Delayed PF/ESI employees' contributions disallowed; rectification u/s 254(2) upholding adjustment while processing under 143(1)

ITAT Chennai allowed the Revenue's rectification application u/s 254(2), holding that non-consideration of the binding SC ruling on employees' contribution to PF/ESI constituted a mistake apparent from record. The earlier order was accordingly modified, and the issue on merits was decided against the assessee. Employees' contributions to PF/ESI deposited beyond the due dates prescribed under the respective welfare statutes were held disallowable, and such disallowance could be made while processing the return u/s 143(1). The AO was directed to recompute income accordingly. The miscellaneous application was allowed.

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Revenue filed miscellaneous applications under section 254(2) seeking rectification of a prior Tribunal order dated 11.04.2022 in a batch of appeals concerning disallowance of employees' contribution to PF/ESI deposited beyond the due dates prescribed under the respective welfare Acts. It was admitted that the decision in the lead miscellaneous applications (MA Nos. 97/Chny/2022 & 11/Chny/2023) would govern all similar matters. The Tribunal, relying on the Supreme Court judgment in Checkmate Services (P.) Ltd. v. CIT (143 Taxmann.com 178, 12.10.2022), held that there existed a "mistake apparent from record" within the meaning of section 254(2), since the earlier order was inconsistent with the law subsequently clarified by the Supreme Court. The Tribunal further followed its decision in Electrical India (ITA No. 789/Chny/2022) to hold that such disallowance can be made while processing under section 143(1). Allowing the Revenue's applications, the Tribunal modified its earlier order, decided the issue on merits against the assessees, and directed the Assessing Officer to recompute income by disallowing late-paid employees' PF/ESI contributions. All applications were allowed.

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