TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1910
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....39;ble Chattisgarth high court's recent landmark decision in Raj Kumar Bothra vs. DCIT (2025) 174 taxmann.com 1199 (Chattisgarh); has already settled the issue in assessee's favour and against the department, the above section 36(1)(va) disallowance of ESI/PF is a highly debatable issue to be rejected in section 143(1) "processing", reading as under: "Sanjay K. Agrawal, J. - This appeal preferred under Section 260A of the Income Tax Act, 1961 (for short the "Act of 1961") was admitted for hearing on 19.03.2025 by formulating the following substantial question of law: - "Whether the CIT (Appeals) and the Income Tax Appellate Tribunal are justified in dismissing the appeals holding that the Assessing Officer has rightly processed the return of the appellant herein under Section 143(1) (a) of the Act ignoring the fact that in light of conflicting judgments on the issue of due date the Assessing Officer was required to resort to the provisions contained in Section 143(3) / Section 147 of the Act, by recording a finding which is perverse to the record ?" 2. The aforesaid question of law arises for consideration on the following factual backdrop: - ....
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....s' State Insurance Ac t, 1948 (for short "ESI Act 1948"), was pending consideration before the Supreme Court in Checkmate Services Pvt Ltd (supra) and only on 12 .10.2022, the issue with regard to claim of deduction under Section 36(1)(va) of the Act of 1961 was settled holding that employees' contribution should be deposited on or before the due dates specified under the respective employees welfare Acts . Therefore, on the date of passing the intimation order, the issue with regard to deposit of contribution on or before the due date under Section 36(1)(va) of the Act of 1961, was highly debatable and contentious . Learned counsel further submits that the s cope and ambit of Section 143(1)(a) of the Act of 1961 only permits prima facie adjustments to be carried out and the highly debatable issues cannot be ad jus ted/disallowed while processing return under Section 143(1)(a) of the Ac t 1961. In support of the contention, learned counsel would rely upon the decisions rendered by the Supreme Court in the matter of Kvaverner John Brown Engg. (India) Pvt. Ltd. v Assis tant Commissioner of Income Tax [2008] 170 Taxman 304/305 ITR 103 (SC) and in the matter of Assistant Commis....
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....essee finally submits that the intimation order under Section 143(1)(a) of the Act of 1961, the order passed by CIT(Appeals) and the order passed by the ITAT, a f firming the order of CIT (Appeals), deserve to be set aside by granting this appeal . 5. Mr. Ajay Kumrani, learned counsel for the respondent would support the impugned order and submit that the contention of subject adjustment/disallowance is beyond the appellant that the the power of Assessing Officer in view of Section 143(1) (a) of the Act of 1961 is not correct. The adjustment made towards delayed deposit of employees' contribution is very much within the powers of Assessing Officer to prima facie make adjustment at the time of processing of return. He further submits that in view of the decision of the Supreme Court in the matter of Checkmate Services Pvt. Ltd. (supra), the issue is now well settled. He further submits that in the present case, it is an admitted position that the appellant/assessee has deposited the employees' contribution under the heads of ESI and EPF after the due date. He would also submit that the clarificatory judgment of the Supreme Court in Checkmate Services Pvt Ltd (supra)....
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.... Act. Their Lordships of the Supreme Court settled the issue by making the following observation: - "62. The distinction between an employer's contribution which is its primary liability under law - in terms of Section 36(1) (iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24) (x) - unless the conditions spelt by Explanation to Section 36(1) (va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts - the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. 63. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante ....
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....was rendered on 12.10.2022. 9. At this stage, it would be appropriate and beneficial to notice the nature of powers under sub-section (1) of Section 143 as against sub-sections (2) and (3) of the Act of 1961. The power under sub-section (1) of Section 143 of the Act of 1961 is summary in nature designed to cause adjustment which is apparent from the return while that under sub-sections (2) and (3) is to scrutinize the return and cause deeper probe to arrive at correct determination of the liability (See: Vodafone Idea Limited v. Assistant Commissioner of Income Tax Circle (2020) 19 SCC 12, Para 17). 10. Further, in Section 143(1)(a) of the Act of 1961, the procedure to process the return in a given case is provided. Section 143 (1)(a) is produced hereunder reference: - "Assessment 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely: - (a) the total income or loss shall be computed after making the following adjustments, namely: - (i) any arithmetical error in the return; (ii) an i....
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....961 and held as under :- "11. What were permissible under the first proviso to section 143(1)(a) to be adjusted were, (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction allowance or relief, which was prima facie admissible on the basis of information available in the return but not claimed in the return and similarly (iii) those claims which were on the basis of the information available in the return, prima facie inadmissible, were to be rectified/ allowed/disallowed. What was permissible was correction of errors apparent on the basis of the documents accompanying the return. The Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the Assessing Officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief." 13. Coming back to the facts of the present case, while following the principles of law laid down in above stated judgments of the Supreme Court for exercise of power and jurisdiction under Section 143 (1) (a) of the Act of 1961, it is quite ....
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.... this Court in M/s. BPS Infrastructure (supra), wherein, this Court has dismissed the appeal preferred by the assessee as barred by limitation summarily without formulating any substantial question of law and as such the substantial question of law formulated herein in this appeal was neither involved, formulated and answered in M/s. BPS Infrastructure (supra). 16. Furthermore, the submission of the Revenue that the judgment passed in Checkmate Services Pvt Ltd (supra) would have retrospective effect, as held in Ramesh Prasad Verma (supra), P.V. George (supra) and in R.R. Kishore's case (supra), is no longer a dispute and well settled as the law declared by a Court will have a retrospective effect if not otherwise stated to be so specifically. However, the retrospective effect of the decision rendered by the Supreme Court in Checkmate Services Pvt Ltd. (supra) is not an issue involved in present case, as the question involved herein was quite different as to whether Section 143 (1) (a) of the Act of 1961 can be resorted to when there is highly debatable issue. Therefore, the case laws relied upon by the Revenue are not applicable to the facts of the present case. ....