Loading judgment…
Facts
The assessee challenged the CIT(A)'s order for AY 2020-21, where an employee's contribution of Rs. 7,69,000/- to ESI/PF was disallowed by the A.O./CPC due to delayed payment. The assessee argued that the payment was made before the due date under Section 139(1) and that Explanation 2 to Section 36(1)(va) r.w.s. 43B was prospective from AY 2022-23. The CIT(A) dismissed the appeal as time-barred by almost three years, without the assessee filing a condonation petition.
Held
The Tribunal noted that the CIT(A) dismissed the appeal solely on delay without considering merits. Applying principles of natural justice, it directed the CIT(A) to provide a final opportunity to the assessee to file a condonation petition under Section 249(3). The CIT(A) must first decide on the delay condonation and, if condoned, then address the merits, specifically considering the Supreme Court's decision in *Checkmate Services* and the timeliness of the deposits according to statutes.
Key Issues
1. Whether the CIT(A) erred in dismissing an appeal as time-barred without providing an opportunity for condonation of delay under Section 249(3). 2. Whether employee's contributions to ESI/PF, if deposited beyond the statutory due date but before the return filing due date under Section 139(1), should be disallowed for AY 2020-21, considering the prospective application of Explanation 2 to Section 36(1)(va) r.w.s. 43B.
Sections Cited
154(2)(B), 154(7), 154(8), 155, 18685, 139(1), 36(1)(va), 43B, 249(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM
The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, dated 14.11.2025 for the assessment year 2020-21 as per the following grounds of appeal:
1. THAT SECTION 154(2)(B) SAYS AS UNDER-shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee 69[or by the deductor] 70 [or by the collector), and where the authority concerned is 71[the Joint Commissioner (Appeals) or] the 72[*] 73[Commissioner (Appeals)), by the 74[Assessing] Officer also. SECTION 154 (7) -Save as otherwise provided in section 155 or sub-section (4) of section 18685 no amendment under this section shall be made after the expiry of four years 86[ from the end of the financial year in which the order87 sought to be amended was passed.] SECTION 154(8)-88[(8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee 89(or by the deductor] 90[or by the collector] on or after the 1st day of June, 2001 tο an income-tax authority referred to in sub-section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,- (a) making the amendment; or (b) refusing to allow the claim.]
2. RECTIFICATION OF MISTAKE Law subsequently interpreted by Supreme Court - A mistake arising as a result of subsequent interpretation of law by the Supreme Court would constitute 'a mistake apparent from the records' and rectificatory action under section 154 would be in order. Therefore, where an assessee moves an application under section 154 pointing out that in the light of a later decision of the Supreme Court pronouncing the correct legal position, a mistake has occurred in any of the completed assessments in his case, the application shall be acted upon, provided the same has been filed within time and is otherwise in order.- Circular: No. 68, dated 17-11- 1971. Action by Assessing Officers- Income-tax Officers are authorised to take action under section 154, or to admit or dispose of on merits applications under section 154 filed by assessees seeking relief, for cancelling such protective assessments as have become redundant by waiving, if necessary, the time limit fixed under sub-section (7) of section 154.-Circular: No. 71, dated 20-12-1971. In all the cases where a valid application under clause (b) of sub-section (2) of section 154 had been filed by the assessee within the statutory time limit but was not disposed of by the authority concerned within the time specified under sub- section (7) of section 154, it may be disposed of by that authority even after the expiry of the statutory time limit, on merits and in accordance with law, Circular: No. 73, dated 7- 1-1972.
In view of the above fact the rectification application order not passed with in six months from my application and view of circular no. 68 dated 17/11/1971. My application will be accepted rupees 7,69,000/- be deleted.”
At the time of hearing, none appeared for the assessee and no adjournment petition has been filed. The matter was heard after recording the submissions of the Ld. Sr. DR and on a careful perusal of the materials/documents available on record.
3. In this case, the A.O/CPC had made an adjustment while adding employee’s contribution towards ESI, PF etc. for delayed payment of such contribution as deemed income in the hands of the assessee. It was contended by the assessee that the assessee had paid the employee’s contribution of Rs.7,69,000/- before the due date as defined u/s. 139(1) of the Income Tax Act, 1961 (for short ‘the Act’), hence, the said amount was wrongly disallowed. It was further contended by the assessee that the amendment in Section 36(va) Explanation 1 and Explanation 2 amendment was from 01.04.2021 effective from A.Y.2022-23, hence, Explanation 2 is prospective amendment to provisions of Section 36(1)(va) r.w.s. 43B of the Act vide Finance Act, 2021 by inserting Explanation 2 was prospective in nature and was applicable only from 01.04.2021 and hence, not applicable in the case of the assessee for A.Y.2020-21 relying on the decision of Pr. CIT Vs. TV Today Network Ltd. (2022) 141 Taxmann.com 275/289 Taxman 132 (Delhi). It was contended by the assessee that the order of the AO/CPC passed u/s.143(1) of the Act without giving any hearing notice was bad in law.
When the matter reached at the first appellate stage, it was asked to the assessee that why the addition should not be sustained in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178. However, before going into the merits of the matter, it was noted by the Ld. CIT(Appeals)/NFAC that the appeal before it was time barred by almost 3 years even after giving full benefit of COVID relaxation period and that the assessee has not filed any condonation petition in terms with Section 249(3) of the Act. The Ld. CIT(Appeals)/NFAC, therefore, had dismissed the appeal in limine on the ground of delay itself.
It was submitted by the Ld. Sr. DR that the matter may be restored to the file of the Ld. CIT(Appeals)/NFAC providing final opportunity to the assessee to file reasons for condonation of the said delay and the Ld. CIT(Appeals)/NFAC shall consider the merits in the said condonation petition and first decide the delay aspect.
I have carefully considered the documents on record and submission of the Ld. Sr. DR. In this case, as admitted by the assessee himself that the employee’s contribution to the relevant labour laws fund i.e. ESI, PF etc. has been done within the due date as defined u/s. 139(1) of the Act, but the A.O/CPC has noted that the deposits were done in delayed manner considering the days mentioned in the relevant statute and thus, the addition was made in the hands of the assessee. It is further noted that before the Ld. CIT(Appeals)/NFAC, the appeal was time barred by almost 3 years, for which, no condonation petition has been filed by the assessee. The principles of natural justice demands that one final opportunity should be provided to the assessee to furnish reasons for such condonation of delay in terms with Section 249(3) of the Act before the Ld. CIT(Appeals)/NFAC and the said authority shall accordingly consider merits of those submissions and first decide regarding condonation of delay. If only delay is condoned then the Ld. CIT(Appeals)/NFAC shall travel to the merits of the matter and at that point of time, if it is found that the facts and circumstances in the case of the assessee is directly hit by the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. v. CIT [supra], in such scenario, the addition sustains. On the other hand, if it is found that deposits of the employee’s contribution were made in accordance with days prescribed in the relevant statutes, in such case, the said addition has to be deleted.
As per the above observations, the grounds of appeal raised by the assessee stands allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in open court on 12th day of December, 2025.