AO must delete disallowance: employee PF/ESI contributions paid after deposit date but before return filing deductible under s.36(1)(va) & s.2(24)(x)

ITAT DELHI-AT allowed the appeal, directing the AO to delete the disallowance under s.36(1)(va) read with s.2(24)(x) in intimation under s.143(1). The Tribunal held the issue was debatable and, in view of binding HC precedent favorable to the taxpayer, employee contributions to PF/ESI paid after statutory deposit dates but before the return-filing deadline were deductible; the AO therefore could not disallow them while processing the s.143(1) intimation.

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Issues: (i) Whether disallowance u/s 36(1)(va) read with s.2(24)(x) in respect of employees' contributions to PF and ESI could be made by the Assessing Officer while processing the return under s.143(1)(a) prior to the Supreme Court decision in Checkmate Services Pvt. Ltd.; (ii) Whether the additions claimed as already reflected in the return (double addition) require verification by the Assessing Officer.

Analysis: The core issue concerns scope of summary adjustments under s.143(1)(a) versus matters requiring deeper scrutiny under s.143(3). The Court examined divergent High Court precedents existing when intimations were issued and noted that the jurisdictional High Court had a binding view favourable to the assessee that delayed deposit of employees' contributions (deposited before filing date but after statutory due date) could be allowed. The Court applied Supreme Court authorities limiting the use of s.143(1)(a) for prima facie/apparent adjustments and held that where the question is highly debatable and pending before higher courts, the Assessing Officer should not make substantive disallowances while processing the return. The Tribunal followed the recent Chhattisgarh High Court decision which set aside similar intimations issued prior to the Supreme Court ruling in Checkmate Services. Regarding alleged double additions in the return, the Court directed remand to the Assessing Officer for verification and decision after giving the assessee opportunity.

Conclusion: The prima facie disallowances of employees' contributions to PF and ESI made under s.36(1)(va) read with s.2(24)(x) by intimation under s.143(1)(a) are set aside for the assessment years in question; the Assessing Officer is directed to delete those disallowances. The additions alleged to be double entries in the return are restored to the file for verification and decision by the Assessing Officer.

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