MAA HARSIDDHI INFRA DEVELOPERS PRIVATE LIMITED vs. THE ASSISTANT COMMISSIONER OF INCIME TAX

Facts

The assessee, Maa Harsiddhi Infra Developers Private Limited, filed its return for Assessment Year 2019-20, declaring an income of Rs. 2,57,41,230/-. The Assessing Officer (AO), through an intimation order dated 27-02-2020 under Section 143(1)(a) of the Income Tax Act, 1961, disallowed a claim for deduction of Rs. 32,77,451/- towards delayed deposit of employees' share of contribution to ESI and EPF, citing Section 36(1)(va). The assessee appealed to the CIT(Appeals), who dismissed the appeal. The Income Tax Appellate Tribunal (ITAT) also dismissed the assessee's further appeal by its order dated 19-12-2024. The present appeal is filed against the ITAT's order.

Held

The High Court held that the Assessing Officer committed a grave legal error by processing the return under Section 143(1)(a) of the Act. On the date of the intimation order (27-02-2020), the issue of whether delayed deposit of employees' contribution, though made before the return filing due date, was deductible under Section 36(1)(va) read with Section 2(24)(x) or subject to Section 43-B, was highly debatable, pending before the Supreme Court in *Checkmate Services Pvt Ltd*. The scope of Section 143(1)(a) does not permit adjudication of debatable issues; it is for prima facie adjustments and correction of apparent errors. The AO should have resorted to Section 143(3) or Section 147. The Court also noted that the Revenue had previously withdrawn its appeals against similar ITAT orders in *Satpal Singh Sandhu* and *Parv Buildcon*, where it was held that Section 143(1)(a) could not be used for debatable issues. The ITAT's reliance on *M/s. BPS Infrastructure* was incorrect as that case did not involve the present substantial question of law. The disallowance made under Section 143(1)(a) was set aside. Liberty was granted to the Revenue to proceed in accordance with law. The substantial question of law was answered in favour of the assessee.

Key Issues

1. Whether the CIT(Appeals) and ITAT were justified in dismissing the appeals, holding that the Assessing Officer rightly processed the return under Section 143(1)(a) despite the issue regarding the due date for deposit of employees' contribution being debatable and pending before the Supreme Court, requiring resort to Section 143(3) or Section 147 of the Act, and if the finding was perverse. Assessee's Contentions: - The issue regarding the claim for deduction under Section 36(1)(va) was highly debatable and contentious on the date of the intimation order (27-02-2020) as the Supreme Court decision in *Checkmate Services Private Limited* was delivered later (12-10-2022). - Section 143(1)(a) only permits prima facie adjustments, not disallowance of debatable issues. - Relied on *Kvaverner John Brown Engg. (India) Pvt. Ltd.* and *Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd.*. - The ITAT's reliance on *M/s. BPS Infrastructure v. ITO* was misplaced as that case dealt with limitation and did not involve the substantial question of law here. - The ITAT had previously held in *Satpal Singh Sandhu v. DCIT* and *Parv Buildcon v. DCIT* that Section 143(1)(a) cannot be used for summary disallowance of debatable issues, and the Revenue had withdrawn its appeals against those orders. Revenue's Contentions: - The adjustment made towards delayed deposit of employees' contribution is within the AO's powers under Section 143(1)(a). - The issue is now well-settled by the Supreme Court in *Checkmate Services Pvt. Ltd.*.