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Facts
The assessee's appeals for AY 2019-20 & 2020-21 were filed with a significant delay. The delay was attributed to a paradigm shift in Section 43B due to a Supreme Court judgment and subsequent High Court/ITAT decisions regarding the deductibility of belatedly paid ESI and EPF contributions. The assessee sought condonation of delay.
Held
The Tribunal condoned the delay, finding reasonable cause. The appeals were remitted to the AO to examine the challans and dates of payment to allow deduction as per law, considering whether a show-cause notice was issued by CPC before making the adjustment. The AO was also to verify if the assessee's facts align with cited favorable precedents.
Key Issues
Whether belated payments of ESI and EPF contributions are deductible, and if the disallowance by CPC/AO/CIT(A) was justified, particularly regarding procedural compliance and interpretation of relevant legal provisions and case laws.
Sections Cited
Sec 43B, Sec 36(1)(va), Sec 2(24)(x), Sec 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH AT KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER BENCH: These appeals filed by the Assessee are against the separate orders of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AYs 2019-20 & 2020- 21 dated 09.03.2023. Since the issues are common, both the appeals were heard together and are being decided vide this common order for the sake of convenience and brevity.
1 The Registry has informed that both the appeals are barred by limitation by 866 days. However, the assessee has filed a petition for condonation of delay for 851 days explaining the reasons as under: “That the honest and bonafide reason of said substantial delays for filing this second appeal before the Hon’ble ITAT rest on most convincing issue of a paradigm shift in the mandate of section 43B under which all employers in the PAN INDIA used to get deduction of belated payment of statutory ESI and EPF payments before the due date of filing of the original return u/s ITA No(s).: 2618 & 2619/KOL/2025 AY(s): 2019-20 & 2020-21 Kaushal Kumar. 139(1) in view of Hon’ble Apex court judgment in the Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-1 which for million of assesses shut the door of opportunity to claim deduction u/s 43B for belated EPF and ESI payments accordingly. So similarly present appellant was in bonafide belief of not getting any relief from the higher judicial forum on said addition/disallowance. However that legal perspective took an interesting turn due to passing of Honble ITAT, MUMBAI Bench judgment in the MASTER POLISHER wherein Honble ITAT MUMBAI taking full consideration of the said legal development allowed the belated EPF, ESI payments on different legal angle and Honble juri ictional ITAT following the said order allowed belated EPF, ESI payments in PAYEL ENTERPRISE case in 2024. However due to long delay of reporting of said two decisions in the journals lower consultant of the appellant and even the Ld. CIT(A) passing the impugned appellate order were in completely dark about such important legal development and for that reason appellant accepted the said first appellate order as sacrosanct. But after reporting of said two important judgments in the different tax journals lower consultant of your appellant came to know about such important legal development post of CKECKMATE judgment but was unable to obtain any contact link with the LD. Advocate who was A/R of the appellant in the said juri ictional case and was at last able to obtain it in the fag end of OCTOBER, 2025 and his whereabouts. In view of afore delineated facts and circumstance appellant is hopeful that Hon’ble Bench will appreciate the genuineness and bonafide reason of said delay orbited with the continuous judicial legal development thus instilling confidence on your appellant mind to take the issue to the higher judicial forum for ends of justice. In view of settled law of Honble Apex court in COLLECTOR OF LAND ACQUISITION VS MST, KARJI, your appellant prays before the Honble Bench to condone this unintended delay beyond the control of your appellant in the interest of substantive justice. Appellant will file affidavit along with the paper book to be filed for this end.”
2 After perusing the petition seeking condonation of delay, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication.
The Assessee is in appeal before the Tribunal raising the following grounds of appeal: ITA No(s).: 2618 & 2619/KOL/2025 AY(s): 2019-20 & 2020-21 Kaushal Kumar. I. ITA No. 2618/KOL/2025; AY 2019-20:
“1. For that confirmation of disallowance of ESI and EPF expenses of Rs.22,89,19 by the Ld.CIT(A) NFAC of the intimation order passed by CPC u/s 143(1) for belated payments is bad in law and unjust.
For that most of the payments were made within due date and only few were beyond the due date with little delay and that too for PAN INDIA technical glitches in the EPF official portal and several Honble ITAT Benches granted relief for the said selfsame cause.
For that the very intimation order of CPC U/S 143(1) is invalid in law for the reasons of firstly non sending any notice to the appellant inviting objection against the proposed disallowance per mandate of section 143(1)(a) by passing a simple template order, secondly CPC can effect such disallowance only if appellant auditor suggested the disallowance for delayed payments under section 143(1)(a)(iv) which is not in case of appellant. Therefore CPC patently violated two explicit and clear mandates of section 143(1)(a).
For that both the A.O, CPC and CIT(A) failed to appreciate the settled legal position that the said belated payments of EPF and ESIC are allowable on the strength of section 38 of PF Scheme, 1952 whereby the employer is required to deposit the EPF/ESI contribution of the assessee within 15 days of the close of every month and that 'every month' is the month of payment of salary or wages due to the employee and not the month for which salary or wages are due to the employees. If the month is taken as the month of payment of the wages to the employees then the all the belated payments are within the due dates. Appellant case is fully covered by the recent order of juri ictional ITAT post of Honble Apex court judgment in Checkmate
For that appellant may modify the grounds.” II. ITA No. 2619/KOL/2025; AY 2020-21: “1 For that confirmation of disallowance of ESI and EPF expenses of Rs.22,89,19 by the Ld.CIT(A) NFAC of the intimation order passed by CPC u/s 143(1) for belated payments is bad in law and unjust. 2 For that most of the payments were made within due date and only few were beyond the due date with little delay and that too for PAN INDIA technical glitches in the EPF official portal and several Honble ITAT Benches granted relief for the said selfsame cause. ITA No(s).: 2618 & 2619/KOL/2025 AY(s): 2019-20 & 2020-21 Kaushal Kumar. 3 For that the very intimation order of CPC U/S 143(1) is invalid in law for the reasons of firstly non sending any notice to the appellant inviting objection against the proposed disallowance per mandate of section 143(1)(a) by passing a simple template order, secondly CPC can effect such disallowance only if appellant auditor suggested the disallowance for delayed payments under section 143(1)(a) (iv) which is not in case of appellant. Therefore CPC patently violated two explicit and clear mandates of section 143(1)(a). 4 For that both the A.O, CPC and CIT(A) failed to appreciate the settled legal position that the said belated payments of EPF and ESIC are allowable on the strength of section 38 of PF Scheme, 1952 whereby the employer is required to deposit the EPF/ESI contribution of the assessee within 15 days of the close of every month and that 'every month' is the month of payment of salary or wages due to the employee and not the month for which salary or wages are due to the employees. If the month is taken as the month of payment of the wages to the employees then the all the belated payments are within the due dates. Appellant case is fully covered by the recent order of juri ictional ITAT post of Honble Apex court judgment in Checkmate 6 For that appellant may modify the grounds.”
We shall take up ITA No. 2618/KOL/2025 for AY 2019-20 as the lead case. Brief facts of the case are that the assessee had filed its return of income for the AY 2019-20 which was processed u/s 143(1) of the Act in which employees’ contribution of ESIC/EPF of ₹22,89,194/- was disallowed by the CPC, Bengaluru u/s 36(1)(va) of the Act as the same was deposited after due dates of the respective legislation. Aggrieved with the intimation, the assessee filed an appeal before the Ld. CIT(A) who has considered the facts of the case, the amendment to section 43B of the Act and has relied upon the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P.) Ltd. vs. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC)/[2023] 290 Taxman 19 (SC)/[2022] 448 ITR 518 (SC)[12-10-2022] and has ITA No(s).: 2618 & 2619/KOL/2025 AY(s): 2019-20 & 2020-21 Kaushal Kumar. dismissed the appeal of the assessee. The relevant extract from the appeal order is as under:
“5. 7. The Hon'ble Supreme Court in its recent decision in Civil Appeal No.2833 of 2016 in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-1 dated 13.10.2022 overruled all the verdicts given by the other Hon'ble Courts and held that the employees' contributions are deductible if paid before the statutory due date. The Hon'ble Supreme Court ruling effectively endorses the amendments made by Finance Act, 2021 with effect from tax year 2020-21 in line with the minority view and makes it clarificatory in nature having retrospective effect to all past tax years. The relevant extract of the judgement reproduce as under: - "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 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 some leeway 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 438 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. ITA No(s).: 2618 & 2619/KOL/2025 AY(s): 2019-20 & 2020-21 Kaushal Kumar.
In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.”
8 Therefore, under the provisions of section 2(24)(x) of the Act, the contributions from employees are, firstly treated as deemed income and subject to tax in the hand of the employer. It is further stated under section 36(1) (va) of the Act that the employer will not get deduction unless the employer credits such contribution to the employee's account in the relevant fund within the due date applicable for the relevant fund. In the instant case, the appellant stated that he had not claimed any deduction in respect of contribution of EPF/ESI collected from the employees. But as per the provisions, the collected contributions firstly treated as deemed income and then, the assessee may claim the deductions only in respect of contributions which were deposited before the due date of respective legislation. In the instant case, as per the Tax Audit Report, the appellant collected the EPF/ESI contributions of Rs.22,89,194/- and all of these contributions of Rs.22,89,194/- were deposited after due date of respective legislation. It is clear that if the appellant claims the deduction of employee's contribution, he will get no deduction as all the contributions were deposited after the due date and his income would has been increased by Rs.22,89,194/-. The claiming of deductions in the return of income is voluntary act of the appellant but contributions collected from the employees is obligatory in nature and is considered as deemed income as per provisions of the section 2(24)(x) of the Act. Therefore, in view of the above discussions, the AO is directed to make addition of Rs.22,89,194/- in appellant's total income and re-compute the income after allowing deductions as claimed in the return of income, if any. Thus, the grounds of appeal No.1&2 raised by the appellant are dismissed.
In the result, the appeal is dismissed.”
Aggrieved with the order of the Ld. CIT(A), the Assessee has filed the appeal before the Tribunal.
Rival contentions were heard and the submissions made have been examined. It was stated before us that the order in Checkmate ITA No(s).: 2618 & 2619/KOL/2025 AY(s): 2019-20 & 2020-21 Kaushal Kumar. No. 1203/KOL/2024 order dated 25.11.2024 which is at page 54 of the paper book filed and also the decision in the case of Kamakshi Jute Industries Ltd. vs. Deputy Commissioner of Income-tax, CPC [2024] 162 taxmann.com 196 (Kolkata - Trib.)[22-02-2024] which appears at page 49 of the paper book and also to para 6.2 at page 52 of the paper book. For AY 2019-20, the show cause notice was issued on 18.02.2020 and the intimation was issued on 14.07.2020. 6. We have considered the facts of the case, the submissions made and the documents filed. Considering the decision in Payel Enterprise (supra) and Kamakshi Jute Industries Ltd. (supra), in the interest of justice and fair play we hereby set aside the order of the Ld. CIT(A) and remand the matter to the Ld. AO who shall examine the challans and the date of payment and shall allow the deduction as per lawas the assessee contends that no show cause notice was issued prior to making the adjustment and as per the details filed before us, the payments are appearing as belated. The assessee shall file the details of the challans and also establish before the Ld. AO that the facts of the case of the assessee are similar to the facts of the case of Payal Enterprise (supra). The Ld. AO shall also examine whether the CPC had issued in the show cause notice prior to making adjustment and take necessary action as per law. Hence, Ground Nos. 3 and 4 are allowed for statistical purposes, while other grounds of appeal being general in nature do not require any separate adjudication.
Since the facts in the appeal in ITA No. 2619/KOL/2025 for AY 2020-21 are identical, our findings in AY 2019-20 shall mutatis mutandis also apply in the appeal for AY 2020-21. The grounds taken ITA No(s).: 2618 & 2619/KOL/2025 AY(s): 2019-20 & 2020-21 Kaushal Kumar. by the assessee in this appeal are also partly allowed for statistical purposes.
In the result, both the appeals filed by the Assessee are partly allowed for statistical purposes. Order pronounced in the open Court on 24th February, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 24.02.2026 Bidhan (Sr. P.S.) ITA No(s).: 2618 & 2619/KOL/2025 AY(s): 2019-20 & 2020-21 Kaushal Kumar. Copy of the order forwarded to:
Kaushal Kumar, Ray Saheb Building, G.T. Road, Panjabi More, Searsol Rajbari, Raniganj, Burdwan, West Bengal, 713358. 2. ITO, Ward-3(1), Asansol.
CIT(A)-NFAC, Delhi.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order