Rectification u/s254(2) restores disallowance of late PF/ESI employee contributions processed u/s143(1) per precedent

ITAT Chennai allowed the Revenue's rectification application under s.254(2), holding there was a mistake apparent from record in the earlier order regarding disallowance of employees' contribution to PF/ESI deposited beyond the due dates under the respective welfare Acts. Relying on the binding SC precedent, the Tribunal held the delayed employees' contributions are not allowable and such disallowance can be made in processing under s.143(1). The Tribunal's prior order was modified accordingly, directing the AO to recompute income and disallow the late deposits. The miscellaneous application was allowed.

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Revenue filed miscellaneous applications under section 254(2) seeking rectification of an earlier ITAT order dated 12.05.2022 on the issue of disallowance of late payment of employees' contribution to PF/ESI. The applications were part of a bunch of similar matters, and it was agreed that the findings in the lead cases (MA Nos. 97/Chny/2022 & 11/Chny/2023) would govern all. Relying on the Supreme Court decision in Checkmate Services (P.) Ltd. v. CIT (143 taxmann.com 178, dated 12.10.2022), the Tribunal held there was a "mistake apparent from record" within the meaning of section 254(2). The earlier view favorable to the assessee was rectified, and the issue on merits was decided against the assessee. It was further held, following Electrical India (ITA No. 789/Chny/2022), that such disallowance could be made while processing the return under section 143(1). The order was modified directing the Assessing Officer to disallow employees' contribution to PF/ESI paid beyond the due dates under the respective Acts.

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