Processing adjustments under section 143(1) cannot include PF/ESI employee contribution disallowance beyond the limited prima facie scope.

Employees' contribution to PF/ESI could not be disallowed as a prima facie adjustment while processing returns under section 143(1) for assessment years preceding Checkmate Services, because such a disallowance fell outside the limited scope of processing-based adjustments. The Tribunal followed co-ordinate bench decisions and held that the addition made under section 36(1)(va) could not be sustained in intimation proceedings. The disallowance was deleted, and the appeals were allowed.

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Issues: Whether disallowance of employees' contribution to PF/ESI could be made as a prima facie adjustment while processing the return under section 143(1) of the Income-tax Act, 1961, for assessment years preceding the Supreme Court ruling in Checkmate Services.

Analysis: The additions were made while processing the returns under section 143(1). The Tribunal noted that the impugned adjustments related to an issue arising in assessment years prior to the Supreme Court's decision and that the disallowance under section 36(1)(va) had been sustained by treating it as a processing-time adjustment. On the facts, the Tribunal held that such a disallowance did not fall within the permissible scope of adjustments under section 143(1), and followed co-ordinate bench decisions taking the same view in similar matters.

Conclusion: The disallowance could not be sustained under section 143(1), and the addition was deleted. The appeals were allowed.

Ratio Decidendi: A disallowance involving employees' contribution to PF/ESI cannot be made as a prima facie adjustment under section 143(1) where it falls outside the limited scope of processing-based adjustments.

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