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Facts
The assessee, a proprietorship firm, filed its income tax return for AY 2020-21. The Centralized Processing Center (CPC) processed the return under Section 143(1) and subsequently issued a rectification order under Section 154, making an adjustment/disallowance of Rs. 21,82,243/- for the late deposit of employee contributions to ESI and PF. The assessee contended that this issue was debatable, citing various High Court judgments allowing deduction if deposited before the due date of filing the return, but the CIT(A) dismissed the appeal relying on the Supreme Court's decision.
Held
The Tribunal held that the issue of belated deposit of employee contributions to PF and ESI is no longer debatable, being settled by the Supreme Court's decision in *Checkmate Services Pvt. Ltd.* However, for a specific payment due on 15/07/2019, which the assessee claimed was paid on the same day, the matter is restored to the Assessing Officer for verification. All other disallowances for belatedly paid PF and ESI contributions were confirmed.
Key Issues
Whether the disallowance of employee contributions to PF and ESI for belated deposit, adjusted under Section 143(1), is valid, especially in light of the Supreme Court's ruling, and whether the issue is debatable.
Sections Cited
143(1), 143(3), 154, 36(1)(va), 43B
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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN & SHRI RATNESH NANDAN SAHAY
Assessee represented by None, written submission filed Department represented by Shri Khubchand T. Pandya, Sr.DR Date of hearing 08/10/2025 Date of pronouncement 08/10/2025 O R D E R PER: BENCH 1. This is an appeal filed by the assessee against the order of the ld. Addl./JCIT,(A)-1, Visakhapatnam in appeal No. NFAC/2019-20/10213074 dated 31/05/2024 for the A.Y. 2020-21.
None represented on behalf of the assessee and Shri Khubchand T. Pandya, ld. Sr.DR represented on behalf of the revenue.
The appeal has been posted for hearing on multiple occasions and no one has represented this appeal. Consequently, the appeal of the assessee is being adjudicated ex parte the assessee. The assessee has, however, filed a written submission which reads as follows: "1. That the assessee is a Proprietorship firm derives Income from Manpower Supply Business. The return was filed declaring total income at Rs 3,91,260/-. However, the assessment was Originally completed at an Neeraj Kumar Sinha Vs ITO Income of Rs 25,73,500/- vide order dated 28-10-2021 passed U/s 143(3) by Centralized Processing Center of the Act and the Rectification Order completed at an Income of Rs 25,51,090/-vide order dated 17-10-2022 passed U/s 154 by Centralized Processing Center of the Act. 1.1 That the first dispute in this case is with regard to addition of Rs. 21,82,243/- on account of Any sum received from employees as contribution to any Provident Fund or superannuation fund or any fund set up under ESI Act or any other fund for the welfare of employees to the extent not credited to the employees account on or before the due date [36(1)(va)] of the appellant. 1.2 That CPC processed the same u/s 143(1) on 28.10.2021 at Rs. 25,73,500/- making adjustment of Rs. 21,82,243/-being late deposit of employee's contribution towards ESI and PF within the due date specified in the respective statute. 1.3 That after filing of rectification at CPC, vide Rectification Order u/s 154 dated 17.10.2022, the Return was processed on the same income as per earlier processing u/s 143(1) dated 28.10.2021 and repeated the aforesaid adjustment of Rs. 21,82,243/-, without giving a reasoned order and the grounds on which the claim of the appellant was not accepted. 1.4 That it is started and submitted that Ld. AO erred in not appreciating the judgment and order of various high courts and Tribunals and even dismissal of SLPs and moreover decision of jurisdictional High Court of Jharkhand in the case of M/S Southern Construction Comp vs. Income Tax Officer Ward 3(1), Tax Appeal No. 56 of 2010 Dt. Of Order 10 August, 2016 (Jhar) -and-Jamshedpur Utilities and Services company Ltd (JUSCO), Jamshedpur vs. joint commissioner of Income Tax, Range-2, Jamshedpur Tax Appeal No. 42 of 2010 Dt. Of order 16.09.2010 (Jhar) wherein Hon'ble jurisdictional High Court has held that the employees contribution to EPF and ESIC are allowable deduction if deposited before the due date of filing of the return. The same stands accepted by the department, as no further appeal has been preferred before Hon'ble Apex Court. 1.5 That it is a settled proposition of law the decision of the jurisdictional High Court shall be binding on the authorities/ tribunal courts situated in the territorial jurisdiction of the High Court. However Even if there are conflicting decision of jurisdictional High Court and non- jurisdictional high Neeraj Kumar Sinha Vs ITO courts than also the Jurisdictional High Court decision shall be binding on the quasi judicial authorities/courts/Tribunal situated within the state. 1.6 That, moreover, in this respect it is stated and submitted that Ld. AO erred in not appreciating that the statutory provision of section 143(1)(a)(ii) provides that the adjustment of an incorrect claim can be made if such incorrect claim is apparent from any information in the return. The issue which is being disputed and for which two opinions can be formed relying upon the various decisions of various High Courts, the majority of which are in favour of the appellant including the decision of Hon'ble jurisdictional High Court. As such the present issue cannot be considered as a mistake apparent from the records which can be adjustment 143(1). There is no scope for adjustment u/s 143(1) in respect of debatable issues. 1.7 That however Ld. CIT(A) dismissed the appeal relying upon the Apex court in the case of M/s Checkmate Services Pvt. Ltd. Vs. CIT dated 12.10.2022. As per regards the ground of the appellant regarding debatable issue he has held that as per revenue it was not a debatable issue. 1.8 For that while processing the return under Section 143(1) of the Act the Centralized Processing Centre (CPC) Bangalore disallowed the employees' contribution to ESI and PF and the ld. CIT (Appeals) also sustained the disallowance relying on various case laws referred to in the order of the ld. CIT (Appeals). 1.9 For that the amendment brought in by the Finance Act, 2021 in Sections 36(1)(va) and 43B of the Act by way of inserting Explanation 2 and Explanation 5 respectively are clarificatory in nature and, therefore, have retrospective applicability in sustaining the disallowance made under Section 36(1)(va) of the Act in respect of employees' contribution made to ESI and PF. 1.10 For that the amendments are prospective and are applicable for Assessment Years 2021-22. That the contributions to PF and ESI were remitted to Govt. account before due dates for filing return of income by the assessee and. therefore, the issue is squarely covered by the decision of the jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. 321 ITR 508. 1.11 For that The Hon'ble Supreme Court in the case of M.M. Aqua Technologies Ltd. Vs. CIT Civil appeal Nos. 4742-4743 of 2021 dated 11.08.2021 held Neeraj Kumar Sinha Vs ITO that retrospective provision in a Tax Act which is for the removal of doubts cannot be presumed to be retrospective even where such language is used if it alters or changes the law as it earlier stood. The Hon'ble Supreme Court also observed that this was the position as held by the apex court in the case of Sedco Forex International Drill. Ine Vs. CIT (2005) 12 SCC 717. The Amendments were made to Section 36 and Section 43B by insertion of Explanations 2 and 5 respectively. In the 3 1.T.A. No. 257/Del/2022 Explanations inserted it is clarified that for the removal of doubts the provisions of these sections were amended. Therefore, the ratio of the decision of the Hon'ble Supreme Court in the case of M.M. Aqua Technologies Ltd. Vs. CIT (supra) squarely applies and the insertion of Explanation 2 and 5 in the provisions of sections 36 and 43B respectively cannot be held to be retrospective. 1.12 For that recently the Tribunal in a batch of appeals in the cases of Raj Kumar Vs. ITO CPC Bangaluru in and other appeals by order dated 28.02.2022 considering various decisions rendered by various High Courts and the Tribunals held that the amendment brought in by Finance Act, 2021 is effective from 1.04.2021 and no disallowance is called for, on belated payment of employees' contribution to ESI and PF in case the assessee deposited the said contribution before due date for filing of return of income under Income Tax Act. 1.13 For that it has been held that the assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the date of the Audit. 1.14 For that, the Hon'ble Court has held that the employers contribution is an allowable deduction, if paid before the due date answering the question of law framed. The Hon'ble Court went further and held that as far as the amounts constituting deductions from employee's salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns. 1.15 For that the order of the Hon'ble Jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. 321 ITR 508 vide order dated 23.12.2009 held that if the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific Neeraj Kumar Sinha Vs ITO provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Hon'ble Supreme Court in the case of Vinay Cement Ltd. Relevant Case Laws 1. Value Momentum Software Services Private Limited v. Deputy Commissioner of Income (2017)
2. M/s Hebe Infrastructure Private Limited v. Central Circle, New Delhi (2022) ITA No. 257/Del/2022 3. CIT Vs. AIMIL Ltd. 321 ITR 508 vide order dated 23.12.2009 In view of the facts and circumstances explained above, it is prayed that your honor the demand raised may kindly be cancelled /withdrawn or suitably reduced, and any relief deemed fit in the Interest of justice may be granted."
It was submitted by the ld. Sr.DR that the issue was in regard to the disallowances of the PF and ESI. It was a submission that the issue is now squarely covered by the decision of the Hon'ble Supreme Court in the case of Checkmate Services Private Limited Vs CIT reported in (2022) 143 taxmann.com 178 (SC).
A perusal of the written submission filed by the assessee shows that the assessee's claim is that the return has been processed and an intimation under Section 143(1) has been issued and what is adjustable in the intimation under Section 143(1) are not debatable issue adjustments. It is submitted in the written submission that the issue of PF and ESI are debatable issues.
We have considered the submission. A perusal of the facts in the present case clearly shows that in regard to the issue of PF and ESI, the issue is no more debatable in so far as the Hon'ble Supreme Court has categorically laid down the law in the decision of Checkmate Service Private Limited referred to supra.