NEERAJ DADHICH,JAIPUR vs. ADIT, CPC, BANGALORE

Per Dr. M. L. Meena, AM:

The captioned appeal has been filed by the assessee against the

order dated of the ld. CIT, Appeal/ADDL/JCIT(A)-1, Chennai (hereinafter referred to as “the JCIT(A)” dated 08.01.2024 which is arising out of the Order dated 13.01.2020 passed u/s 143(1) of the Income Tax Act, 1961 (in

2 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC

short “the Act”) by the ADIT, Centralized Processing Centre, Bengaluru (in

short “The AO, CPC”) in respect of Assessment Year: 2018-19.

“1. Ld. CIT(A) erred in confirming the disallowance made by the A.O without appreciating the fact that the adjustment made by AO/CPC is not permissible u/s 143(1). 2. Ld. CIT(A) erred in confirming disallowance of Rs.22,22,399/- made by the A.O invoking Sec.36(1)(va), on account of delayed payment of employees contribution to Provident Fund & ESIC. The disallowance made by the A.O and sustained by the Ld. CIT(A) is arbitrary, baseless and not justified. 3. The appellant reserves the right to amend, modify or add any of the ground/s of appeal.”

dated 29.09.2024 which reads as under:

“Whether prior to the judgment of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd. Vs. CIT (supra), the assessee's claim for deduction of delayed deposit of employees share of contributions towards ESI/PF, an issue which was debatable at the relevant point of time, could have been disallowed by the A.O u/s. 143(1)(a) of the Act.”

appellant explained that the assesse met with an accident on 15.02.2024

and fractured his jaw with dislocation of hip bone. Consequently, he was

confined to bed rest for the period of four months and could not

3 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC communicate with the Authorized Representative. The ld. AR explained

that owing to such medical exigency, the filing of appeal was slipped out of

the appellant mind and even the earlier AR failed to remind filing of the

appeal. Consequently, the assessee has engaged the present counsel Sh.

Rajendra Sisodia Advocate to file the appeal before the Tribunal. In

support, he filed an affidavit stating therein the facts illustrating the reasons

for the delay in filing the appeal with a request to condone the delay in filing

the appeal. The Ld. DR has no objection to the request of the Appellant in

view of the medical exigencies. Accordingly, the delay is hereby condoned

and appeal is admitted on merits.

additional ground of appeal pertains to the disallowance of Rs.22,22,399/-

made by the A.O. u/s Sec.36(1)(va) of the Act, on account of delayed

payment of employees contribution to Provident Fund & ESI, a debatable

issue at the relevant point of time, which could not be disallowed by the

A.O u/s. 143(1)(a) of the Act.

decision of the ld. JCIT(A) in confirming the disallowance made by the AO

u/s 143(1) by invoking section 36(1)(va) on account of delayed payment of

4 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC employees contribution to PF & ESI contributions. The ld. AR has

contended that the said disallowance has been made by the AO and

sustained by the ld. JCIT(A) in arbitrary manner which is not justified. He

contended that the prima facie adjustment made by the CPC by way of

disallowance on account of late deposit of employee’s contribution of PF

and ESI amounting to Rs.22,22,399/- was not permissible within the ambit

of 143(1) and such adjustment is illegal and unsustainable. In support he

placed reliance on the following judgement:

411 (HC).

that the appellant’s case is squarely covered in favour of revenue by the

decision rendered by the Hon’ble Apex court in the case of Checkmate

Services (P.) Ltd. v. Commissioner of Income Tax [2022] 448 ITR 518 (SC)

as rightly relied by the ld. JCIT(A). He pleaded that JCIT(A)’s order may be

sustained.

5 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC 8. We have heard the rival contention, perused the material on record

impugned order, the written submission and case law cited before us.

Admittedly, the assessee failed to deposit the employees contributions to

PF and ESI to the employee’s account for the relevant assessment year

before the due date under the PF and ESI. In the present case, the order

passed by the AO and the Ld. JCIT(A), disallowing by way of an

adjustment under section 143(1) r.w.s. 36(1)(va) of the IT act, in respect of

delayed remittance of employees contribution to Provident fund (PF) and

Employee’s State Insurance(ESI) for the assessment year 2018 -19. The

Ld. JCIT(A) relying upon the decision of the honourable Supreme Court in

the case of “Checkmate Services (P.) Ltd. v. Commissioner of Income

Tax”, [2022] 448 ITR 518 (SC) held that such delayed deposit, no

adjustment or deduction could be claimed. The relevant para of the

judgement reads as under:

"54. 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

6 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC 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 sucht amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under section 43B 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.”

case of Roshan Korgaonkar v. Deputy Commissioner of Income Tax [2024]

159 taxmann.com 321 (Bombay), following the has followed the decision of

honourable Apex Court delivered in the case of Checkmate Services (P)

Ltd. (supra), dealt with the issue of disallowance of late payment of PF and

ESI contributions in processing of Income Tax Return under section

143(1)(a) by the AO/CPC. The relevant para of the judgement are

reproduced here under:

7 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC 7. Though the decision cited was that of the ITAT, we have

considered the same. In our judgment, however, the fact that the

assessment order in Checkmate Services (P) Ltd. (Supra) was

incidentally under section 143(3) and assessment order in the present

case is under section 143(1)(a) The IT act, makes no difference to

the principle involved in this matter. The ITAT decision does not

discuss why this circumstance constitute a distinguishing feature

based on which the ratio of Checkmate Services (P) Ltd. (supra)

would be departed from

be claimed or adjustments can be made under section 141(1)(a)(iv)

read with section 36(1)(va) only when the employer deposits the

contributions in the employees accounts on or before the due date

prescribed under the employees Provident fund/employees state

Insurance Act. In this case, admittedly, the contributions were

deposited in the employee’s accounts beyond the due date. The

circumstance that the assessment order was made under section

143(1)(a) of the act can make no difference.”

8 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC 10. In the present case, admittedly, the PF and ESI contributions were

deposited in the employee’s accounts beyond the due date. The Ld. AR

failed to rebut the contention of the Ld. DR or furnish contrary judgement to

the latest judgment of Apex Court delivered in the case of Checkmate

Services (P) Ltd. (supra) and Bombay High Court in case of Roshan

Korgaonkar (supra) on the issue. In view of that matter, we find no infirmity

or perversity in the order of the ld. JCIT(A) to the facts on record.

According, we find no merit in the contention of the Ld. AR with regards to

the grounds and additional grounds of appeal and same would be liable to

be rejected.

Court (supra), the disallowance of Rs. of Rs.22,22,399/- by way of an

adjustment under section 143(1) r.w.s. 36(1)(va) of the IT act, confirmed by

the Ld. JCIT(A) is sustained.

Order pronounced in the open court on 10.10.2024

Sd/- Sd/- (Sandeep Gosain) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to:

9 ITA No. 1142/JPR/2024 Neeraj Dadhich v. ADIT, CPC

(1) The Appellant: (2) The Respondent: (3) The ld. CIT (4) The ld. CIT(A) (5) The DR, I.T.A.T., Jaipur (6) Guard File

By Order, Asstt. Registrar

Date Initial 1. Draft dictated on 01.10.24 Sr.PS/PS 2. Draft placed before author 01.10.24 Sr.PS/PS 3. Draft proposed & placed before the JM/AM Second Member 4. Draft discussed/approved by JM/AM Second Member 5. Approved Draft comes to the Sr. Sr.PS/PS P.S./P.S. 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order