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Facts
The assessee filed its return of income for AY 2018-19. The CPC made a prima facie adjustment under Section 143(1) of the Income Tax Act, 1961, disallowing Rs. 1,71,37,588/- for belated remittance of ESI & PF contributions paid after the statutory due date. The CIT(A) confirmed this action, leading the assessee to appeal before the Tribunal.
Held
The Tribunal dismissed the assessee's appeal, holding that the CPC's prima facie adjustment was justified. It relied on the binding precedents of the jurisdictional Kerala High Court (CIT v. Merchem Ltd. and Popular Vehicles & Services Pvt. Ltd. v. CIT), which consistently held that belated remittance of employees' ESI & PF contributions, even if deposited before the due date for filing the return of income under Section 139(1), is not allowable as a deduction.
Key Issues
Whether the CPC was justified in making a prima facie adjustment under Section 143(1) by disallowing belated remittance of employees' ESI & PF contributions, which were paid after the statutory due date but before the due date for filing the return of income under Section 139(1).
Sections Cited
143(1), 139(1)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 25.07.2022 for Assessment Year (AY) 2018-19.
Brief facts of the case are that the appellant is an individual engaged in business. The return of income for AY 2018-19 was filed on 28.02.2019 declaring income of Rs. 79,57,560/-. The said return of income was processed u/s. 143(1) of the Income Tax Act, 1961 (the Act) vide intimation dated 08.01.2020. While doing so, Sreejith Velappan Radhamony the CPC had made prima facie adjustment u/s. 143(1) of the Act by disallowing belated remittance of ESI & PF contributions paid after the due date under the respective statutes of Rs. 1,71,37,588/-.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The learned counsel for the assessee submits that in view of catena of decisions of several Hon'ble High Courts, the delayed remittance of ESI & PF contributions of employees’ within the due date for filing the return of income was allowable as deduction.
On the other hand, the learned Sr. DR submits that in view of the decision of the Hon'ble Supreme Court Checkmate Services Pvt. Ltd. vs. CIT [2022] 448 ITR 518 (SC) CPC was justified in making prima facie adjustment by disallowing belated remittance of ESI & PF contributions. She further submits that even before the judgement of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. (supra), the Hon'ble Jurisdictional High Court in the case of CIT v. Merchem Ltd. [2015] 378 ITR 443 and Popular Vehicles & Services Pvt. Ltd. v. CIT [2018] 96 Taxmann.com 13 took a view that deposit of employees’ contribution towards ESI & PF beyond the due date stipulated under the respective statutes but deposited before the due date prescribed u/s.
We have heard the rival contentions and perused the material available on record. The solitary issue that arises for our determination is whether the CPC was justified in making prima facie adjustment by disallowing belated remittance of employees’ contribution of ESI & PF paid beyond the due date prescribed under the respective statutes but deposited before the due date prescribed u/s. 139(1) for filing the return of income. The material facts are not in dispute. No doubt, as on the date of processing of the return of income, decision of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. (supra) was not available. However, the Hon'ble Jurisdictional High Court in the case of CIT vs. Merchem Ltd. reported in 378 ITR 443 held that belated remittance of the employees’ contribution towards ESI & PF paid beyond the due date stipulated under the respective statutes but deposited before the due date for filing the return of income is not allowable for deduction. This decision was subsequently followed by the Hon'ble Jurisdictional High Court in the case of Popular Vehicles & Services Pvt. Ltd. v. CIT [2018] 96 Taxmann.com 13. The appellant is situated in the state of Kerala and falls within the jurisdiction of the Hon'ble Kerala High Court. Therefore, the decision of the Hon'ble Jurisdictional High Court is binding on the CPC as well as the appellate authorities. Therefore, it cannot be said that there is any illegality in the prima facie adjustment made by the CPC, as the claim of the assessee is “incorrect claims” within the meaning section 143(1) of the Act. Thus, we do not find any merit in the appeal filed by the assessee.
Order pronounced in the open court on 13th June, 2025.