DONDAPATI SUDHAKARA RAO,HYDERABAD vs. ITO., WARD-13(3), HYDERABAD

प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The present appeal filed by the assessee is directed against the order passed by the Addl/JCIT(A), Panaji, dated
07.02.2025, which in turn arises from the intimation issued by 2
Dondapati Sudhakara Rao the Assessing Officer (for short “A.O.”) / CPC, Bengaluru under Section 143(1) of the Income Tax Act, 1961 (for short “the Act”) dated 16.12.2021 for A.Y. 2020-21. The assessee has assailed the impugned order on the following grounds of appeal before us:

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Dondapati Sudhakara Rao claim for deduction of delayed deposit of employees' share of contributions towards ESI/PF amounting to Rs. 36,63,930/-.
Thereafter, the income of the assessee vide intimation issued under Section 143(1) of the Act, dated 16.12.2021, after, inter alia, making the aforesaid addition/disallowance under Section 36(1)(va) of the Act was determined at Rs. 50,83,778/-.
3. Aggrieved, the assessee carried the matter in appeal before the CIT(A), but without success. As the assessee, despite sufficient opportunity, failed to participate in the proceedings before the CIT(A), therefore, he was constrained to proceed with and dispose of the appeal vide an ex parte order. The CIT(A), finding no infirmity in the view taken by the A.O., upheld the addition/disallowance made by him under Section 36(1)(va) of the Act and dismissed the appeal.
4. The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us.
5. We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial

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Dondapati Sudhakara Rao pronouncements that have been pressed into service by them to drive home their respective contentions.
6. Shri Polireddy Srikanth, the learned Authorized Representative
(for short “Ld.AR”) for the assessee, at the threshold of hearing of the appeal, submitted that both the authorities below had grossly erred in law and on facts of the case in disallowing the assessee's claim for deduction of delayed deposit of employees' share of contribution of ESI/PF amounting to Rs. 36,63,930/- vide an intimation issued u/s 143(1) of the Act, dated 16.12.2021. Elaborating on his contention, the Ld. AR submitted that, as the issue pertaining to allowability of the delayed deposit of employees' share of contribution towards labour welfare fund by an assessee, prior to the judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT [2022] 143
Taxman.com 178 (SC), which was delivered on 12.10.2022 was highly debatable and had only been settled after the aforesaid judgment, therefore, the A.O., CPC, Bengaluru had clearly traversed beyond the scope of his juri iction and disallowed the assessee's claim for deduction on the aforesaid issue which was highly debatable on the date when the subject intimation was 5
Dondapati Sudhakara Rao passed under Section 143(1) of the Act i.e. on 16.12.2021. It was, thus, the Ld. AR's claim that as the entitlement of the assessee to claim deduction for the delayed deposit of the employees' share of contribution towards ESI/PF account on the date on which his return of income was summarily processed under Section 143(1) of the Act i.e. on 16.12.2021, was highly debatable, therefore, the same could not have been disallowed by the A.O. by taking recourse to the provisions of Section 143(1) of the Act. The Ld. AR, in support of his aforesaid contention that a disallowance on a debatable issue was beyond the scope of Section 143(1) of the Act, had relied upon the judgment of the Hon'ble High Court of Telangana in the case of CIT Vs. GVK Industries Ltd. [2023]
147 Taxman.com 281 (Telangana). Also, support was drawn from the judgment of the Hon'ble Supreme Court in the case of Kvaverner John Brown Engg (India) (P.) Ltd, Vs. ACIT [2008]
305 ITR 103 (SC).
7. Apart from that, the Ld. AR submitted that the issue involved in the present appeal, as to whether or not the A.O., CPC,
Bangalore, prior to the judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (supra), could,

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Dondapati Sudhakara Rao vide an intimation issued under Section 143(1)(a) of the Act, disallow an assessee's claim for deduction of the delayed deposit of employees' share of contribution towards ESI/PF is covered by the judgment of the Hon'ble High Court of Chhattisgarh in the case of Raj Kumar Bothra Vs. DCIT, Tax Case No. 56 of 2025, dated 08.05.2025. 8. Per contra, Dr. Sachin Kumar, the learned Senior
Departmental Representative (for short “Ld. DR”) relied upon the orders of the lower authorities. The Ld. DR submitted that as the amendment made available on the statute wherein “Explanation
1” was inserted under Section 36(1)(va) of the Act, had not been considered in the aforesaid judicial pronouncements relied upon by the Ld. AR, therefore, the same would not carry his case any further. The Ld. DR submitted that “Explanation 1” (supra) had clarified beyond doubt that the “due date” within which an assessee is obligated to deposit the employees' share of contribution in the employees' welfare funds was the date contemplated in the relevant Acts, Rules, Orders or Notification issued thereunder or under any standing Order, Award or Contract or Services or otherwise. The Ld. DR submitted that as 7
Dondapati Sudhakara Rao the assessee in the present case had failed to deposit within the prescribed period the employees' share of contribution towards
ESI/PF, therefore, the A.O./CPC, Bangalore had rightly disallowed the same under Section 143(1) of the Act.
9. We have thoughtfully considered the issue in hand and find that the controversy therein involved lies in a narrow compass, i.e. as to whether or not the A.O., CPC, Bengaluru is justified in disallowing the delayed deposit of employees'
share of contribution towards ESI/PF by the assessee prior to the judgment of the Hon'ble Supreme Court in the case of Checkmate
10. We find that the present issue is squarely covered by the judgment of the Hon'ble High Court of Chhattisgarh in the case of Raj Kumar Bothra Vs. DCIT (supra), wherein, based on extensive deliberations, it was held that, as prior to the judgment of the Hon'ble Supreme Court in the case of Checkmate
Services Pvt. Ltd. (supra), the issue regarding the allowability of the assessee's claim for deduction of the delayed deposit of employees' share of contribution towards ESI/PF was highly

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Dondapati Sudhakara Rao debatable, therefore, the same could not have been disallowed by taking recourse to the provisions contained under Section 143(1)(a) of the Act. For the sake of clarity, the observations of the Hon'ble High Court of Chhattisgarh are culled out as under :

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As the facts and the issue involved in the present appeal before us is squarely covered by the aforesaid judgment of the Hon'ble High
11. Resultantly, we herein set aside the order of the CIT(A) and direct the A.O. to vacate the disallowance of the assessee's claim for deduction of the delayed deposit of employees' share of contribution of Rs. 36,63,930/- made by him vide intimation issued under Section 143(1) of the Act, dated 16.12.2021. 12. Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations.
Order pronounced in the Open Court on August, 2025. (श्री मिुसूदन सावडिया)
(MADHUSUDAN SAWDIA)
लेखा सदस्य/ACCOUNTANT MEMBER (श्री रवीश सूद)
(RAVISH SOOD)
न्यायिक सदस्य/JUDICIAL MEMBER

Hyderabad, dated .08.2025. TYNM/sps

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Dondapati Sudhakara Rao

आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:-

आदेशधिुसधर / BY ORDER

Sr. Private Secretary
ITAT, Hyderabad