Employees' PF and ESI contributions paid before return filing date under Section 139(1) are deductible despite missing statutory deadlines

The ITAT Raipur dismissed the assessee's challenge to adjustments made under Section 143(1) for PF and ESI disallowances, holding that CPC Bangalore properly followed procedural requirements by providing reasonable opportunity through email communication before making adjustments. However, the tribunal allowed the appeal regarding disallowance of employees' PF and ESI contributions, ruling that payments made after statutory due dates but before the return filing date under Section 139(1) are deductible. The assessee's appeal was partly allowed.

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Issues:
1. Adjustment made in intimation u/s 143(1) for debatable issues
2. Disallowance of employees' contributions to EPF and ESIC
3. Set-off of unabsorbed depreciation

Issue 1: Adjustment made in intimation u/s 143(1) for debatable issues

The appeal challenged the CIT(A)'s confirmation of the adjustments made by the DCIT(CPC) in the intimation u/s 143(1), arguing that only arithmetical errors or incorrect claims can be adjusted during processing. The Tribunal noted that the AO must provide an intimation before such adjustments, and in this case, the intimation mentioned communication to the assessee's email. The Tribunal found that the adjustments were made in accordance with Section 143(1)(a)(iv) of the Act, covering disallowances indicated in the audit report but not considered in the return. As the CPC had provided a reasonable opportunity to the assessee, the Tribunal dismissed this ground.

Issue 2: Disallowance of employees' contributions to EPF and ESIC

The appeal contested the disallowance of contributions to EPF and ESIC made after the specified due dates but before u/s 139(1) of the Income-tax Act. The Tribunal considered recent judgments and found that payments made before the due date of filing the return, though after the statutory due date, should be allowed. Referring to various case laws, the Tribunal concluded that the contributions were allowable, citing precedents where similar disallowances were deleted. Consequently, the Tribunal allowed ground Nos. 2 and 3 of the appeal, overturning the disallowances.

Issue 3: Set-off of unabsorbed depreciation

The appeal raised concerns about the disallowance of set-off of brought forward unabsorbed depreciation against the income assessed u/s 143(1). However, this ground was not pressed by the assessee and was dismissed as such during the proceedings.

In conclusion, the Tribunal partly allowed the assessee's appeal, overturning the disallowances related to employees' contributions to EPF and ESIC. The Tribunal upheld the adjustments made in the intimation u/s 143(1) and dismissed the issue regarding the set-off of unabsorbed depreciation as it was not pressed during the proceedings.

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