Debatable provident fund disallowance cannot be made as a prima facie adjustment when jurisdictional High Court precedent favours the assessee.

A prima facie adjustment under section 143(1)(a)(iv) could not be used to disallow employees' provident fund contribution under section 36(1)(va) where, on the date the return was processed, the jurisdictional High Court had already taken a view favourable to the assessee and the issue remained debatable. The later Supreme Court decision in Checkmate Services did not govern the position at that earlier point of processing. The commentary therefore notes that such a disallowance was not sustainable through summary processing, and that interest-related additions were only consequential to the substantive dispute.

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Issues: (i) Whether the adjustment under section 143(1)(a)(iv) of the Income-tax Act, 1961 to disallow employees' contribution to provident fund under section 36(1)(va) was sustainable when, on the date of intimation, the jurisdictional High Court had taken a view in favour of the assessee and the issue was debatable.

Issue (i): Whether the adjustment under section 143(1)(a)(iv) of the Income-tax Act, 1961 to disallow employees' contribution to provident fund under section 36(1)(va) was sustainable when, on the date of intimation, the jurisdictional High Court had taken a view in favour of the assessee and the issue was debatable.

Analysis: The return had been processed under section 143(1) of the Income-tax Act, 1961 on 12 May 2020. On that date, the jurisdictional High Court decisions held that employees' contribution, though not deposited within the due date under the relevant labour statute, could still be allowed if paid up to the due date for filing the return. The issue had not then been settled against the assessee by the Supreme Court decision in Checkmate Services, which came later. In that legal setting, the disallowance involved a debatable issue and could not be made by way of adjustment under section 143(1)(a)(iv).

Conclusion: The adjustment disallowing employees' contribution to provident fund was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded on the substantive disallowance issue, while the interest additions were treated as consequential, leaving the assessee with only partial relief.

Ratio Decidendi: A prima facie adjustment under section 143(1)(a)(iv) cannot be used to disallow a claim where, at the time of processing, the issue was debatable and the jurisdictional High Court had already taken a view in favour of the assessee.

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