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Income Tax Appellate Tribunal, JAIPUR BENCHES, ‘’SMC” JAIPUR
ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against the order of the ld. CIT(A) dated 20-10-2022 , National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment years 2019-20 wherein the assessee has raised the following grounds of appeal. ‘’1. The impugned additions/ disallowance made by way of adjustments in the order u/s 143(1) of the Act dated 29-07-2020 are bad in law and on facts of the case, for want of jurisdiction and various reasons and hence the same kindly be deleted.
2. The ld. CIT(A) erred in law as well as on facts of the case in disallowing Rs.13,14,798/- on account of alleged delay in making the payment towards Employee’s 2 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA contribution to PF & ESI before the respective due dates u/e 36(1)(va). The disallowance so made is without jurisdiction and contrary to the provisions of law, hence may kindly be deleted in full.
3. The ld. CIT(A) erred in law as well as on facts of the case in not considering that the expenditure so incurred was wholly and exclusively incurred for the purpose of business fully allowable u/s 37(1) of the Act. The assessee therefore may kindly be held eligible and entitled to get the deduction u/s 37(1) of the Act.
4. The ld. CIT(A) erred in law as well as on facts of the case in charging interest u/s 234A, 234B, 234C & 234D of the Act. The assesse totally denies its liability of charging and withdrawal of such interest. The interest so charged/withdrawn, being contrary to the provisions of law and facts, kindly be deleted in full 2.1 During the course of hearing, the Bench noted that the Ground No. 1 of the assessee is general in nature which does not require any adjudication and the ld. AR of the assessee in his written submission has not taken up this ground for adjudication by the Bench. Hence, the Ground No. 1 is dismissed. 3.1 Apropos Ground Nos. 2& 3 of the assessee, brief facts of the case are that the assessee is engaged in the business of wholesale trading of medicine, construction of building and hostel business. The assessee filed the return of income on 30-09-2019 declaring total income at R.3,68,45,340/-. The return of income was processed u/s 143(1) vide intimation dated 29-07-2020. The AO (CPC) made the disallowance by holding that the employees contribution towards PF/ESI is governed by the provisions of Section 36(1)(va) r.w.s. 2(24(x) of the Act and not by the provisions of Section 43B of the Act. Thus the AO made an addition of Rs.13,14,798/- i.e. Rs.2,21,037/- towards ESI and Rs.10,93,761/- towards EPF.
3 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA On perusal of the assessment record, the AO noticed that during the year the assessee did not deposit the PF/ESI of Rs.13,14,798/- by the due date which is not allowable deduction u/s 36(1)(va) of the Act. 3.2 Aggrieved by the assessment order of the AO, the assessee carried the matter before the ld. CIT(A) who has confirmed the action of the AO taking the recent decision of Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. vs CIT-1 vide Civil Appeal No. 2833 of 2016 dated 12-10-202. 3.3 During the course of hearing, the ld. AR of the assessee filed the written submission countering the decision of the ld.CIT(A) on the late deposit of employees Contribution towards ESI/PF. The relevant part of the written submission is as under:- ‘’1.1 It is not disputed that though the assessee could not deposit the amount of PF and ESI on the due date specified in the related Act, but all the contributions were duly deposited before the due date (as evident from the table given hereunder) of filing of return u/s 139. Hence, the same are fully allowable. The original due date for filing of ROI was 30.10.2019. 1.2 Adjustment beyond the scope of S. 143(1): At the outset it is submitted Ld. AO (CPC, Bangalore) made adjustment while processing return filed by the assessee u/s 143(1) of the Act disallowing the employee's contribution of PF/ESI deposited beyond the date in the relevant law. Under Section 143(1)(a)(iv), it is asserted that only those claims or expenses, which have been identified as disallowable in the audit report but have not been considered while calculating the total income in the tax return, can be adjusted during the processing of the income tax return. The amendment made in S. 143(1)(a)(iv) by the Finance Act, 2021, which added the term increase in income, was effective from April 1, 2021. It is important to note that the processing in question took place on 29 07 2020, and pertains to the A.Y 2019-20. The current addition can be considered an increase in income as per S. 2(24)(s). However, the authority to increase income u/s 143(1)(a)(iv) was granted only from April 1, 2021.
4 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA Consequently, using this clause to adjust the reported income lacks proper jurisdiction. In facts of the present case, the auditor specified details of employee contributions to various funds as mentioned in S. 36(1)(va) under clause 20(b). The auditor provided only the required factual reporting and did not express any opinion concerning disallowance. Furthermore, disallowance cannot be made solely based on reporting in the audit report. Instead, it must be made in accordance with applicable laws and considering the judicial views on the matter. Additionally, it is important to clarify that under clause 20(b), the auditor's responsibility is to report the details of the contributions, rather than the disallowance amount or any late payments made to the respective funds. The Ld. AO (CPC) merely compared the due dates of payment and the actual dates of payment during the processing of the income tax return, and any discrepancy between these dates was presumed to be a disallowance. However, in reality, there is no disallowance, the difference only pertains to the due date and the actual date of payment. Therefore, when no disallowance exists, the provisions of S. 143(1)(iv) of the Actcannot be invoked. 1.3.1 Reliance is placed on recent judgement of Hon'ble ITAT, Delhi Bench in the case of Garg Heart Centre & Nursing Home Private Limited ITA No.1700/Del/2022 wherein it has been held as under: "At the very least, Revenue should have given due consideration to the fact that the issue was highly debatable and controversial. As already discussed earlier, adjustments u/s 143(1) of Income Tax Act by way of intimation u/s 143(1) of Income Tax Act, on debatable and controversial issues, is beyond the scope of section 143(1) of Income Tax Act. Revenue was clearly in error, in making the aforesaid adjustments u/s 143(1) of Income Tax Act on a debatable and controversial issue" 1.3.2. In the judgement of the judgement of Hon'ble ITAT, Mumbai Bench in the case of Kalpesh Synthetics (P.) Ltd. Vs. DCIT, CPC Bengaluru [2022] 137 taxmann.com 475, it was held that: "In the light of this ground reality, an auditee being presumed to have accepted, and concurred with, the audit observations, just because the appointment of auditor is done by the assessee himself, is too unrealistic and incompatible with the very conceptual foundation of independence of an auditor. On the one hand, the position of the auditor is treated so subservient to the assessee that the views expressed by the auditor are treated as a reflection of the stand of the assessee, and, on the other hand, the views of the auditor are treated as so sacrosanct that these views, by themselves, are taken as justification enough for a disallowance under the scheme of the Act. There is no meeting ground in this inherently contradictory approach. Elevating the status of a tax auditor to such a level that when he gives an opinion which is not in harmony with the law laid down by the Hon'ble 5 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA Courts above-as indeed in this case, the law, on the face of it, requires such audit opinion to be implemented by forcing the disallowance under section 143(1), does seem incongruous." 1.3.3 Similarly the Hon'ble ITAT in the case of P.R. Packaging Service vs. ACIT 25(3), Mumbai ITA No. 2376/Mum/2022, addressed a situation identical to that of the assessee company. In this case, additions made with respect to S. 36(1)(va) under S. 143(1) were deleted by the Hon'ble ITAT. Mumbai Bench. The tribunal held that such adjustments during processing were beyond the scope of S. 143(1)(a)(iv). Notably, this decision was rendered by the Hon ble ITAT, Mumbai Bench after the Hon'ble Supreme Court's ruling in Checkmate Services Private Limited (Supra). In light of the above discussion, the adjustment deserves to be deleted and relief may kindly be granted.
Debatable issues are out of scope of prima-facie adjustment: The law is well settled that no prima facie adjustment u/s143(1) is permissible on any issue which is a debatable issue on the day, when an intimation u/s 143(1) is passed irrespective of the nature of issue involved. It is well settled that no adjustment u/s 14311) is permissible on a debatable/controversial issue being beyond its scope as has been repeatedly held in several decisions. In this regard, we place reliance on the cases of ACIT vs. Haryana Telecom Pvt. Ltd. 14 taxman.com 122 (Delhi), George Williamson (Assam) Ltd. vs. CIT &Anr. [2006] 286 ITR 0533 (Gauhati); Tata Yadogawa Ltd. vs. CIT [2011] 335 ITR 0053 (Jharkhand): God Granites vs. Central Board of Direct Taxes &Ors. [1996] 218 ITR 0298 (Karnataka); Swamy Distributors vs. ACIT &Ors. [2003] 180 CTR 0290; 139 Taxman 0310 (Karnatka), CIT vs. Eicher Goodearth Ltd. [2008] 296 ITR 0125 (Delhi); Smt. Shanta Chopra vs. ITO [2004] 271 ITR 0132 (Delhi); Kvaverner John Brown Engg. (India) (P.) Ltd. vs. ACIT, [2008] 305 ITR 0103 (Supreme Court). In the present came the addition had been made by way of injustments, vide intimaticis sound u/s 14301) of tocomeTes Act on dt. 20.07.2020 3. Law of binding precedent: However, at that point of time is undisputed fact on record that this Hon'ble Bench which is the Jurisdictional ITAT, in so many cases had already decided the sue in favour of assessee which was affirmed by several decision of Hon'ble Rajasthan High Court in favour of Assessee Kindly refer CIT vs State Bank of Bikaner Jaipur (2014 265 CTR 471 (Raj CIT vs Jaipur Vidyut VitranNogam limited (2014) 265 CTR 62 (Raj) and many more. Needless to say that the decisions of Hon'ble Rajasthan High Court were binding upon the sub-ardmate officers, with reference to the assessee situated in such jurisdiction. No doubt there were contrary decisions too but then the issue was highly debatable and controversial 6 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA 4. Further, it is also well settled that retrospective amendment cannot be invoked to make addition by way of adjustment and intimation u/s 143(1) of Income Tax Act. This view was taken by the Hon'ble Supreme Court in the case of CIT vs. Hindustan Electro Graphites Ltd. [2000] 243 ITR 0048 (SC), wherein the view of Hon ble Kolkata High Court in of Modern Fibotex India Ltd. & Aur. Vs DCIT &Ors. [1995] 212 ITR 0496 (Calcutta) was approved. In Modern Fibotex India Ltd it was held as under: "Assessment--Prima facie adjustment-Validity-Assessee had itself, in its return, drawn the attention of the IT authorities to the basis upon which the cash compensatory support had not been included as income and had clearly offered to include the same in any assessment if the basis is shown to exist- Additionally, the change in the law by amendment of s. 28 took place several months after the return was filed by the assessee-The jurisdiction under s 143(1)(a) is a summary one, whereas s. 143(2) precedes an assessment under s. 143(3) or what has been described as the scrutiny or regular assessment-Revenue's submission that the issuance of an intimation is compulsory is incorrect-To accept the submission would be to read the provisions of s. 143(1)(a) in a manner not warranted by the language-The- context in which the word shall has been used in s. 143(2) has to be read in the background of the proviso to the section and that is where there is no scope for any adjustments in terms of the proviso, there would be no scope for sending any intimation-Once having found the return not immediately determinable or summarily, the Assessing Officer cannot and this u and determine the matter unders 143/1 uthout there being any change in law or fact between the issuance of the notice under 1492) and the adjustment under s. 143/10-pugned adjustment and intimation pere ultra vires the section and must accordingly be set aside Same view was taken by the Hon'ble Madhya Pradesh High Court in the case of CIT vs. Satish Traders [2001] 247 ITR 0119 (Madhya Pradesh).
Similarly, the decision in the case of Checkmate (2022) 329 CTR (SC) 1 was passed on 12.10.2022 Le, much later to the subjected intimation dt. 29.07.2020 hence, on that day the binding law was not against the assessee. Therefore, the department (AO/ CPC has erred in making impugned adjustment u/s 143(1) of the Act, because the Apes Court decision was not available before them. It is not the case that the adjudication of the appeal against scrutiny assessment order, is still open, before ITAT after the availability of the Apex Court decision and the situation prevailing on the date of intimation has to be considered which is a provision similar to S:154 of the Act 6. It is further submitted that the adjustments to be made u/s 143(1)(a) have been held to be pari-materia to the provisions of s. 154 not only by the Hon'ble Courts but also (in the cases of SRF Charitable Trust Vs. Union of India (1991) 100 CTR (Del) 160 and KhatauJunkarItd. Vs. K.S Pathania, Dy.CIT (1992) 102 CTR (Bom) 194 referred and reproduced in Modern Fibotex and also so opined by CBDT in its binding in Circular No. 581 dated 28.09.1990 reported in [1990] 186 ITR (St.) 2. Therefore, the law laid down u/s 154 of the Act has also been followed in the context of S.143(1)(a) of the Act that no adjustment is permissible beyond the scope of the adjustment provided in that provision 7 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA because no power has been specifically conferred upon the AO/ CPC to make such adjustment. This is a jurisdictional aspect. If the AO cannot enter into jurisdiction itself legal positions available on merit, becomes irrelevant. To take an example if the proceedings u/s 147/148 is barred by limitation u/s 149 the AO cannot enter into S. 147/ S. 148 or S.148A proceedings what to talk of applying the decision of the Hon'ble Apex Court on merit. Similar situation is with 8.143(1)(a) 7. The decisions cited by the Revenue completely distinguishable: In Savleen Kaur Vs. ITO (2023) 147 taxmann.com 402 (Delhi - Trib.) [09:01 2023] cited by ld. DR although has taken a contrary view in the context of S.143(1)(a) r/w s. 36(1)(va) and has applied Checkmate (supra) but at the same time, there is no elaborate discussion on the aspect that debatable/controversial issue are completely beyond the scope of s 143(1)(a) this was a categorically held in the case Kvaverner John Brown Engg. (India) (P) Ltd. vs. ACIT, [2008) 305 ITR 0103 (SC) (para 6) as also in the case of CIT vs. Hindustan Electro Graphites Ltd. [2000] 243 ITR 0048 (SC) which has affirmed the decision in the case of Modern Fibotex India Ltd. &Anr. Vs. DCIT &Ors. [1995] 212 ITR 0496 (Calcutta). However, in the case of Savleen Kaur (supra) there is absolute no reference to this settled legal position hence, Savleen Kaur is not a Good Law so also the other decisions of Hon'ble Tribunals u/s 143(1)(a) r/w s. 36(1)(va) being cite by the Revenue. Hence, the impugned adjustments made by the AO u/s 143(1) of IT Act were unjust bad in law and deserves to be deleted. GOA-3 Expenditure wholly and exclusively Incurred for the purpose of business fully allowable u/s 37(1) of the Act Submission: Alternatively, if the deduction claimed is not a allowed u/s 36(1)(va) r/w 2(24) (10), the same has be considered u/s 37 (1) of the Act in as much as intention of the legislature is not to completely disallow the entire amount forever or for never ever time to come, which is against the very concept of real income The gross receipt cannot be taxed unless the expenditure incurred by assessee businessmen to earn the same, are not allowed merely on technicalities. The default, if any, made by the assesse (if assumed so) in deposit of the PF/ESI therefore the due dates as prescribed under the laws, has already been made punishable under relevant Act, where under there are suitable provisions for imposition of penalty and compensating the government by the levy of interest Therefore, in addition thereto, making disallowance under Income Tax Act and creating demand cannot be the legislative intent. The above provisions of 36(1)(val nowhere prohibits the allowability u/s 37(1), which is a residuary category. Even in the case of Checkmate (Supra) there is no provision if the assessee is allowed u/s 37(1) of the Act. This contention is duly supported by the case of Trupti Enterprises (P) Ltd. Vs. DCIT (2022) 36 NYPTTJ 1280 (Cuttack). In view of the submission, that the adjustment so made lacks proper jurisdiction and intimation u/s 143(1) deserves to be quashed.’’ 8 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA 3.4 On the other hand, the ld. DR supported the order of the ld. CIT(A) and also relied upon following judgements. 1. M/s. Jyoti Automobiles Pvt. Ltd vs Asstt. Director of Income Tax, CPC (ITA No. 354JP/2022 dated 22-12-2022. 2. Pr. CIT vs Strides Arcolab Ltd. [2023] 147 taxmann.com 202 (SC)
3.5 We have heard both the parties and perused the materials available on record including the case laws cited by both the parties. In this case, it is noted that the AO disallowed the amount of Rs.13,14,798/- u/s 36(1)(va) of the Act on the ground that payments of employees contribution towards EPF and PF had not been made on or before the due date by the employer as per respective Acts which has been confirmed by the ld. CIT(A). It is not imperative to repeat the facts of the case and the case laws cited by both the parties. The Bench has observed that the recently the Hon’ble Supreme Court has opined in the case of Checkmate Services Pvt. Ltd. vs CIT-1, 143 Taxmann.com 178 (SC)/Civil Appeal No. 2833 of 2016 held that the provision of Section 43B of the Act shall not apply to employee’s contribution to PF/ESI and the due date specified u/s 36(1)(va) of the Act shall apply for determination of deductibility of employee’s contribution to PF/ESI. The relevant portion of the Judgement of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs CIT-1 (supra) is reproduced as under:-
9 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA ‘’53. The distinction between an employer’s contribution which is its primary liability under law – in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers’ income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B.
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 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.
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.’’ Similar issue has also been decided by the Hon’ble Supreme Court in the case of PCIT vs Strides Arcolab Ltd. vide its order dated 29-11-2022 (Civil Appeal 10 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA No.9009 of 2021 [2023] 147 taxmann.com 202 SC)]. The relevant head note is reproduced as under:- Section 36(1)(va), read with section 2(24) and 43B of the Income Tax Act – Employee’s contributions (PF/ESI) – High Court by impugned order held that Tribunal was correct in deleting disallowance made under section 36(1)(va) being employee’s contribution to Provident Fund and ESI even though same were not deposited in respective fund within stipulated time – Apex Court in case of Checkmate Services (P) Ltd. vs CIT [2022] 143 taxmann.com 178/ [2023] 290 Taxman 19/[2022] 448 ITR 518/2022 SCC Online Sc 1423, held that non obstante clause under section 43B could not apply in case of employee’s contribution which were deducted from their income and was not part of assessee-employer’s income and, thus, said clause would not absolve assessee-employer from its liability to deposit employee’s contribution on or before due date as a condition for deduction. – Whether in view of the said judgement of Supreme Court, impugned order of High Court was to be set aside – Held , yes [Para 4) [In favour of Revenue] For the sake of convenience and brevity of the case, the order passed by the Supreme Court in the case of PCIT vs Strides Arcolab Ltd. (supra) is also reproduced as under:- ‘’1.Leave granted.
2. As per the Office record, Service is complete on the sole respondent but none has entered appearance on behalf of the Respondnet Assessee.
Mr. Balbir Sharma, learned Additional Solicitor General appearing for the appellant submits that the issue involved in this appeal is squarely answered in favour of the Revenue by a Three-Judge Bench of this Court vide judgement dated 12-10-2022 in Checkmate Services (P) Ltd. vs CIT [2022] 143 taxmann.com 178/[2023] 290 Taxman 19/[2022] 448 ITR 518/2022 SCC Online SC 1423 4. In view of the above, the impunged judgement dated 22-03-2019 passed by the High Court of Judicature at Bombay is set aside and the appeal is allowed in terms of the cited decision.’’ It may be mentioned that similar issue has also been decided by the ITAT Delhi Bench in favour of the Revenue in the case of Salveen Kaur Vs Income Tax Office vide its order darted 9th January 2023 (in IT Appeal Nos. 2197,2249, 2250 and 11 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA 2293 (Delhi) of 2022 – A.Y. 2017-18 to 2019-20 [2023] 147 taxmann.co. 402 (Delhi-Trib) by observing as under:- 10. In our understanding, the aforementioned binding observations of the Hon'ble Supreme Court cannot be brushed aside simply because the decision was rendered in the context where the assessment was framed u/s 143(3) and not u/s 143(1)(a) of the Act. In our considered opinion, the decision of the Hon'ble Supreme Court is in the context of allowability of deposit of PF/ESI after due date specified in the relevant Act.
The Hon'ble Supreme Court has categorically held that the employees’ contribution deposited after respective due date cannot be allowed as deduction, and, therefore, it would be incorrect to say that the decision of the Hon'ble Supreme Court is applicable only in the case of an assessment farmed u/s 143(3) of the Act. In our considered view, the ratio decidendi is equally applicable for the intimation framed u/s 143(1) of the Act.
Now coming to the challenge that the impugned adjustment is beyond the powers of the CPC Bengaluru u/s 143(1) of the Act is also not correct. In light of the aforementioned decision of the Hon'ble Supreme Court [supra], as mentioned elsewhere, it cannot be stated that the impugned adjustment u/s 143(1) of the Act is beyond the powers of the CPC, Bengaluru.
The provisions of section 143(1)(a) read as under:- “143(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of Section143, such return shall be processed in the following manner, namely;- (a) The total income or loss shall be computed after making the following adjustments, namely;- (i) Any arithmetical error in the return; (ii) An incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) Disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) Disallowance of expenditure [or increase in income]indicated in the audit report but not taken into account in computing the total income in the return; (v) Disallowance of deduction claimed under [section 10AA or under any of the provisions of Chapter VI-A under the heading “C.-Deductions in respect of certain income”, if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or 12 SHRI LAXMAN NAINANI VS ACIT, CENTRAL CIRCLE- KOTA (vi) Addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return;” 13.1 A perusal of the afore-stated provisions show that at every stage in sub-section (1) of the Act, the return submitted by the assessee forms the foundation, with respect to which, if any of the inconsistencies referred to in various sub-clauses are found,appropriate adjustments are to be made. It is an open secret that hardly 3 to 5% of the returns are selected for scrutiny assessment, out of which, more than 50% are because of AIR Information under CASS and the Assessing Officer cannot go beyond the reasons for scrutiny selection and such cases are called Limited Scrutiny cases and only the remaining returns are taken up for complete scrutiny u/s 143(3) of the Act. 13.2 Meaning thereby, that exercise of power under sub-section (2) of section 143 of the Act leading to the passing of an order under sub-section (3) thereof, is to be undertaken where it is considered necessary or expedient to ensure that the assessee has not understated income or has not computed excessive loss, or has not under paid the tax in any manner.
If any narrow interpretation is given to the decisions of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd [supra], it would not only defeat the very purpose of the enactment of the provisions of section 143(1) of the Act but also defeat the very purpose of the Legislators and the decision of the Hon'ble Supreme Court would be made redundant because there would be discrimination and chaos, in as much as, those returns which are processed by the CPC would go free even if the employees’ contribution is deposited after the due date and in some cases the employer may not even deposit the employees’ contribution and those whose returns have been scrutinized and assessed u/s 143(3) of the Act would have to face the disallowance.
This can neither be the intention of the Legislators nor the decision of the Hon'ble Supreme Court has to be interpreted in such a way so as to create such discrimination amongst the tax payers. Such interpretation amounts to creation of class [tax payer] within the class [tax payer] meaning thereby that those tax payers who are assessed u/s 143(3) of the Act would have to face disallowance because of the delay in deposit of contribution and those tax payers who have been processed and intimated u/s 143(1) of the Act would go scot- free even if there is delay in deposit of contribution and even if they do not deposit the contribution.
We are of the considered view that the ratio decidendi of the Hon'ble Supreme Court is equally applicable to the intimation u/s 143(1) of the Act and, therefore, the decision of the co-ordinate bench relied upon by the assessee is distinguishable. Therefore, respectfully following the binding decision of the Hon'ble Supreme Court [supra], all the three appeals of the assessee are dismissed and that of the revenue is allow 17. In the result, all the three appeals of the assessee in ITA No. 249/DEL/2022, 2250/DEL/2022 and 2197/DEL/2022 are dismissed whereas the appeal of the Revenue in ITA No. 2293/DEL/2022 is allowed.’’