner of Income-tax (supra) decided on 12.10.2022.

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4.1 A co-ordinate Bench in ITA No. 2576/Del/2022 in para No. 5 observed as under:

“5. Considered the rival submissions and material placed on record. We observed that the first plea of the assessee that the issue under consideration is beyond the scope of section 143(1)(a) of the Income-tax Act, 1961 (for short ‘the Act’). We observed that the present order u/s 143(1) was passed on 19.03.2019. The decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) was delivered on 12.10.2022. On the date of order passed u/s 143(1), the issue under consideration was debatable and majority of the decisions were in favour of the assessee. Invoking the decision of Hon’bel Supreme Court in the present case is beyond jurisdiction. Therefore, we are inclined to dismiss the grounds raised by the Revenue.” 4.2. In view of above, it is material fact and by following the judicial precedents, it is held that the impugned orders dated 14.01.2026 of Ld. CIT(A) u/s 250 of the Act and Assessment order dated 29.03.2019 of Ld. AO u/s 143(1) of the Act being illegal are set aside.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 15.07.2026

Sd/- Sd/- (RENU JAUHRI) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 15.07.2026 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent

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CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI

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