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Facts
The assessee filed its return of income for A.Y. 2019-20 declaring NIL income. The CPC Bangalore made two adjustments: employees' contribution to PF and ESI and reversal of provision for bonus. The assessee appealed the adjustments.
Held
The tribunal held that the adjustment for employees' contribution to PF and ESI was correctly made based on the Hon'ble Gujarat High Court's decision. The issue of reversal of provision for bonus was set aside to the CIT(A) for adjudication. The claim for interest under Section 244A was allowed.
Key Issues
Whether adjustments for employees' contribution to PF/ESI and reversal of bonus provision are permissible under Section 143(1)(a)? Whether interest under Section 244A is allowable when the return is filed by the extended due date?
Sections Cited
143(1)(a), 36(1)(va), 2(24)(x), 43B, 41, 244A
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI T R SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
(Assessment Year: 2019-20) Elsamex Maintenance Services Vs. Deputy Commissioner of Ltd. Income Tax, 1207-1210, Shapath V, Beside Circle Gandhinagar Hotel Crown Plaza, S.G Highway, Prahladnagar, Ahmedabad-380015 [PAN No.AADCE5042Q] (Appellant) .. (Respondent) Appellant by : Shri Bhupal Rapelli, A.R. Respondent by: Shri B.P. Srivastava, Sr. DR Date of Hearing 08.07.2025 Date of Pronouncement 17.07.2025 O R D E R
PER NARENDRA PRASAD SINHA, AM:
This appeal is filed by the assessee against the order dated 18.03.2025 of the Additional / Joint Commissioner of Income Tax (Appeals)-7, Kolkata (in short “the CIT(A)”) for A.Y. 2019-20 in the proceeding under Section 143(1)(a) of the Act.
The brief facts of the case are that the assessee had filed its return of income for A.Y. 2019-20 on 31.10.2019 declaring income of Rs. NIL. While processing the return under Section 143(1)(a) of the Income Tax Act, 1961 (hereinafter referred as “the Act”) the CPC Bangalore had made the following two adjustments: (i) Employees’ contribution to PF and ESI: Rs. 2,99,61,925/- (ii) Reversal for Provision of Bonus: Rs. 1,30,00,000/-.
Elsamex Maintenance Services Ltd. vs. DCIT Asst. Year –2019-20 - 2– 3. Aggrieved with the adjustment made while processing of return, the assessee had filed an appeal before the First Appellate Authority which was decided by Ld. CIT(A) vide the impugned order and the appeal of the assessee was partly allowed.
Now the assessee in second appeal before us. The following grounds have taken in this appeal:
“1. On the facts and circumstances of the case and in law, the Learned Joint Commissioner of Income Tax (Appeals), National Faceless Appeal Centre ['Jt. CIT(A)'] erred in not deleting the adjustment of Rs. 2,99,61,925 made by Learned Asst. Director of Income Tax, CPC ('ADIT-CPC') u/s. 143(1)(a)(iv) while processing the return of income under section 143(1) of the Act, being contrary to provisions as laid down in Section 143(1)(a) of the Act. The Learned Jt. CIT(A)/ ADIT-CPC erred in making the adjustments under section 143(1)(a)(ii) of Rs. 2,99,61,925 without appreciating that issues where question of law or debatable issues are involved are beyond the scope of Section 143(1)(a).
2. On the facts and circumstances of the case and in law, the appellant prays for reduction of Rs. 1,30,00,000 being reversal of provision for bonus made in AY 2019- 20 in terms of section 41 of the Act. The said ground will be operative for reduction from total income of AY 2019-20 if the claim of Rs.1,30,00,000 made in AY 2018-19 is not allowed.
On the facts and circumstances of the case and in law, the appellant prays for direction for granting full interest under section 244A of the Act consequent to the above-mentioned grounds of appeal
.”
5. The first ground pertains to adjustment of Rs. 2,99,61,925/- on account of belated payment of employees’ contribution to PF and ESI. Shri Bhupal Rapelli, Ld. AR appearing for the assessee submitted that the CPC was not correct in making adjustment in respect of employees’ contribution to PF and ESI. He explained that this was a debatable issue which required thorough examination of facts and application of mind and Elsamex Maintenance Services Ltd. vs. DCIT Asst. Year –2019-20 - 3– was not covered in the nature of prima facie adjustment as stipulated under Section143(1)(a) of the Act. He further submitted that the various authorities have already held that no adjustment could be made in respect of employees’ contribution to PF and ESI in the intimation under Section143(1)(a) of the Act. In this respect he relied upon the following decisions:
(i) Qualcomm Asia Pacific Pte. Ltd. vs. CIT(A) 173 taxmann.com 839 (Mumbai – Trib.) (ii) Sanjay Kumar Sharma vs. ITO 174 taxmann.com 592 (Chhattisgarh HC) (iii) Gurmeet Singh Hora vs. ACIT 158 taxmann.com 628 (Raipur – Trib.)
5.1 The Ld. AR further submitted that this issue was finally settled by the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. 143 taxmann.com 178 (SC). He explained that this decision was rendered by the Hon’ble Apex Court on 14.10.2022 whereas the return of income of the assessee was processed by the CPC much earlier on 29.06.2020. Therefore, the matter had not reached certainty when the return of the assessee was processed by the CPC. Therefore, no adjustment in respect of belated payment of employees’ contribution to PF and ESI was called for while processing the return.
Per contra, Shri B. P. Srivastava, Ld. Sr. DR submitted that as per provision of Section 36(1)(va) of the Act there was no dispute about disallowance of belated payment of employee’s contribution of PF and ESI. He explained that the employees’ contribution to PF and ESI paid belatedly was already reported in the Tax Audit Report which required no Elsamex Maintenance Services Ltd. vs. DCIT Asst. Year –2019-20 - 4– application of mind vis-à-vis the disallowance as per the provision of the Act. The Ld. Sr. DR further submitted that this issue was already decided in favour of the Revenue by Hon’ble Gujarat High Court in the case of Checkmate Services Pvt. Ltd. and being a binding precedent there was no ambiguity about the disallowance. He, therefore, strongly supported the adjustment as made while processing the return.
We have considered the rival submissions. The issue of belated payment of employee’s contribution to PF and ESI there is no more res integra. The Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) has upheld the position that the unpaid employees’ contribution to PF and ESI was income of the assessee in accordance with provision of Section 36(1)(va) r.w.s. section 2(24)(x) of the Act. The Hon’ble Supreme Court had examined the intention of the legislature and clarified the provision as it existed on the statute. Thus, there was no dispute or debate about the disallowance in respect of belated payment of employees’ contribution to PF and ESI. It is true that the Coordinate Bench of ITAT, Bombay and other Tribunals have held that no such adjustment can be made while processing the return. An identical view was taken by Hon’ble Chhattisgarh High Court as well in the case of Sanjay Kumar Sharma (supra). With due regard to those decisions, we are unable to align ourselves with the view as taken therein. Hon’ble Gujarat High Court in the case of CIT vs. Checkmate Services Pvt. Ltd. (Tax Appeal No. 680 of 2014 dated 14.10.2014) had already decided this issue in favour of the Revenue and, thus, there was no ambiguity on the issue following the Elsamex Maintenance Services Ltd. vs. DCIT Asst. Year –2019-20 - 5– binding decision of the Jurisdictional High Court. Further, the decision of the Hon’ble Gujarat High Court on this issue was not stayed by the Hon’ble Supreme Court. Therefore, there was no debate or dispute on this issue and in view of the binding precedent of the Hon’ble Gujarat High Court, the adjustment in respect of unpaid employees’ contribution to PF and ESI was correctly made in the case of the assessee while processing the return of the assessee. The quantum of the unpaid amount was available in the tax audit report which was considered as income of the assessee in accordance with provisions of Section 36(1)(va) r.w.s. section 2(24)(x) of the Act. We, therefore, upheld the order of Ld. CIT(A) on this issue and the ground taken by the assessee is dismissed.
The next ground pertains to adjustment of Rs. 1.30 crores on account of reversal of provision for bonus. The Ld. AR explained that in the A.Y. 2018-19 provision of bonus of Rs. 2.60 crore was made out of which Rs. 1.30 crore was reversed on 30.09.2018 i.e. before filing the return of income of A.Y. 2018-19. The balance amount of Rs.1.30 crore was reversed on 31.03.2019. The reversal of bonus of Rs. 1.30 crore made on 30.11.2018 was claimed as deduction under Section 43B of the Act in the return of income for A.Y. 2018-19. However, the CPC had disallowed this amount in the A.Y. 2018-19 on the ground that there was mismatch between the claim and the Tax Audit Report. Thereafter, the case for A.Y. 2018-19 was selected for scrutiny but the Assessing Officer while completing the assessment had disallowed the claim Rs. 1.30 crores made under Section 43B of the Act. The Ld. AR submitted that the reversed Elsamex Maintenance Services Ltd. vs. DCIT Asst. Year –2019-20 - 6– provision for bonus of Rs. 1.30 crores which was made on 30.11.2018 was offered for tax in the A.Y. 2019-20. However, the assessee was not allowed deduction of this Rs. 1.30 crores either in A.Y. 2018-19 or in A.Y. 2019-20. The Ld. AR submitted that since this amount was already disallowed in the A.Y. 2018-19 this should be allowed as deduction in the A.Y. 2019-20. He further submitted that the appeal against the disallowance made under Section 43B in the A.Y. 2018-19 was still pending for adjudication before the Ld. CIT(A).
Per contra, Ld. Sr. DR supported the adjustment as made by the CPC.
We have considered the submissions of the assessee. It is found that this issue was not adjudicated by the Ld. CIT (A) in his order dated 18.03.2025. The assessee has submitted that an additional ground was raised in this respect before the Ld. CIT(A) vide letter dated 09.08.2024. A copy of the online acknowledgement in this respect has also been brought on record and the “Remarks” in this acknowledgement is found to be as under:
“Dear Sir/Madam, In connection with this appeal, the Appellant would like to raise additional grounds of appeal and requests your goodself to admit the said ground of appeal. The said ground of appeal is filed and is in connection with appeal filed for AY 2018-19. One of the grounds of appeal is disallowance of reversal of bonus provision of Rs. 1,30,00,000 made in AY 2018-19. If the disallowance is upheld, the Appellant prays that the total income of AY 2019-20 be reduced to such extent since the reversal was made on 30. November 2018. In accordance with section 41 of the Act, reversal of such provision is not a taxable receipt since the provision when created was not claimed as deduction. The Appellant had offered such income to tax in AY 2019-20 and prays for the reduction of total income if the said reversal is disallowed in AY 2018-19.”
11. Since the additional ground raised by the assessee before the Ld. CIT(A) on the issue of adjustment of provision for bonus has not been adjudicated, we deem it proper to set-aside the matter with the file of Ld. CIT(A) with a direction to adjudicate the same. Further, the disallowance made in this respect under Section 43B of the Act in the A.Y. 2018-19 is also pending before the Ld. CIT(A). It will be in the interest of justice, if both the matters are tagged together and decided conjointly in order to give a finality to this issue. The ground of the assessee is allowed for statistical purpose.
12. Ground No. 3 pertains to allowing interest under Section 244A of the Act. The Ld. AR submitted that the return filed by the assessee on 31.10.2019 was treated as delayed by one month while processing the return under Section 143(1)(a) of the Act and, therefore, the working of interest under Section 244A as allowed to the assessee was not correct. He explained that the due date of filing of return for A.Y. 2019-20 was extended by CBDT to 31.10.2019. Therefore, there was no delay in the filing of return of the assessee.
13. We have considered the request of the assessee. As per the copy of 143(1) intimation brought on record, it is found that the extended due date for filing of original return was 31.10.2019. As the assessee had filed the return of income on 31.10.2019, there was no delay. Therefore, the assessee was entitled to interest under Section 244A of the Act by treating the returned filed by the assessee to be on the “due date”. In the intimation issued by the CPC, at Sr. No. 49, the “Delay attributable to the tax payer” has been mentioned as “one month” which is not correct. Considering the fact that the due date for filing of return was extended by one month, there was no delay on the part of the assessee and the delay of one month as mentioned in the intimation has to be ignored. Therefore, the Revenue is directed to re-compute the interest under Section 244A of the Act by ignoring the delay of one month flagged by the CPC while processing the return. The ground taken by the assessee is allowed.
In the result, the appeal of the assessee is partly allowed.
This Order pronounced in Open Court on 17/07/2025