JANARTHANAM SRINIVASAN,VELLORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, VELLORE, VELLORE

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ITA 3783/CHNY/2026Status: DisposedITAT Chennai12 October 2026AY 2019-209 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 adjustment made by the CPC under Section 143(1)(a) of the Act for disallowing the employees' contribution to PF/ESI on account of delayed remittance was unsustainable in law. The Tribunal noted that the issue was debatable at the relevant time, especially before the Supreme Court's decision in *Checkmate Service (P) Ltd.*, and therefore, could not be a subject matter of adjustment under Section 143(1)(a). The Tribunal relied on the decision of the jurisdictional High Court of Madras in *CIT vs. Industrial Security and Intelligence India Pvt Ltd*, which held that remittances made before the due date of filing the return of income under Section 139(1) were allowable as a deduction. The Tribunal also referred to its own decisions in *M/s. SRC Projects Pvt Ltd* and *Transsys Solutions Pvt Ltd*, which followed the ratio of the Chhattisgarh High Court in *Raj Kumar Bothra*. The Tribunal acknowledged conflicting decisions but applied the principle that where two reasonable constructions of a taxing provision are possible, the one favouring the assessee should be adopted, citing *CIT vs. Vegetable Products Ltd*. Consequently, the Tribunal set aside the order of the Ld. CIT(A) and directed the AO/CPC to delete the impugned addition of Rs. 55,30,492/-.

What were the facts?

The assessee, Janarthanam Srinivasan, filed an appeal against the order of the Ld. CIT(A) for Assessment Year 2019-20. The appeal was filed with a delay of over a thousand days. The assessee had declared an income of Rs. 1,16,62,334/-, but the CPC processed it under Section 143(1) and made an addition of Rs. 55,30,492/- for disallowance of late payment of employees' contribution to Provident Fund (PF) and Employee State Insurance (ESI) under Section 36(1)(va). The Ld. CIT(A) partly allowed the appeal, deleting an addition of Rs. 5,67,453/- but sustaining the balance disallowance of Rs. 49,63,039/-. The assessee's business is leather processing. The delayed remittances were sometimes minor (not more than 7 days) or due to technical issues.

What were the issues?

1. Whether the adjustment made by the CPC under Section 143(1)(a) of the Income Tax Act, 1961, disallowing the employees' contribution towards PF and ESI on account of delayed remittance, is sustainable in law for AY 2019-20, particularly when the remittances were made before the due date of filing the return of income under Section 139(1)? Assessee's contentions: - The CPC lacked jurisdiction to make such an addition/adjustment under Section 143(1)(a) as the issue was debatable at the relevant time, especially prior to the Supreme Court's decision in *Checkmate Service (P) Ltd.*. Reliance was placed on *Raj Kumar Bothra vs DCIT* (Chhattisgarh High Court). - The amendments by the Finance Act, 2021, introducing Explanation 2 to Section 36(1)(va) and Explanation 5 to Section 43B, are prospective and applicable from AY 2021-22 onwards. - The jurisdictional High Court of Madras in *CIT vs. Industrial Security and Intelligence India Pvt Ltd* held that remittances before the due date of filing the return under Section 139(1) were allowable. Revenue's contentions: - The Ld. DR supported the Ld. CIT(A)'s decision by relying on the Delhi Tribunal's decision in *MI2C Business Enterprises vs. DCIT* and the Delhi High Court's order in *Woodland (Aero Club) Pvt Ltd vs ACIT*, where similar adjustments by the CPC were upheld.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 143(1),Section 143(1)(a),Section 139(1),Section 43B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY. S

Hearing: 27.08.2026Pronounced: 12.10.2026

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld. CIT(A)’), Delhi, dated 23.08.2021 for AY 2019-20 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act). 2. The assessee has filed the present appeal with a delay of more than thousand days. Explaining the cause for the delay the assessee is noted to have filed an affidavit for condoning the delay. From perusal of the contents of the same it reveals that assessee had filed his return of income for AY 2019-20 on 19.09.2019 declaring total income of

ITA 3783 /Chny/2026 (AY 2019-20) Janarthanam Srinivasan :: 2 :: Rs.1,16,62,334/- which was processed by the CPC on 14.05.2020 and intimation was passed u/s.143(1) of the Act determining the income at Rs.1,71,92,826/- in place of Rs.1,16,62,334/- making an addition of Rs.55,30,492/- on account of disallowance of late payment of employees contribution of Provident Fund (PF) and Employee State Insurance u/s.36(1)(va) of the Act.

3.

Aggrieved by the action of the CPC u/s.143(1) of the Act, the assessee preferred an appeal before the Ld. CIT(A) who is noted to have directed the deletion of the addition of Rs.5,67,453/- on account of payment made towards PF/ESI for February 2019 after verifying correctness of the dates as claimed by the assessee. Thus, the Ld. CIT(A) is noted to have partly allowed the appeal of the assessee by sustaining the balance disallowance of Rs.49,63,039/- made by the CPC u/s.143(1) of the Act vide impugned order.

4.

Aggrieved the assessee is before us. As noted supra, the assessee is noted to have filed the appeal with a delay of more than thousand days, and the assessee pleads that the reason for the delay is due to non- receipt of the impugned order dated 23.08.2021. According to the assessee, inter alia, after the demand notice was served upon the assessee, assessee became aware of the order passed by the Ld. CIT(A) confirming of Rs.49,63,039/- and thereafter, immediately filed the appeal before this Tribunal with a delay of more than thousand days. The plea of the assessee for condoning the delay cannot be overlooked and hence, we impose a cost of Rs.15,000/- which assessee was directed to remit before the “Tamil Nadu State Legal Authorities” which assessee has remitted and the proof of the same has been filed before this Tribunal which we have taken note of and placed on record. Therefore, we condone the delay in filing of the appeal before this Tribunal. Having condoned the delay, we

ITA 3783 /Chny/2026 (AY 2019-20) Janarthanam Srinivasan :: 3 :: note that the assessee is engaged in leather processing and other related business under the proprietorship M/s. Gopi Leather & Co. and filed his return on 19.09.2019 for AY 2019-20. The assessee is noted to have remitted the employee contribution towards PF amounting to Rs.49,63,039/- after the due date of payment as mentioned under the Employees Provident Fund and Miscellaneous Provisions Act 1952 but before the due date of the filing of return of income u/s.139(1) of the Act. It was pointed out by the assessee that delay in remitting of employees contribution of PF in some months were not more than 7 days; and on other occasions remittance was due to technical issues on the PF Portal and not due to the fault of the assessee. Be that as it may, the CPC while processing the return of income is noted to have disallowed Rs.55,30,492/- on account of late payment of employees contribution of PF and employees state insurance u/s.36(1)(va) of the Act. The Ld. CIT(A) has reduced the disallowance to Rs.49,63,039/-.

5.

The assessee is noted to have raised a legal issue, assailing the action of the CPC passing the intimation order u/s.143(1) of the Act as without jurisdiction. According to assessee, for making the aforesaid disallowance u/s.36(1)(va) of the Act, the CPC didn’t had the power to make such addition/adjustment u/s.143(1)(a) of the Act. For such a proposition, asssessee has relied on the decision of the Hon’ble High Court of Chhattisgarh in the case of Raj Kumar Bothra vs DCIT (2025) 174 taxamnn.com 1199 (Chattisgarh) 476 ITR 249, wherein the Hon’ble High Court while dealing with identical controversy arising out of an addition made u/s.143(1)(a) of the Act prior to the decision of the Hon’ble Supreme Court in the case of Checkmate Service (P) Ltd (Civil Appeal No.2833 of 2016 dated 12.10.2022), had categorically held that the issue regarding delayed deposit of employees’ contribution towards ESI and PF was debatable at the relevant point of time and therefore, could not have

ITA 3783 /Chny/2026 (AY 2019-20) Janarthanam Srinivasan :: 4 :: the subject matter of adjustment u/s.143(1)(a) of the Act. The Hon’ble High Court further observed that, where divergent judicial view existed and the matter itself was pending consideration before the Hon’ble Supreme Court, the CPC committed a legal error in invoking provisions of section 143(1)(a) and making an addition summarily without resorting to regular assessment proceedings u/s.143(3) of the Act.

6.

In this regard, it is noted that the Hon’ble Madras High Court (Jurisdictional High Court) in the case of CIT vs. Industrial Security and Intelligence India Pvt Ltd in TCA Nos.585 & 586 of 2015 dated 24.09.2015, had held that employees’ contribution to PF/ESI remitted before the due date of filing of return of income u/s.139(1) of the Act was allowable as deduction. Therefore, it is noted that the law declared by the Hon’ble Jurisdictional High Court as on the date when the intimation order was passed by the CPC in this case was that if the assessee had remitted the employees’ contribution to PF/ESI before due date of filing of return of income u/s.139(1) of the Act, then deduction shall be allowed. The CPC has ignored the binding decision of the Hon’ble Madras High Court and passed the impugned addition/adjustment on 14.05.2020, whereas, the Hon’ble Supreme Court decision in Checkmate Service (P) Ltd (supra) was only on 12.10.2022. Hence, the CPC erred in making an addition u/s.143(1)(a) of the Act while passing the intimation order on 14.05.2020 when the Hon’ble Jurisdictional High Court order was binding on it dated 24.07.2015 (refer decision of Hon’ble Madras High Court in the case of CIT vs. Industrial Security and Intelligence India Pvt Ltd. Dated 24.07.2015).

7.

We find that the legal issue raised by assessee is no longer res- integra. This Tribunal in the case of M/s. SRC Projects Pvt Ltd vs. ACIT (ITA No.2358/Chny/2025 for AY 2017-18 vide order dated 17.11.2025)

ITA 3783 /Chny/2026 (AY 2019-20) Janarthanam Srinivasan :: 5 :: and Transsys Solutions Pvt Ltd vs. ITO (ITA No.1393/Chny/2026 for AY 2020-21 vide order dated 08.07.2026) had an occasion to adjudicate similar issue and had allowed the appeal of the assessee by deleting the adjustment/addition made by the CPC u/s.143(1)(a) of the Act by relying on the decision of the Hon’ble High Court of Chhattisgarh in the case of Raj Kumar Bothra (supra) had held as under:- 1……………… ……………….. ……………….. ……………….. ………………… 16. We have heard the rival submissions perused the material available on record and gone through the orders of the authorities along with the case laws relied upon. The issue that arises for consideration in the present appeal is whether the adjustment made by the CPC u/s.143(1)(a) of the Act, by disallowing the employees' contribution towards Provident Fund and ESI amounting to Rs.68,12,142/- on account of delayed remittance under the respective welfare enactments, is sustainable in law for the assessment year 2020-21. 17. It is an undisputed factual position that the assessee had deposited the employees' contribution towards PF/ESI beyond the due dates prescribed under the respective statutes governing such contributions. However, it is equally undisputed that the entire amount of employees' contribution had been remitted before the due date prescribed for filing the return of income u/s.139(1) of the Act for the relevant assessment year. The adjustment in question was made by the CPC while processing the return of income u/s.143(1)(a) of the Act vide intimation dated 18.12.2021 based on the particulars disclosed by the tax auditor in Form No.3CD. 18. The primary contention of the assessee before us is not on the ultimate allowability of the deduction in light of the subsequent decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT [2022] 143 taxmann.com 178 (SC), but rather on the limited issue as to whether such disallowance could at all have been made by way of a prima facie adjustment u/s.143(1)(a) of the Act at the relevant point of time. 19. In this regard, it is necessary to examine the legal position prevailing as on the date of issuance of the intimation u/s.143(1), namely, 18.12.2021. It is well settled that the scope of adjustment u/s.143(1)(a) is extremely limited and is confined only to those adjustments which are apparent, patent and indisputable from the record. The provision does not permit adjudication of debatable questions of law or issues requiring detailed examination and interpretation. The Hon'ble Supreme Court in the cases of Assistant CIT vs. Rajesh Jhaveri Stock Brokers (P.) Ltd. (291 ITR 500) and Kvaerner John Brown Engg. (India) Pvt. Ltd. vs. ACIT (305 ITR 103) has consistently held that the processing u/s.143(1) of the Act is summary in nature and cannot be

ITA 3783 /Chny/2026 (AY 2019-20) Janarthanam Srinivasan :: 6 :: equated with an assessment involving adjudication of contentious legal issues. 20. On examining the legal landscape prevailing on 18.12.2021, we find considerable merit in the contention of the assessee that the issue relating to allowability of employees’ contribution to PF/ESI paid after the due date prescribed under the respective enactments but before the due date of filing of return u/s.139(1) of the Act was highly contentious and debatable. Various High Courts across the country had taken divergent views on the issue. More importantly, insofar as the present assessee is concerned, the issue stood covered in favour of the assessee by the binding judgment of the jurisdictional Hon’ble Madras High Court in the case of CIT vs. Industrial Security & Intelligence India Pvt. Ltd. in TCA Nos.585 and 586 of 2015 dated 24.07.2015, wherein it was held that employees' contribution to PF/ESI remitted before the due date of filing of return u/s.139(1) of the Act was allowable as deduction. The said decision continued to hold the field till the controversy was ultimately settled by the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. on 12.10.2022, which was nearly ten months after the impugned intimation u/s.143(1) of the Act had been issued. 21. We further note that the Hon'ble High Court of Chhattisgarh in the recent judgment in Raj Kumar Bothra vs. DCIT [2025] 174 taxmann.com 1199 (Chhattisgarh) [476 ITR 249], while dealing with an identical controversy arising out of an adjustment made u/s.143(1)(a) of the Act prior to the decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd., has categorically held that the issue regarding delayed deposit of employees' contribution to PF/ESI was highly debatable at the relevant point of time and, therefore, could not have been the subject matter of adjustment u/s.143(1)(a) of the Act. The Hon'ble High Court observed that where divergent judicial views existed and the matter itself was pending consideration before the Hon'ble Supreme Court, the assessing authority committed a legal error in invoking the provisions of section 143(1)(a) and that the issue, if at all, could only have been examined in regular assessment proceedings u/s.143(3) of the Act. 22. The ratio laid down by the Hon'ble Chhattisgarh High Court, in our considered view, squarely applies to the facts of the present case. Here also, the tax auditor had merely disclosed the particulars of delayed remittance in the audit report; no suo motu disallowance had been made by the assessee in the return of income; the intimation u/s.143(1)(a) was issued on 18.12.2021, i.e., much prior to the decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd.;and the jurisdictional High Court decision prevailing at that point of time was admittedly in favour of the assessee. Therefore, it cannot be said that the disallowance represented an adjustment arising from an error apparent from the record. On the contrary, the issue undoubtedly involved a debatable question of law, which was beyond the permissible scope of section 143(1)(a) of the Act. We also find force in the contention of the assessee that the amendments introduced by the Finance Act, 2021 by insertion of Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B were specifically made effective from 01.04.2021 and, therefore, apply prospectively from assessment year 2021-22 onwards. Thus, the said amendments could not have been relied upon for sustaining an adjustment u/s.143(1)(a) for assessment year 2020-21.

ITA 3783 /Chny/2026 (AY 2019-20) Janarthanam Srinivasan :: 7 :: 23. Having regard to the totality of the facts and circumstances of the case and respectfully following the ratio laid down by the Hon'ble High Court of Chhattisgarh in Raj Kumar Bothra vs. DCIT (supra), coupled with the legal position prevailing under the jurisdictional High Court at the relevant point of time, we are of the considered view that the CPC was not justified in making the impugned disallowance by way of an adjustment u/s.143(1)(a) of the Act. The ld.CIT(A), in our opinion, erred in sustaining the same by relying upon the subsequent decision of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd., which was rendered long after the issuance of the impugned intimation. Accordingly, we hold that the adjustment made by the CPC u/s.143(1)(a) of the Act towards employees' contribution to PF/ESI amounting to Rs.68,12,142/- is unsustainable in law and deserves to be deleted. We, therefore, set aside the order of the ld.CIT(A) and direct the Assessing Officer/CPC to delete the impugned addition. 24. In the result, the appeal filed by the assessee stands allowed 8. Before parting, we would like to deal with the submission of the Ld. DR supporting the decision of the Ld. CIT(A) upholding the disallowance made by the CPC u/s.143(1)(a) by relying on the decision of the Delhi Tribunal in the case of MI2C Business Enterprises vs. DCIT 187 taxmann.com 668 Delhi Tribunal as well that of the order of the Hon’ble Delhi High Court in the case of Woodland (Aero Club) Pvt Ltd vs ACIT reported in 178 taxmann.com 207 Delhi, wherein the action of the CPC making adjustment/addition u/s.143(1)(a) in similar cases were upheld. Since, we find there are conflicting decision in favour of the assessee as well as in favour of the Revenue and there is no Jurisdictional High Court order on this issue, in such an event, the settled position of law is that, where two reasonable constructions of a taxing provision are possible in a given case, the construction in favour of the assessee should be followed and necessary relief be allowed to the assessee. In this regard, necessary guidance can be drawn from the decision of the Hon’ble Supreme Court in the matter of CIT vs. Vegetable Products Ltd 88 ITR 192 (SC), wherein it was held that “if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted”. Considering the fact that assessee has remitted the employees construction of PF and ESI before the due date of filing of the return of

ITA 3783 /Chny/2026 (AY 2019-20) Janarthanam Srinivasan :: 8 :: income u/s.139(1) of the Act and the assessee’s said action was in consonance with the decision rendered by the Hon’ble Jurisdictional High Court of Madras in the case of Industrial Security and Intelligence India Pvt Ltd (supra), such remittance made before the due date of filing of return of income was allowable as deduction. In such a scenario, the impugned action of the CPC dated 14.05.2020 making addition u/s.143(1)(a) of the Act (on before the order of the Hon’ble Supreme Court in Checkmate Services Pvt Ltd (supra) dated 12.10.2022) cannot be sustained in the light of the decision of the Hon’ble High Court of Chhattisgarh in the case of Raj Kumar Bohra (supra), wherein the decision of the Hon’ble Supreme Court in Checkmate was also considered. Therefore, we set aside the order of the Ld. CIT(A) and direct the AO/CPC to delete the impugned addition made to the tune of Rs.55,30,492/-. 9. In the result, the appeal of the assessee is allowed.

Order pronounced on the 12th day of October 2026, in Chennai.

Sd/- Sd/-

(प�ावती .एस) (एबी टी. वक�) (PADMAVATHY. S) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai, �दनांक/Dated: 12th October, 2026. YS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF YASHVI Digitally signed by YASHVIR SINGH R SINGH Date: 2026.10.16 16:00:13 +05'30'

ITA 3783 /Chny/2026 (AY 2019-20) Janarthanam Srinivasan :: 9 ::

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