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Facts
The assessee filed an appeal against the order confirming the disallowance of employees' contribution to ESI/PF amounting to Rs. 50,74,476/- paid beyond the due date. The assessee did not attend the hearings and no written submissions were filed.
Held
The Tribunal held that the employees' contribution towards ESI/PF, if not deposited within the due dates prescribed by the respective welfare laws, is not allowable as a deduction. This decision was based on the Hon'ble Supreme Court's ruling in the case of Checkmate Services Pvt. Ltd.
Key Issues
Whether employees' contribution to ESI/PF paid after the due date but before the due date of filing the return is allowable as a deduction.
Sections Cited
250, 143(1), 36(1)(va), 43B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: MS.ASTHA CHANDRA & DR.DIPAK P. RIPOTE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the Assessee against the order of ld.Addl./Joint Commissioner of Income Tax(Appeal)-1, Noida passed under section 250 of the Income Tax Act, 1961 for the A.Y.2018-19 dated 03.01.2024 emanating from the Assessment Order passed under section 143(1) of the Act, dated 09.01.2020.
At the outset of hearing, no one attended on behalf of the Assessee. No written submission or adjournment letter was filed.
[A] Earlier the case was fixed for hearing on 10.06.2025 and 28.07.2025, no one attended for hearing on these dates on behalf of the Assessee.
Submission of ld.DR : 3. Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of AO and ld.Commissioner of Income Tax(Appeal)[ld.CIT(A)]. Ld.DR relied on the decision of Hon’ble Supreme Court in the case of Checkmate Services Private Limited vs CIT in Civil Appeal No.2833 of 2016 order dated 12.10.2022.
Findings & Analysis : 4. We have heard ld.DR for the Revenue and perused the records. In this case, Assistant Director of Income Tax(CPC) vide order under section 143(1) dated 09.01.2020 disallowed assessee’s claim of Rs.50,74,476/-. The reason mentioned in the order under section 143(1) is as under : “Any sum received from employees as contribution to any provident fund or superannuation fund or any fund set up under ESI Act or any other fund for the welfare of employees to the extent not credited to the employees account on or before the due date [36(1)(va)].”
It is also specifically mentioned in the order under section 143(1) that a notice dated 15.05.2019 was sent to the Email of the 2 Assessee. Thus, before making the adjustment, the ADIT(CPC) had [A] provided opportunity of hearing to the Assessee. Aggrieved by the order u/s.143(1), Assessee filed appeal before the ld.CIT(A) who has confirmed the disallowance following the Hon’ble Supreme Court’s decision in the case of Checkmate Services Private Limited Vs. CIT(supra).
In this case, in the statement of facts filed along with the appeal memo, Assessee has not denied the fact that Assessee has not paid the employees contribution towards ESI/PF within the due date mentioned in the respective statutes. The ADIT(CPC) has noted that Employees Contributions towards ESI/PF totalling to Rs.50,74,476/- was paid beyond the due date mentioned in the respective statutes. Therefore, ADIT(CPC) added back the amount of Rs.50,74,476/- u/s.36(1)(va) of the Act.
This issue is covered against the Assessee by the decision of Hon’ble Supreme Court in the case of Checkmates Services Pvt. Ltd., vs. CIT [2022] 448 ITR 518 vide order dated 12.10.2022, the Hon’ble Supreme Court held as under : “54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition 3 [A] that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given someleeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction.”(emphasis supplied)
Thus, the Hon’ble Supreme Court has laid down the law that Employees Contribution towards ESI/PF if not deposited within the [A] time mentioned in the respective welfare laws, it will not be allowed as deduction.
In the case under consideration, Employees Contribution towards ESI/PF were not deposited within the due dates mentioned in the respective statutes. Hence, respectfully following the Hon’ble Supreme Court(supra), we uphold the order under section 143(1) and order under section 250 of the Act. Accordingly, grounds of appeal raised by the assessee are dismissed.
10. Though assessee has raised many grounds, the basic issue is disallowance of Employees Contribution towards ESI/PF. Therefore, we are not discussing each and every ground separately. In one ground, Assessee has alleged that opportunity of hearing was not provided by ADIT(CPC), however it is noted that ADIT(CPC) had issued a notice dated 15.05.2019. It means, ADIT(CPC) had given opportunity before making the disallowance, hence, the Ground No.9 raised by the Assessee is dismissed.
11. In Ground No.3, Assessee has pleaded that since Draft Assessment Order was not provided, the order u/s.143(1) is bad in law. There is no provision of providing Draft Assessment Order 5 [A] under section 143(1) of the Act, therefore, Ground No.3 is dismissed.
As far as Assessee’s reliance on the various judicial pronouncements are concerned, all the decisions relied by Assessee are prior to the decision of Hon’ble Supreme Court in the case of Checkmate Services Private Limited vs. CIT(supra). Therefore, the decisions relied by Assessee are not applicable.
Accordingly, all grounds of appeal raised by the Assessee are dismissed.
In the result, appeal of the assessee is dismissed. Order pronounced in the open Court on 30 September, 2025.