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Facts
The assessee filed an appeal against the order of the CIT(A) regarding a disallowance made for delayed deposit of employees' contribution to Provident Fund. This disallowance was made by the CPC under section 143(1) of the Act. The assessee contended that the issue was debatable and should not have been processed under section 143(1).
Held
The Tribunal noted that the disallowance was made under section 143(1) for a highly debatable issue. The Tribunal referred to the judgment of the Hon'ble Chhattisgarh High Court in Raj Kumar Bothra's case, which held that such disallowances for debatable issues should not be made under section 143(1) and the Assessing Officer should have resorted to section 143(3).
Key Issues
Whether the disallowance for delayed deposit of employee's contribution to PF/ESI made under section 143(1) is valid when the issue is debatable.
Sections Cited
143(1), 36(1)(va), 2(24)(x), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA BENCH: AGRA
(ASSESSMENT YEAR: 2018-19) Dy. CIT, Govind Agarwal, Circle-2(1), 15, Tagor Nagar, Vs Gwalior (M.P.) University Road, . Gwalior-474011, (M.P.) PAN-ABVPA0161A (Appellant) (Respondent) Assessee by None Department by Shri Shailendra Srivastava, Sr. DR Date of Hearing 19/05/2025 Date of Pronouncement 29/05/2025 O R D E R [ PER MANISH AGARWAL, AM: This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(E), in short] dated 20.09.2021, in Appeal No. CIT(A), Gwalior/10058/2019-20 for Assessment Year 2018-19 arising out of the order passed u/s 143(1) dated 26.04.2019.
The sole issue involved in appeal with regard to the disallowance of Rs.4,98,569/- made on account of delayed deposit of Employees Contribution to Provident Fund made by way of prima facie adjustment u/s 143(1) of the Act.
Govind Agarwal vs. DCIT 3. From the perusal of the orders of the lower authorities, it is seen that the CPC while processing the return of the assessee u/s 143(1) in terms of impugned order dated 26.04.2019 has made disallowance of delayed payment of employees’s contribution towards PF/ESI by invoking the provisions of section 36(1)(va) read with section 2(24)(x) which stood confirmed by the Ld. CIT(A) by placing reliance on various judgements of Hon’ble High Courts.
During the course of hearing, none was present on behalf of the assessee and Ld. Sr. DR on behalf of the Revenue submitted that issue has now been settled by the judgments of Hon’ble Supreme Court in the case of Checkmate Services Private Limited vs. CIT-1, reported 65 SCC 451 and, he therefore, prayed for confirmation of the order of Ld. CIT(A).
On the other hand, though the assessee was not represented during the course of hearing, however, written submissions filed by the AR of the assessee dated 16.05.2025 wherein the AR of the assessee has placed reliance on the recent judgment of the Hon’ble Chhattisgarh High Court in the case of Raj Kumar Bothra vs. DCIT in TAXC No.56 of 2025 wherein the Hon’ble High Court vide its order dated 08.05.2025 has held that the judgment of Hon’ble Supreme Court in the case of Checkmate Service Pvt. Ltd. (supra) was delivered on 12.10.2022 wherein the Hon’ble Supreme Court has settled the controversy with respect to the delayed payment of employees contribution towards PF/ESI. However, prior to the judgment of Checkmate Service Pvt. Ltd. (supra) there were contrary decision Govind Agarwal vs. DCIT available on the issues and the issue of allowability of delayed payment of employees contributions towards PF/ESI was highly debatable issue and, therefore, the Hon’ble High Court was of the view that the same could not be done in the processing of return u/s 143(1) and for making such disallowance, the AO should resorted to the provisions of section 143(3) of the Act.
From the perusal of the impugned order passed u/s 143(1) of the Act by the CPC, it is seen that the said order is passed on 26.04.2019 and further order of Ld. CIT(A) is dated 28.09.2021 and therefore, when both the orders of lower authorities were before the judgment of Hon’ble Supreme Court in the case of Checkmate Service Pvt. Ltd. (supra) which was not delivered at that point of time, where the issue was highly debatable and disallowance u/s 143(1) could not be made on such issue. The Hon’ble Chhattisgarh High Court in the case of Raj Kumar Bothra (supra) while dealing this issue has held as under: “15. In the instant case, the ITAT has committed a grave legal error by relying upon the decision rendered by this Court in M/s. BPS Infrastructure (supra), wherein, this Court has dismissed the appeal preferred by the assessee as barred by limitation summarily without formulating any substantial question of law and as such the substantial question of law formulated herein in this appeal was neither involved, formulated and answered in M/s. BPS Infrastructure (supra). in this appeal was neither involved, formulated and answered in M/s. BPS Infrastructure (supra).
Furthermore, the submission of the Revenue that the judgment passed in Checkmate Services Pvt. Ltd. (supra) would have retrospective effect, as held in Ramesh Prasad Verma (supra), PV George (supra) and in R.R. Kishore's case (supra), is no longer a dispute and well settled as the law declared by a Court will have a retrospective effect if not otherwise stated to be so specifically. However, the retrospective effect of the decision rendered by the Supreme Court in Checkmate Services Pvt. Ltd. (supra) is