M/S. CHECKMATE SERVICES PVT. LTD.,,VADODARA vs. THE ADIT, CPC, BANGALORE PRESENT JURIDICTION THE DY. CIT, CIRCLE-1(1)(1), , VADODARA

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA RAGHUNATH KAMBLE, JUDICAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 69/Ahd/2023 (िनधा�रण वष� िनधा�रण वष� / Assessment Year : 2019-20) िनधा�रण वष� िनधा�रण वष� M/s. Checkmate ADIT, CPC, बनाम बनाम/ बनाम बनाम Services Pvt. Ltd. Bangalore Vs. G.F 6-9, Amaan Tower, & Suvas Colony, Fatehgunj, Dy.CIT Vadodara, Gujarat, Circle-1(1)(1), Vadodara 390002 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAACC8465A (Appellant) .. (Respondent) Shri M. R. Sahu, AR अपीलाथ� ओर से /Appellant by : ��यथ� क� ओर से/Respondent by : Dr. Darsi Suman Ratnam, CIT. DR 12/07/2024 Date of Hearing Date of Pronouncement 16/07/2024 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi, (in short ‘the CIT(A)’) dated 08.12.2022 for the Assessment Year 2019-20.

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 2 –

income Rs.16,46,54,070/- and with a claim of refund of Rs.7,32,82,770/-. The return was processed by the CPC, Bangalore on 31.03.2021 and an intimation under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was sent electronically by email on 01.04.2021. While processing the return an adjustment of Rs.5,87,43,293/- was made by the CPC on account of delay in deposit of employees’ contribution to PF & ESI as mentioned in the tax audit report filed by the assessee.

“1. That on the facts, and in the circumstances of the case and in law, it is chanted that Intimation issued u's. 143(1) was dated 31/03/2021 here in after referred as intimation, digitally signed by the ADIT.CPC Banagalore (here in after referred as AOI on 01/04/2021 and Email was send on 01/04/2021 thus date of issuance of the intimation was 01/04/2001, accordingly the intimation was issued beyond the statutory time period specified in Proviso 5 to section 143(1) thus the intimation was time barred deserves to be declared as invalid, void ab-initio and bad in law. 2. That on the facts, and in the circumstances of the case and in law, it is objected that the Intimation dated 31/03/2021 is defective due to the following reasons:

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 3 –

(i). That the adjustments are made in the intimation without mentioning the specific limb of the section 143(1)(a) which was applied for making such adjustments accordingly Principles of Natural Justice is offended; (ii). That the intimation was issued reflecting incorrect E filling Acknowledgement No: 36600484020620 ignoring the correct E filling Acknowledgement No: 184360611300919 for the return of income filed u/s.. 139 on 30/09/2019. Assessee-Appellant prays before the Hon'ble Tribunal to treat the intimation dated 31/03/2021 as defective for making adjustments against the assessee. 3. That on the facts, and in the circumstances of the case and in law, it is objected that the intimation dated 31/03/2021 was issued by making adjustments without following the mandatory procedures as under: (1). Neither any intimation nor any show cause notice was issued as specified in Proviso 1 to Section 143(1) before making such adjustments; (i) Adjustments are made without passing a judicious order and not communicating the reasons of adjustments thus mandatory procedure given in Proviso 2 to section 143(1) not followed. Assessee-Appellant prays before the Hon'ble Tribunal to delete the adjustments made in the intimation dated 31/03/2021 because neither the mandatory procedures nor the Principles of Natural Justice was followed before making such adjustments GROUNDS OF APPEAL RELATING TO MERITS AND FACTS OF THE CASE: 4. That on the facts, and in the circumstances of the case and in law, the CIT(A)-NEAC Delhi [ here in after referred as CIT(A)) erred in sustaining the addition of Rs.5.87.43.2931- made us.36(1)(va) in the intimation without appreciating the fact that processing of return of Income us. 143(1)(a) is not an 'assessment’ and scope of adjustment in the intimation is limited thus Hon'ble Supreme Court decision in the case of "Checkmate Services Pvt Ltd Vs. CIT [2022] 143 taxmann.com 278 (SC)" held in the contest where assessment was framed u/s.. 143(3) may not be applicable to

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 4 –

the adjustments made in the intimation accordingly the disallowance deserves to be deleted in full. GROUNDS OF APPEAL RELATING TO MERITS AND FACTS OF THE CASE NOT RAISED BEFORE CIT(A)-NFAC,DELHI: 5. That on the facts, and in the circumstances of the case and in law, the CIT(A) erred in sustaining the addition of Rs. 5,87,43,291/- made u/s 36(1)(va) in the intimation without appreciating the fact that employees contribution to PF and ESI are treated as 'Deemed Income' u/s.2(24)(x) in the books of accounts and not being deposited within the due dates specified under the relevant acts as given in Explanation-1 to section 36(1)(va) deduction u/s 36(1)(va) was not claimed thus on its subsequent accounting in the books of account including deposit with additional liability of interest and penalty as specified under the relevant Acts such expenditure changes its colour and is allowable in the hands of the assessee employer under the following heads: (1). As normal business expenditure under section 37 of the LT Act, 1961; (ii). As business expenditure incurred on account of 'Business and Commercial Expediency" eligible for deduction under section 37 of the 1.T Act, 1961. Assessee-Appellant prays before the Hon'ble Tribunal to held the expenditure incurred by the Assessee-Employer on depositing the employees contribution due to 'business and commercial expediency as normal business expenditure deserves to allowed under section 37 of the 1.T Act, 1961. 6. That on the facts, and in the circumstances of the case and in law, the AO erred in making disallowance of Rs.43,00,440/- claimed in the return of income under section 43B on payment basis without appreciating the fact that inadvertently in the Tax Audit Report the amount disallowed in earlier previous years under section 43B and paid during the current financial year was not reflected by the Tax Auditor, thus assessee prays for allowing the amount of Rs.43,00,440/- under section 43B on payment basis during the current financial year. 7. That the above grounds of appeal are independent and prejudice to each other and the appellant craves leave to add, alter,

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 5 –

withdraw or replace any ground or grounds of appeal before or at the hearing of the appeal.”

“1. That having regard to the facts of the case, provisions of law and judicial propositions, the Ld. CIT (A), NFAC, Delhi [here in after referred as CIT(A)] erred in confirming the adjustment of Rs.5,87,43,293/- u/s.36(1)(va) r.w.s 2(24)(x) on account of delay in deposit of employees contribution to PF and ESI made in the intimation u/s.143(1),dated 31/03/2021 by applying the Hon'ble Supreme Court decision in the case of Checkmate Services Pvt Ltd Vs. CIT [2022] 143 taxmann.com 278 (SC)' without appreciating the fact that the provisions of section 143(1) was neither raised nor discussed by the Supreme Court, accordingly the said decision held in the context of section 143(3) may not be directly applicable fully to the facts of the present case, thus to that extent the order of the CIT(A) deserves to be set-aside. 2. That on the facts, and in the circumstances of the case and in law, the CIT(A) erred in confirming the adjustment of Rs.5,87,43,293/- u/s.36(1)(va) r.w.s 2(24(x) on account of delayed deposit of employees contribution to PF and ESI in the intimation u/s.143(1) dated 31/03/2021 without appreciating the fact that for the return of income filed on 30/09/2019 for the A.Y.2019-20 the due date for issuing the intimation was on or before 31/03/2021 as specified in Proviso 5 to section 143(1) and in the present case the intimation was digitally signed on 01/04/2021 and was issued to the assessee by Email on 01/04/2021, accordingly the Intimation was issued beyond the time period and barred by limitation, thus deserves to be held as invalid, void ab-initio and bad in law and to be annulled.

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 6 –

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 7 –

“1. That on the facts, and in the circumstances of the case and in law293/ CIT(A) erred in confirming adjustment of Rs.5,87,43,293/- u/s.36(1)(va) r.w.s 2(24(x) on account of delayed deposit of employees contribution to PF and ESI made in the intimation u/s.143(1) dated 31/03/2021, digitally signed on 01/04/2021 without appreciating the fact that employees contribution to PF and EST are recovered from the employees on disbursement of salary and wages, accordingly due date for deposit of employees contribution to PF and ESI that is within 15 days of the following month has to be counted from the end of the month during which salary and wages was actually disbursed among the employees, thus assessee claims that employees contribution to PF and ESI were deposited on or before 15th of the following month in which salary and wages were actually disbursed, accordingly prays for relief of the adjustment of Rs.5,87,43,293/- made in the intimation in full. 2. That on the facts, and in the circumstances of the case and in law, the CIT(A) erred confirming adjustment in of Rs.5,87,43,293/- u/s.36(1)(va) r.w.s 2(24)(x) on account of delayed deposit of employees contribution to PF and ESI made in the intimation u/s.143(1) dated 31/03/2021, digitally signed on 01/04/2021without appreciating the fact employees contribution to PF and ESI are treated as 'Deemed Income' u/s.2(24)(x)' in the books of accounts on its receipt/recovery and not being deposited within the due dates specified under the relevant Acts as given in Explanation-1 to section 36(1) (va), accordingly deduction u/s.36(1)(va) was not claimed thus on its subsequent deposit after the due dates specified under the relevant Acts incurring additional expenses of interest and penalty as specified under the relevant Acts, such late deposit of employees contribution to PF and ESI including interest and penalty are normal business expenditure may kindly be allowed u/s.37 under the principle of "business and commercial expediency". 3. That the above grounds of appeal are Independent and prejudice to each other and the appellant craves leave to add, alter, withdraw, revise or replace any ground or grounds of appeal before or at the hearing of the appeal.”

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 8 –

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 9 –

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 10 –

Co. Ltd. vs. CIT, [1998] (97 Taxman 358) (SC) that the Tribunal can consider the question of law only where it is necessary to consider that question in order to correctly assess the tax liability of an assessee. He submitted that the legal questions as raised by the assessee were not at all connected with correct assessment of tax liability of the assessee as the adjustment was correctly made as per the law as laid down by the Hon’ble Supreme Court in the case of Checkmate Services Private Limited vs CIT (143 taxmann.com 178). He also placed reliance on the observation of the Hon’ble Apex Court as given in the case of Jute Corporation of India Ltd. vs. CIT, [1991] 187 ITR 688 in this regard and requested that the additional legal grounds as raised by the assessee should not be admitted.

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 11 –

the Supreme Court in the case of Checkmate Services Private Limited (supra) was applicable to the assessments completed u/s 143(3) of the Act and that no adjustment could have made while processing the return u/s 143(1) of the Act on the basis of the said judgement.

Decision on factual grounds: 12. We have given thoughtful consideration to the rival submissions. We will first take up the grounds taken by the assessee on merits as the only ground taken by the assessee before the Ld. CIT(A) was in respect of addition of ₹5,87,43,293/- in the respect of payment of employees’ contribution to PF and ESIC beyond the due date. The Ld. CIT (A) upheld this adjustment made by CPC while processing the return following the decision of Hon’ble Supreme Court in the assessee’s own case. The Apex Court had held in the case of Checkmate Services Private Limited (supra) that there is clear distinction between 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 from its employees' [in terms of section 36(1)(va)]. 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) and therefore, subjected to conditions spelt out by Explanation to section 36(1)(va) 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 contributions - the employer's liability is to be paid out of its income

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 12 –

whereas the second is deemed to be 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. If the same is not deposited as per mandate of section 36(1)(va), the deduction of the same would not be available to the assessee.

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 13 –

Tribunal had also upheld the adjustment in respect of employees’ contribution to PF & ESI while processing the return in the case of Corrtech International Pvt. Ltd. (supra). Considering the declaration of law on this issue by the Hon’ble Supreme Court, the provisions of the Act as well as the decision of this Tribunal in various cases, we uphold the order of the Ld. CIT(A) confirming the adjustment as made while processing the return u/s 143(1) of the Act.

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 14 –

Auditor had reported the delay in deposit of employees’ contribution under different funds. The Auditor had not certified any of the contentions as raised by the assessee in these grounds. Therefore, the Ground No.1 as taken by the assessee is devoid of any merit and is rejected. Further, Ground No.2 as taken by the assessee also doesn’t emanate from the adjustment as made by the CPC while processing the return. If the assessee is of the opinion that late deposit of employees’ contribution in PF & ESI is business expenditure allowable under Section 37 of the Act, no-one prevented it to make such claim in the return of income. When no such claim was made in the return and neither the claim was certified by the Auditor, it could not have been allowed while processing the return. Therefore, both the grounds as taken by the assessee on merits of the adjustment, are rejected.

Decision on legal grounds: 15. Having decided the grounds taken on merit in this appeal, we will now revert to the additional legal grounds taken by the assessee. The Revenue has objected to admission of these legal grounds by relying on the decision of Hon’ble Supreme Court in the case of NTPC (Supra). The Apex Court had observed in that case as under:

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 15 –

the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. (emphasis supplied) 16. The Hon’ble Supreme Court held in that case the Tribunal has jurisdiction to examine a question of law which arises from facts as found by the authorities below. The Court further held that the question of law may be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Thus, it is clear from this decision that any question of law may be allowed to be raised only in order to correctly assess the tax liability of the assessee. So far as the correct assessment of the tax liability in this case is concerned, the issue involved in this case is already settled by the decision of Hon’ble Supreme Court in the case of Checkmate Services Private Limited (supra) and the grounds taken by the assessee on the merits of the case stand dismissed. Therefore, we are inclined to agree with the submission of the Revenue that this is not a fit case where the legal grounds as raised by the assessee are relevant to consider the question of correct assessment of tax liability of the case. The only objective of the assessee behind raising these legal grounds is to obviate the correct tax liability. Nevertheless, since the issue of limitation and natural justice, while processing the return, has been raised in the legal grounds, we deem it proper to consider these grounds on merits as well.

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 16 –

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 17 –

“3. The matter has been considered by the Board in view of pending grievances of taxpayers related to issue of refund for AYs 2018-19 2019-20 and 2020-21. To mitigate genuine hardship being faced by the taxpayers on this issue, the Board, by virtue of powers vested with it under section 119 of the Act hereby relaxes the time-frame prescribed in second proviso to sub-section (1) of section 143 and directs that all returns of income validly filed electronically with refund claims for AYs 2018-19, 2019-20 and 2020-21, for which date of sending intimation under sub-section (1) of section 143 of the Act has lapsed, subject to the exceptions mentioned in para 5 below, can be processed now with prior administrative approval of Pr.CCIT/CCIT concerned. The intimation of such processing under sub-section (1) of section 143 of the Act can be sent to the assessee concerned by 31.01.2024.” (emphasis supplied)

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 18 –

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 19 –

email ID accounts@checkmatservices.com with the remark “Pending response under Section 143(1)(a)”. When this matter was brought to the notice of the assessee in the course of hearing on 12th July, 2024 the Ld. AR submitted that in the same “User Profile Administration”, there was mention of communication dated 19.02.2021 wherein it was mentioned that the “ITR filed is defective or incomplete”. The Ld. AR contended that the processing could not have been done until & unless the defect was rectified by the assessee. On this logic the Ld. AR submitted that no presumption can be drawn from the “User Profile Administration” and that the communication generated by CPC Bangalore on 30.12. 2020 was not transmitted to the assessee. Accordingly the Ld. AR made a request that the sheet “User Profile Administration” should not be used against the assessee. He also submitted that there was no mention of any proposed adjustment in the “User Profile Administration”. Further, the Ld. AR also pointed out that the communication dated 30.12.2020 was sent to email ID accounts@checkmatservices.com which was not legally valid as it was an unrelated email ID. He has drawn our attention to the fact that in the return of income for AY 2019-20, the email ID “contact@checkmateservices.com” was mentioned for transmitting all communications electronically.

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 20 –

was communicated about the proposed adjustment under Section 143(1)(a) of the Act for A.Y. 2019-20. A copy of the said communication is reproduced below:

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 21 –

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 22 –

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 23 –

and misleading. Though in the return for A.Y. 2019-20, the email address of the assessee was mentioned as “contact@checkmateservices.com”, the email ID on which this communication was sent i.e. “account@checkmateservices.com” also belonged to the assessee. In fact, the email ID “account@checkmateservices.com was the primary email ID as appearing on user profile of the assessee. Further, in the RTI application dated 27.12.2022 filed by the assessee with the AO as well as in Form No.- 36, email ID as mentioned therein was “account@checkmateservices.com”. Therefore, there cannot be any doubt that the email ID account “account@checkmateservices.com” on which this communication was sent belonged to the assessee and that the assessee was duly communicated about the adjustments before the processing of the return. In fact, the intimation dated 31.03.2021, which is subject matter of this appeal, was also sent on the same email ID “account@checkmateservices.com”. Therefore the contention of the assessee that the email accounts@checkmatservices.com was an unrelated email ID is not found correct. The CPC had all along made all communication with the assessee on this email ID only. Hence, the contention that the prior intimation sent on this email was not legally valid can’t be accepted. The intimation u/s 143(1) sent to the assessee on this email ID was well received by the assessee. So the earlier communication dated 30.12.2020 regarding proposed adjustments u/s 143(1)(a) of the Act before processing of the return of income for the A.Y. 2019-20 sent on this email ID was legally valid intimation. In fact the assessee has not come clean before us and has tried to misrepresent the facts. The response to the crucial factual evidences filed by the Revenue has been given with a blinker on the eyes and in the garb of selective response and the legal arguments. In view

ITA No. 69/Ahd/2023 [M/s. Checkmate Services Pvt. Ltd. vs. ADIT] A.Y. 2019-20 - 24 –

of these facts, we do not find any merit in the grounds as taken by the assessee and the ground is dismissed.

This Order pronounced in the Open Court on 16/07/2024

Sd/- Sd/- (SUCHITRA RAGHUNATH KAMBLE) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 16/07/2024 S. K. SINHA True Copy आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत अपीलाथ� / The Appellant 1. ��यथ� / The Respondent. 2. संबंिधत आयकर आयु� / Concerned CIT 3. 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार

उप/सहायक पंजीकार उप सहायक पंजीकार (Dy./Asstt. Registrar) उप उप सहायक पंजीकार सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद आयकर अपीलीय अिधकरण अहमदाबाद / ITAT, Ahmedabad आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण अहमदाबाद अहमदाबाद