Late PF and ESIC contributions disallowed under section 143(1) following Supreme Court's Checkmate Services judgment on employee deductions

ITAT Ahmedabad upheld disallowance of late PF and ESIC contributions under section 143(1) proceedings. Following Supreme Court's Checkmate Services judgment, the tribunal ruled that section 43B's non obstante clause cannot apply to employee contributions deducted from salaries. CPC validly disallowed the claim as an incorrect claim apparent from return information under section 143(1)(a)(ii). The assessee failed to respond to CPC's communication regarding the disallowance. Appeal dismissed as grounds lacked merit post-Checkmate Services ruling.

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Issues Involved:
1. Late payment of PF and ESIC contributions by the assessee.
2. Sufficient opportunity of hearing during COVID-19.
3. Jurisdiction and permissible adjustments under Section 143(1).
4. Applicability of amendments by the Finance Act, 2021.
5. Proper appreciation of facts and submissions by lower authorities.
6. Levying of interest under Section 234A/B/C of the Act.

Summary:

1. Late Payment of PF and ESIC Contributions:
The solitary issue in this appeal is whether the late payment of PF and ESIC contributions by the assessee, deposited before the due date of filing the Income Tax Return, can be disallowed in the intimation dated 14.07.2020 passed u/s. 143(1) of the Act. The assessee, a proprietor of M/s. Star Labour Services, filed its Return of Income for AY 2019-20, which was processed u/s. 143(1). The CPC issued a communication regarding the disallowance u/s. 36(1)(va) due to late payment of PF and ESIC, which the assessee did not respond to, leading to the disallowance.

2. Sufficient Opportunity of Hearing During COVID-19:
The assessee contended that the CIT(A) erred in not granting sufficient opportunity of hearing, especially during the COVID-19 pandemic, violating the principles of natural justice.

3. Jurisdiction and Permissible Adjustments Under Section 143(1):
The assessee argued that the disallowance was without jurisdiction and beyond the permissible adjustments contemplated u/s. 143(1) of the Act. The Tribunal noted that the CPC had given a communication to the assessee, which was not responded to, justifying the disallowance as an incorrect claim apparent from the return information.

4. Applicability of Amendments by the Finance Act, 2021:
The assessee argued that the amendments made by the Finance Act, 2021, are not applicable. However, the Tribunal, following the Hon'ble Supreme Court's judgment in Checkmate Services (P.) Ltd., held that the non-obstante clause under section 43B does not apply to employees' contributions which are deducted from their income and held in trust by the employer.

5. Proper Appreciation of Facts and Submissions by Lower Authorities:
The assessee claimed that the lower authorities did not properly appreciate the facts and submissions, breaching the principles of natural justice. The Tribunal found that the CPC's action was within the provisions of law, given the lack of response from the assessee.

6. Levying of Interest Under Section 234A/B/C:
The assessee also contested the levy of interest under Section 234A/B/C of the Act. The Tribunal upheld the disallowance and the consequential levy of interest.

Conclusion:
The Tribunal dismissed the appeal, upholding the disallowance of late payment of PF and ESIC contributions u/s. 143(1) as valid in law, following the Supreme Court's judgment in Checkmate Services (P.) Ltd. The grounds raised by the assessee were found to be devoid of merits, and the appeal was dismissed.

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