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Facts
The assessee filed appeals against the CIT(A)'s orders dismissing their appeals against the AO's orders for assessment years 2018-19 and 2020-21. The core issues involve disallowance of employees' contributions to ESIC and EPF paid after the due date but before the tax return filing, and a credit for gratuity allowance. The assessee's appeals were dismissed by the CIT(A).
Held
The Tribunal held that the disallowance of employees' ESIC/EPF contributions paid late, but before filing the return, is in line with Supreme Court decisions and cannot be processed under section 143(1)(a) as a debatable issue. The appeal concerning the gratuity allowance was allowed, directing the AO to give effect to the assessment order u/s 143(3) and vacate the demand.
Key Issues
Whether disallowance of late payment of employees' ESIC/EPF contributions can be made under section 143(1)(a), and whether the AO correctly adjusted the demand regarding gratuity allowance.
Sections Cited
250, 154, 143(1), 143(3), 40A(7), 43B, 36(1)(va), 139(1), 2(24)(x), 20(B), 40A(7)
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Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW
Before: SH. KUL BHARAT & SH. NIKHIL CHOUDHARY
O R D E R PER NIKHIL CHOUDHARY, A.M.: These two appeals have been filed by the assessee against the separate orders of the ld. CIT(A) under section 250 of the Income Tax Act for the assessment years 2018-19 and 2020-21 dated 11.10.2022 and 7.10.2022, respectively. In both cases, the ld. CIT(A) has dismissed the appeals of the assessee against the orders passed by the ld. AO under section 154 r.w.s. 143(1) for the assessment year 2018-19 and under section 143(1) for the assessment year 2020-21. The grounds of appeal are as under:-
1. “1. Because the CIT(A) has not given any direction for giving the credit of allowance of Gratuity addition of Rs.49,17,636.00 in the intimation, which was finally allowed in the Assessment order passed u/s 143(3) of the IT Act dated 10th July, 2020.
2. Because the CIT (A) has erred on facts and in law in upholding the disallowance of Rs.29,16,547/- being employees contribution to ESIC and EPF under section 43B read with 36(1) (va), paid after the due date but before the filing of the income tax return, which disallowance is contrary to facts, bad in law be deleted.
3. Because the CIT(A) has failed to appreciate that the contribution towards ESIC & EPF are all expenditure incurred for the purposes of business and are to be & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 allowed, irrespective of the time frame, provided deposited before the filing of the tax return, the disallowance be deleted. 04. Because on a proper consideration of the facts and reading of the provisions of section 36(1)(va) as interpreted by the Apex Court, time and again, it would be found that the contribution to EPF & ESIC are allowable whenever paid but before the filing of the income tax return.”
“1. Because the CIT (A) has erred on facts and in law in upholding the disallowance of Rs.23,88,603/- being employees contribution to ESIC and EPF under section 43B read with 36(1)(va), paid after the due date but before the filing of the income tax return, which disallowance is contrary to facts, bad in law be deleted.
2. Because the CIT(A) has failed to appreciate that the contribution towards ESIC & EPF are all expenditure incurred for the purposes of business and are to be allowed, irrespective of the time frame, provided deposited before the filing of the tax return, the disallowance be deleted.
3. Because on a proper consideration of the facts and reading of the provisions of section 36(1)(va) as interpreted by the Apex Court, time and again, it would be found that the contribution to EPF & ESIC are allowable whenever paid but before the filing of the income tax return.”
It is observed that the appeal in 2022 is delayed by 17 days and appeal in 21 days. Condonation petitions have been filed by the assessee in respect of both appeals albeit for lesser periods of delay. Be that as it may, the condonation petitions states that on receipt of the order, the same was handed over to the person in the office who was looking after the tax matters and the said order so received was misplaced in the files and escaped from the mind of the said person. Subsequently, while filing the papers and challans in the respective files, the assessment orders re-surfaced. Immediately necessary action on the same was taken as advised by the counsels and an appeal was prepared and filed spontaneously. Thus, the delay in filing the appeal was on account of the mistake of the staff which was inadvertently and without any mala fide intention. It has been submitted that the assessee was prevented by sufficient and reasonable clause from the filing of appeal and therefore, the delay may be condoned.
We have duly considered the facts submitted and after considering the judgment of the Hon’ble Supreme Court in the case of Collector of Land Acquisition Vs. 2 & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 MST. Katiji & Ors 167 ITR 471 (SC), the appeals are admitted for hearing on their merits.
As the grounds of appeal
are similar on most issues, the appeal against the order of the ld. CIT(A) for the assessment year 2018-19 is taken up as the lead case and our findings with regard to the issues therein will apply mutatis mutandis to the appeal against the orders of the ld. CIT(A) for the assessment year 2020-21.
5. The facts of the case are that the assessee company filed a return of income on 30.10.2018 which was processed under section 143(1)(a) vide order dated 2.10.2019 at a total income of Rs. 76,82,700/- by making the following adjustments:- i. Inconsistency in provision of payment of gratuity under section 40A(7) of the I.T. Act of Rs.49,17,636/- and ii. sums received from employees as contribution to provident fund / ESI but not credited to the employees account before the due date under section 36(1)(va) of Rs. 29,16,547/-.
6. Thereafter, on 29.08.2019, the case was picked up for limited scrutiny and the matter was scrutinized on the issue of, ‘disallowance under section 40A(7)’. The ld. AO concluded the assessment with the finding that, ‘no addition on the issue was made’ vide his order dated 10.07.2022. However, the ld. AO did not make any discussion regarding the addition made on account of violation of section 36(1)(va) of Rs. 29,16,547/-. In the computation sheet annexed with the assessment order, the income of the assessee continued to be assessed as per the intimation dated 2.10.2019 i.e. at Rs.76,82,700/-. In effect, despite not making any disallowance on account of gratuity in the body of the assessment order, the ld. AO continued to perpetuate the demand created on this account in the proceedings under section 143(1)(a).
7. Aggrieved by this order under section 143(3), the assessee filed an application under section 154 for correction of the mistakes apparent from record which were cited as & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 i. giving effect to the expense allowed in the assessment order passed under section 143(3) on the issue of gratuity payment and ii. Allowance of employees PF/ESI contribution of Rs. Rs. 29,16,547/- which had been deposited in the designated account of employees before the due date of the filing of the income tax return as provided under section 139(1), in view of the provisions of section 43B of the Income Tax Act.
However, the assessee did not receive a response to the application under section 154 and therefore, after waiting for six months, the assessee filed an appeal before the ld. CIT(A), NFAC. Before the ld. CIT(A), it was submitted that during the processing under section 143(1), an addition of Rs.78,34,183/- was made on account of some inconsistency noticed in the provisions for payment of gratuity under section 40A(7) of Rs.49,17,636/- and for delayed payment of ESI / EPF dues of Rs. Rs. 29,16,547/-. It was submitted that the payment/deposit of ESI / EPF was made beyond the due dates as prescribed under the respective Acts but much before the filing of the income tax return. Further, it was submitted that vide order dated 143(3) dated 10.07.2020, no inconsistency had been noticed in the provisions made for gratuity and no disallowance had been made in respect of the same. No order was passed in respect of ESI / EPF payment. Since, the demand as per the intimation dated 2.10.2019 was outstanding, a petition under section 154 was moved on 14.12.2020 pointing out that the adjustment on account of late payment of ESI / EPF was unwarranted and misplaced in view of the decision of the jurisdictional High Court in the case of Sagun Foundry (P.) Ltd., (2017) 78 taxman.com 47 (Alld) and the Hon’ble Apex Court decision in the case of Alom Extrusions / several decisions of ITAT Lucknow Bench. The failure to follow the decision of the Hon’ble Apex Court and the jurisdictional High Court was a mistake apparent from record which needed to be rectified. It was submitted that the petition moved under section 154 had not been adjudicated or disposed of. Accordingly, an appeal was filed to the ld. CIT(A) asking him to delete the said additions. 4 & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 8. The ld. CIT(A) considered the addition of Rs.29,16,547/- to the returned income of the assessee under section 143(1)(a)(iv) on account of late deposit of employee contribution to provident fund and ESI while processing the return of income. He reproduced the provisions of section 143(1) and highlighted the fact that expenditure could be disallowed, which was indicated in the audit report but not taken into account in computing the total income in the return. He moved on to analyse the various amendments made to section 143(1) over a period of time and pointed out that in the memorandum to Finance Bill, 2016, it had been explained that Clause (a) of sub section (1) of section 143 provided that, a return filed was to be processed and total income or loss was to be computed, after making the adjustments on account of any arithmetical error in the return or on account of an incorrect claim, if such claim was apparent from any information in the return and in order to remove the mismatch between the return and the information available with the Department, it was proposed to expand the scope of adjustments that could be made at the time of processing of returns under sub section (1) of section 143. It was now proposed that such adjustments could be made, based on the data available with the Department in the form of the audit report filed by the assessee, returns of earlier years of the assessee, 26AS statement, Form 16 and Form 16A. However, before making any such adjustments, in the interest of natural justice, an intimation was to be given to the assessee, requiring the assessee to respond to such adjustments and such response was to be considered. However, if no response was received within a period of 30 days of such intimation, the processing was to be carried out incorporating the adjustments. The ld. CIT(A) pointed out that clause 20(B) of Form 3CD, the tax audit report, specifically required the tax auditor to report sums coming under section 2(24)(x), with their due dates and actual date of payments of such sums, to the concerned authorities under section 36(1)(va) of the Act. The ld. CIT(A) held that the significance attached to the due dates and the actual dates of payment in respect to the employees’ contributions in the tax audit report, was different from the employers’ contribution which was dealt under clause 21 of the Form 3CD report. He held that section & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 143(1)(a)(iv) (inserted by Finance Act, 2016) provided that disallowance of expenditure could be made as indicated in the audit report. Therefore, in view of such amendments made in the Act and explanations provided in the memorandum to the Finance Bills, he concluded that the actions of the ld. AO, CPC in making disallowance on account of late deposit of employee contribution to ESI / EPF, as indicated in para 20(B) of the Audit report and challenged in the appeal before him, had rightly been made under section 143(1)(a)(iv) of the Act.
The ld. CIT(A) also held that various judicial pronouncements on the subject that had held that no such prima facie adjustment could be made under section 143(1)(a), were with respect to the adjustments being made under section 143(1)(a), prior to the amendment / insertion of section 143(1)(a)(iv) by the Finance Act, 2016. In view of the above amendments made in the Act and the explanations provided in the memorandum to the Finance Bills, those judgments did not express the correct position in law with reference to late payments of EPF/ESI after 1.04.2016. Thereafter, the ld. CIT(A) proceeded to discuss the disallowance on its merits. He observed that the ld. AR had considered the provisions of section 43B also with respect to employees contribution for EPF/ESI, which was otherwise applicable to the employers’ contribution, and after referring to CBDT Circular No.22/2015, that clarified that the said Circular relating to section 43B of the Income Tax Act did not apply to claim of deduction relating to employees’ contribution to welfare funds which were governed by section 36(1)(va) of the Income Tax Act. He also quoted from the judgment of the Hon’ble Kerela High Court in the case of CIT vs. Merchem (Ltd.) 2015 61 taxman.com 119/235 taxman 291 (Ker) which clearly pointed out that section 36(1)(va) and section 43B(6) operate in different fields and the benefit of deduction under section 43B(6), as provided under the proviso thereto, only existed with regard to the employers’ contribution to the welfare funds. The ld. CIT(A) also placed reliance on the decisions of the ITAT Mumbai in the case of IMP Power Limited vs. ITO (2007) 107 TTJ (Mum) 522, 535-37, the decision of the Hon’ble Gujarat High Court in the case of CIT 6 & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj), the decision of the Hon’ble Madras High Court in the case of Unifac Management Services (India) Pvt. Ltd. vs. DCIT (2018) 409 ITR 225 (Mad) and the decision of the Hon’ble Bombay High Court in the case of CIT vs. Ghatge Patil Transports Limited (2014) 368 749 (Bom), all of which had held that the beneficial provisions of section 43B is not extended to sums mentioned under section 36(1)(va). The ld. CIT(A) also took note of the explanatory memorandum, explaining the provisions of the Finance Bill, 2021 and, after quoting from the amendments made to section 36(1)(va) and section 43B, pointed out that the same were declaratory amendments which simply clarified the law and clearly stated that the provisions of section 43B do not apply and were deemed to have never applied to any sum received by the assessee from any of his employees, to which the provisions of sub-clause (x) of clause (24) of section 2 applies. In order to emphasize the retrospective nature of these amendments, the ld. CIT(A) quoted from the Hon’ble Supreme Court decision in the case of CIT vs. Poddar Cement Pvt. Ltd. and Ors (1997) 226 ITR 625 (SC), the judgment in Keshavlal Jethalal Shah vs Mohanlal Bhagwandas & Anr (1968) 3 SCR 623 and the Hon’ble Supreme Court judgment in the case of CIT-1, Ahmedabad vs. Gold Coin Health Food Pvt. Ltd., (2018) 9 SCC 622. He also quoted from the decision of the Hon’ble Supreme Court in the case of Zile Singh vs. State of Haryana (2004) 8 SCC 1 and the decisions of the Hon’ble Supreme Court in the case of Union of India vs. S. Muthyam Reddy (1999) 240 ITR 341 (SC), M/s L.R. Brothers, Indo Flora Limited vs. Commissioner, Central Excise in Civil Appeal No. 7157 of 2008 and the order of the ITAT ‘F’ Bench Delhi in the case of Vedvan Consultants Pvt. Ltd. in all of which had held that the said amendments were retrospective in nature. Therefore, considering the totality of facts and circumstances of the case, the ld. CIT(A) dismissed the appeal of the assessee against the disallowance of Rs.29,15,547/- under section 36(1)(va). However, as no specific mention had been made with regard to the giving credit of allowance of gratuity of Rs.49,17,636/- in the grounds of appeal
before him, it appears that the ld. CDIT(A) did not pass any order on the said matter. 7 & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21
10. The assessee is aggrieved at this order passed by the Ld. CIT(A), dismissing the appeal of the assessee and has accordingly come before us. Shri Rakesh Garg, Adv (hereinafter referred as to “AR”) submitted that following the judgment of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT-1 (2023) 6 SCC 451, that the contribution towards ESI/EPI was to be paid before the due dates as indicated under the respective Acts, he was not pressing ground nos. 2, 3 & 4 in the original memorandum of appeal. However, he prayed to raise an additional ground that the said disallowance could not be made under the provisions of Section 143(1)(a) of the Act as the issue was highly debatable, at the time when the processing was done. For this proposition, the Ld. AR placed reliance on the recent judgment of the Hon’ble Chhattisgarh High Court in the case of Raj Kumar Bothra vs DCIT, Circle-2(1), Raipur in Tax Case No. 56 of 2025. The Ld. AR took us through the said judgment and pointed out that after considering the judgment of the Hon’ble Supreme Court in the case of Kvaverner John Brown Engg. (India) Pvt Ltd vs ACIT in CA No. 3073 of 2008 and the judgment in ACIT vs Rajesh Jhaveri Stock Brokers Pvt Ltd (2008) 14 ITR 208 and also after observing that the Revenue had withdrawn appeal on similar issue in the cases of Satpal Singh Sandhu vs DCIT and Parv Buildcon vs DCIT, their Lordships had held that the Section 143(1)(a) of the Act could not be resorted to on issues that were highly debatable and the disallowance could only be made u/s 143(3) of the Act. However, since in that case the disallowance had been made under section 143(1)(a) of the Act before the issue was resolved by the Hon’ble Supreme Court in the matter of Checkmate Services Pvt Ltd (supra), the order of the Assessing Officer in that matter had been set aside. Accordingly, it was prayed that following said judgment of the Hon’ble Chhattisgarh High Court, the order on this issue deserves to be set aside and since this was a pure question of law, the Ld. AR requested that it may be considered by the Tribunal while disposing the appeal. On the issue of disallowance and gratuity, it was pointed out by the Ld. AR that the gratuity amount of Rs.49,17,636/- had been disallowed by the CPC in the intimation order but subsequently it was allowed by the Assessing Officer in an assessment u/s 143(3) of the Act, where the case had 8 & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 specifically been selected for scrutiny to examine the provision for gratuity u/s 40A(7) of the Act. It was pleaded that since the Assessing Officer had recorded a finding that no addition was being made on the said issue, he should have revised the demand and reduced the amount demanded after processing u/s 143(1)(a) of the Act, to the extent of the amount allowed by him on account of gratuity provision. Furthermore, it was submitted that the assessee had moved an application u/s 154 of the Act on this issue to the Assessing Officer which had not been disposed of within the specified time period. Therefore, the assessee had preferred an appeal to the Ld. CIT(A) and specifically raised this issue in ground no. 2 of his appeal before the Ld. CIT(A). However, the Ld. CIT(A) had not decided the issue and therefore the matter had been raised before the Tribunal in ground no.
1. It was argued that the Ld. CIT(A) was obliged to grant the relief to the assessee in view of the fact that the Ld. AO had himself accepted the claim of the assessee in proceedings u/s 143(3) of the Act. Since this had not been done, it was prayed that the Tribunal may allowed it.
On the other hand, Shri Deepak Yadav, Ld. Sr. DR, appearing and argued on behalf of the Revenue, submitted that the issue of deposit of employees share of contribution towards labour welfare fund had been settled by the judgment of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT (supra). It was submitted that the Hon’ble Supreme Court in its judgment had only explained the law as it always existed. Therefore, the decision rendered by the Lordships in the matter of Raj Kumar Bothra vs DCIT (supra) was not a correct interpretation of the law, when they held retrospective effect of the Hon’ble Supreme Court decision was not an issue involved in that case. It had been pointed out by the Ld. DR in that case, that the Hon’ble Supreme Court judgment would have a retrospective effect as has been held in the Hon’ble Supreme Court decision rendered in the State of Bihar and Ors vs Ramesh Prasad Verma (Dead) and in the case of P.V. George and Ors vs State of Kerala and Ors, but this had been overlooked. Therefore, it was not correct to hold that the matter could not be processed u/s 143(1)(a) of the Act because the Hon’ble Supreme Court 9 & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 had laid down the law as it always stood. Thus, it could not be held in retrospect that there was any debate, to oust the provision of Section 143(1)(a) of the Act. On the issue of failure to allow credit of gratuity, the Ld. DR left it to the wisdom of the Tribunal.
We have duly considered the facts and circumstances of the case. Ground no. 1 relates to failure of the Assessing Officer to revise the demand after having accepted that no disallowance was required for gratuity u/s 40A(7) of the Act. The assessee had raised the issue before the Ld. CIT(A) through the ground no. 2 of their appeal but the Ld. CIT(A) had failed to pronounce judgment on this, which is clearly an error. Since the claim has been allowed by the Assessing Officer in proceedings u/s 143(3) of the Act, it was natural that the demand raised on the same issue under section 141(1)(a) of the Act is required to be modified. We, therefore, direct the Assessing Officer to give effect to his own order u/s 143(3) of the Act and vacate that portion of the demand created on account of disallowance of provision of gratuity u/s 40A(7) of the Act. Ground no. 1 of the appeal is accordingly allowed.
Ground nos. 2, 3 & 4 of the appeal, relates to claim for allowance of deduction on account of payment of EPF/ESI before the filing of return in accordance with the provisions of Section 43B of the Act. Following the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd (supra), wherein the Hon’ble Supreme Court has specified that the deduction can only be allowed if the condition spelt out by the Explanation -2 of Section 36(1)(va) of the Act i.e. deposit of the accounts before the due dates specified under those Acts, the plea of the assessee is without merit and these grounds of appeal are accordingly dismissed.
14. With regard to the arguments raised by the Ld. AR regarding the inapplicability of section 143(1)(a) of the Act for the purposes of making such disallowances prior to the judgment of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd (supra), we observe that their Lordships of the Chhattisgarh High Court have rendered their judgment on the basis of the judgment of 10 & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 the Hon’ble Supreme Court in the case of Kvaverner John Brown Engg. (India) Pvt Ltd vs ACIT (supra), and Rajesh Jhaveri Stock Broker Pvt Ltd (supra). However, in the case of Kvaverner John Brown Engg. (India) Pvt Ltd vs ACIT (supra), the only issue before the Hon’ble Court was whether u/s 143(1)(a) of the Act could be resorted to, for making the disallowance, when there were conflicting judgment on the interpretation of Section 80O of the Act. In that case, the Hon’ble Supreme Court had not settled the issue as has been done in respect of EPF/ESI by the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd (supra). It is also observed that the judgment in the case of Rajesh Jhaveri Stock Broker Pvt Ltd was delivered in the year 2008 and was rendered in the context of provisions of Section 143(1)(a) of the Act as it stood them. The Ld. CIT(A) has pointed out in his order, that the provisions of Section 143(1)(a) of the Act have undergone a change due to amendment made by the Finance Act, 2016. Therefore, the said judgment in the case of Rajesh Jhaveri Stock Broker Pvt Ltd (supra), having considered the provisions of Section 143(1)(a) of the Act as they stood earlier, would not hold good for adjustment made to the income of the assessee u/s 143(1)(a) of the Act after 01.04.2016. It is further, observed that contrary to the decision of the Hon’ble Chhattisgarh High Court in the aforesaid case, the Hon’ble Bombay High Court in the matter of Rohhan Korgaonkar vs DCIT 2024) 159 taxmann.com 321 (Bom) has held that after the decision of the Hon’ble Supreme Court in Checkmate Services Pvt Ltd (supra), it is of no relevance as to whether the disallowance has been made u/s 143(3) of the Act or u/s 143(1) of the Act.
15. It is also pertinent to note that the Allahabad Bench of ITAT in the case of SBW Udyog Ltd vs DCIT, Circle-1, in which one of us was the author, has considered this issue of disallowance for late payment of Employee’s Contribution to Welfare Fund and decided the issue as under: - “ 11.With regard to the reliance placed on the orders of the ITAT Raipur Bench by the ld. AR, we are inclined to agree with the ld. Sr. DR that an order of the Hon’ble Supreme Court clarifies the law as it has always stood. We observe that section 36(1)(va) was always on the statute, its language was clear and unambiguous and any debate on the issue was only due to the fact that certain Courts and Tribunals had held that the non-obstante clause under section 43B would also 11 & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 apply employees contribution to Provident Fund. The Hon’ble Supreme Court, vide its order in Checkmate Services (P.) Ltd. vs. CIT (supra), has in fact clarified the law as it always stood and removed that controversy. Therefore we are unable to appreciate the view of the Raipur Bench that before the decision of the Supreme Court, since the matter was debatable , it could not be taken up under section 143(1). In our view, once the Supreme Court has clarified the law as it always stood, any previous debate on the matter therein before, can only be held to be on an incorrect appreciation of the law and that cannot oust the jurisdiction of the assessing officer under section 143(1).The issue has been well summed up by the Ranchi Bench of the Tribunal in the case of Nepal Chandra Dey Vs ACIT (2023) 152 Taxmann.com 221(Ranchi-Trib) wherein our “ld brothers have held, “It has been held time and again that law declared by a court will have retrospective effect, if not otherwise stated to be so specifically. It is also a well settled proposition that whenever, a previous decision is overruled by a larger bench of the Supreme Court , the previous decision is completely wiped out and article 141 will have no application to the decision which has already been overruled and the court would have to decide the cases according to the law laid down by the latest decision of the Hon’ble supreme Court and not by the decision which has been expressly overruled. The above reasoning stems from the principle that when a court decides a matter, it is not as if it is making any new law but it is as it is only restating what the law has always been. The Reliance in this respect can be placed on the decision of the Hon Supreme Court in the case of Ramdas Bhikaji Chaudhari vs Sadanand (1980)1 SCC 550 and on the recent decision of the Hon’ble Supreme Court in the case of Manoj Parihar v State of Jammu and Kashmir, (SLP(c ) no 11039 of 2022 dated 27-06-202;P.V.George vs State of Kerala (2007)3 SCC 557; Asst CIT vs Saurashtra Kutch stock exchange Ltd( 2008) 173 Taxman 322/305 ITR 227(SC)/14 SCC 171, wherein the Hon Supreme Court has held that the judges do not make law , they only discover and find the correct law . Even where an earlier decision of the court operates for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. In view of the above stated legal position, the law declared by the Supreme Court will be retrospectively applicable and it will be treated that the earlier decisions of different High Courts favouring the assessee would be of no benefit to the assessee at this stage as the said decisions of the High Court are treated to be never existed or to say are wiped out by the aforesaid decision of the Hon’ble Supreme Court”.
12. For this reason, we hold that the reliance placed by the Ld AR on the earlier decision of the Hon Allahabad High Court in the case of Shagun Foundry (supra), will not help his case. We further notice that the decision of the Hon Raipur Bench in Satpal Singh Sandhu, was based on two cases rendered earlier by the Mumbai Bench of the Tribunal in the case of Kalpesh Synthetics (P) ltd vs DCIT( 2022)137 taxmann.com 475 and in the case of PR.Packaging services Ltd vs ACIT(2023)148 taxmann.com153 . We observe that the decision in the case of Kalpesh Synthetics (supra) was predicated on the fact that when there was a decision of the jurisdictional High Court that was in favour of the assessee , then the provisions of 143(1) which stated that adjustments could be made if disallowances were indicated in the audit report, could not prevail over the law laid down by the court and therefore the Bench had read down the provisions of section 143(1) accordingly and granted relief to the assessee . However , now that the cited decision of the Hon High Court has been overruled by the Hon’ble Supreme Court in Checkmate Services (p) Ltd (supra), the said judgment would not help the assessee because the indicated disallowance in the audit report is in alignment with the law as laid down by the Apex Court. With regard to the decision rendered by the Mumbai Tribunal in PR Packaging (supra), we note that the Hon Ranchi 12 & 243/LKW/2022 M/s Pramod Telecom Pvt. Ltd. A.Ys. 2018-19 & 2020-21 Bench in the case of Nepal Chandra Dey(supra), has pointed out that there is a prescribed form for submitting the audit report and the auditor is supposed to furnish the information as per the prescribed columns of form 3CD. They have noted that under clause 20B of the prescribed form, the auditor is supposed to furnish information regarding nature of fund, sum receipts from employee, due date of payment and actual date of payment to the authorities. This information itself indicates the allowability or dis-allowability of an item while processing a return. The Auditor is not required to specifically mention what disallowance or what amount of disallowance is to be made under 36(1)(va) in the prescribed form and therefore, “ indicated in the audit report” means that when some information in the audit report is suggestive of a disallowance , which has not been taken into account by the assessee in computing his total income in the return, then there is no bar to the adjustment on this account while processing the return of income and since notice has to be given before adjustment , the principles of natural justice are also adhered to. Hence in that case, the Ranchi Bench has upheld the adjustment under section 143(1).A similar view of the matter has been taken by the Indore Bench of the Tribunal in the case of Prashanti Engineering Works (P) Ltd vs ADIT (2023)149 taxmann.com 488 Indore. Finally, we observe that while deciding the case of Rohan Korgaonkar(2024) 159 taxmann.co,321(Bombay) , the Bombay High Court, after considering the case of PR Packaging(supra),effectively overruled the same, holding that after the decision of the Hon Supreme Court in Checkmate Services(P) Ltd, it is of no relevance whether the disallowance has been made under section 143(3) or under section 143(1). Therefore, in view of the aforesaid, we hold that once the legal position had been made clear in the case of Checkmate Services (P)Ltd (supra) and the disallowance had been indicated by the information in the audit report, the Assessing Officer was well within his rights to make the disallowance, while processing the return under section 143(1)(a).”
16. Accordingly, following the decision of the Co-ordinate Bench on the matter, the additional ground raised by the learned counsel is also dismissed. for A.Y. 2020-21, raises identical issues to raise in the aforesaid appeal on the issue of disallowance of late contributions on account of ESIC/EPF, therefore, the order rendered above, in the matter in ITA. No. 242/LKW/2022. for the A.Y. 2018-19 is partly allowed while A.Y. 2020-21 is dismissed. Order pronounced on 19 .08.2025 in the Open Court. Sd/- Sd/- [KUL BHARAT] [NIKHIL CHOUDHARY] VICE PRESIDENT ACCOUNTANT MEMBER DATED: 19/08/2025 13