M/S. BAKSHI SECURITY AND PERSONNEL SERVICES P. LTD ,MUMBAI vs. INCOME TAX OFFICER 12(1)(1), MUMBAI

(5) On the facts and circumstances and in law, it is humbly prayed that the alleged addition may be deleted & oblige.

(6) Your Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal.

(II) Additional ground of Appeal arising out of the record -

Without prejudice to the above Ground (I), above, the Appellant humbly states that they are purely legal in nature and arising on the facts and record. It is humbly stated that they were not raised out of inadvertence and without any malafide intention to defraud revenue.

On the facts and circumstances and in law, the Appellant craves leave to raise the following Additional Grounds of Appeal.

However, the Appellant humbly prays that the following Additional Grounds may be admitted and adjudicated in the interest of justice & oblige.

(1) On the facts and circumstances & in law, A.O. [CPC] erred in disallowing of Rs.3,07,41,124/- under the provisions of section 36(1)(va) of the Act merely relying on the Tax Audit Report Clouse 20(b) which mistakenly reported the contribution towards PF & ESIC as "Sum received from employees" whereas the alleged disallowed amount was actually comprised of Employer's Contribution and Employees' contribution towards PF & ESIC.

(2) Your Appellant humbly states that, as per law, the Employer's contribution is legally disallowable if not paid on or before the due date as per the provisions of section 43B and Employees contribution is legally disallowable if not paid on or before the due date as per the provisions of section 36(1)(va) of the Act.

(3) On the facts and circumstances and in law, it is humbly prayed that the alleged disallowance may be decided as per the applicable provisions of section 43B and 36(1)(va) of the Act, respectively & oblige.

(4) Your Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal.”

CIT(A) on the abovementioned grounds.

of the Act. The Ld. AR contended that section 143(1) order would merge automatically with the section 143(3) order though the Ld. AO has not commenced the section 143(3) proceeding on the basis of the income determined by the CPC in the section 143(1) proceeding. The Ld. AR placed his arguments on the additional grounds stating that the CPC/Ld. AO has failed to verify that the disallowance was towards employer’s contribution or employees’ contribution and stated that in the assessee’s own case for the earlier year i.e. A.Y. 2019-20 the Tribunal has set aside this issue to the Ld. AO for verifying whether the PF & ESIC deposited belatedly was for employer’s or employees’ contribution i.e. in accordance with section 43B or section 36(1)(va) of the Act respectively. The Ld. AR prayed for similar direction be granted for the impugned year as well.

the disallowance made u/s 36(1)(va) of the Act by the CPC was only on the basis of the assessee’s return of income, tax audit report etc. and when the assessee has not bifurcated the same there can be no fault with the order of the CPC/AO. The Ld. DR relied on the order of the Ld. CIT(A).

The issue with regard to whether or not section 143(1) order would merge with section 143(3) automatically as alleged by the Ld. AR. It is observed that the provision of section 143(1) of the Act states that where a return has been made u/s 139 of the Act or in response to notice u/s 142(1) of the Act the said return shall be processed determining total income or loss by making adjustment on any arithmetical error, an incorrect claim if any, any inconsistency in the return, disallowance of loss, expenditure, deduction etc. which are only prima-facie adjustments made on the basis of the return of income filed by the assessee. The scrutiny assessment u/s 143(3) of the Act on the other hand is subject to the evidences produced by the assessee as required by the Ld. AO on any issue specified by the Ld. AO, considering which the Ld. AO shall pass a speaking order determining the total income/losses of the assessee on the basis of the evidences. The issue here is whether section 143(1) order would merge with the section 143(3) proceeding is the debatable issue where various decisions have held that the same does not merge automatically and only in circumstances where the issues are common in both 143(1) as well as 143(3), there would be merger and more so when the Ld. AO in the scrutiny assessment commences the proceeding with the income determined by the CPC in the section 143(1) intimation.

Further, we place reliance in the decision of the co-ordinate Bench in the case Innovsource Services Pvt. Ltd. vs DCIT in decided on 29.01.2025 where it was held that only where there are common issues in both the 143(1) intimation order and the 143(3) order, the doctrine of merger would be applicable and not in a case where the issues are different where the co-ordinate Bench had again relied on the decision in the case of Areca Trust vs. CIT(A) (2024) 117 ITR (Trib.) 264 (ITAT – Bang.) which held that the Ld. AO’s action in merely reproducing the figure of income which was mentioned in the intimation order does not tantamount to merger of the orders u/s 143(1) & 143(3) of the Act. We, therefore, decline to accept the contention raised by the assessee on this issue and hereby deem it fit to dismiss grounds No.1 to 4 raised by the assessee.

by the assessee where it is contended that there was a mistake crept in the tax audit report at clause 20(b) of the Act where the disallowance made to the contribution towards PF & ESIC is not merely the employees’ contribution but it also comprises the employer’s contribution which is governed by the provisions of section 43B of the Act. We are conscious of the fact that the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. (supra) is to the extent of delayed payment of employees’ contribution deposited after the due date prescribed under the relevant Acts nevertheless paid before filing of return of income and the same does not relate to the delayed payment of employer’s contribution. Though the assessee has raised this in the nature of additional ground, we hereby admit the same in terms of the proposition laid down by the Hon’ble Supreme Court in the case of National Thermal

6. Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC) which emphasizes that legal ground which does not require any verification can be admitted by the appellate authority and can be adjudicated. In the present appeal, though the factual details are to be verified by the Ld. AO, we are conscious of the fact that in a 143(1) proceeding there is no scope of explaining the details by the assessee nor is there a circumstance where the Ld. AO can call for details in case of any discrepancy in the details furnished by the assessee. For the reason that the assessee should not be remediless, we deem it fit to restore this issue to the Ld. AO for the limited purposes of verifying whether the impugned disallowance pertains to both employer as well as employees’ contribution for which we direct the assessee to furnish all relevant details before the Ld. AO and having considered the fact that the Tribunal in assessee’s own case for earlier year has also remanded this issue to the Ld. AO, we give relief to that extent. We direct the Ld. AO to decide the issue and admit any additional evidences proposed to be filed by the assessee in accordance with law on the merits of the case.

Order pronounced in the open court on 24.02.2026

Sd/- Sd/- (OM PRAKASH KANT) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 24.02.2026 * Kishore, Sr. P.S. 7 Copy of the Order forwarded to:

(Dy./Asstt.Registrar) ITAT, Mumbai