TaxTMI 
TaxTMI 
2026 (7) TMI 1297
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....ical, all the three appeals are being disposed of by this common order for the sake of convenience and brevity 3. Grounds of appeal filed by the Assessee in ITA No. 1361/Del/2026 are as under : 1. That the DCIT, CPC, Bengaluru erred in law and on facts in making and sustaining the disallowance of followings:- EMPLOYER SHARE EMPLOYEE SHARE TOTAL PF 1,74,63,033 1,56,36,878 3,30,99,911 ESI 74,57,047 27,54,555 1,02,11,602 Employee and employers contribution to PF/ESI amounting to 4,33,11,513/-, despite the same having been deposited before the due date of filing the return of income under section 139(1), rendering the addition wholly unsustainable. 2. That no adjustment under section 36(1)(va) could have been made while processing the return under section 143(1)(a), as such disallowance does not fall within the scope of permissible prima facie adjustments and was a debatable legal issue at the time of processing. 3. That the impugned adjustment under section 143(1)(a)(iv) was made mechanically, solely on the basis of Clause 20(b) of the Tax Audit Report, which merely reports factual particulars and does n....
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.... 12. That section 36(1)(va), being an anti-abuse provision as clarified by CBDT Circular No. 495 dated 22-09-1987, is intended only to prevent misuse of funds, and in absence of any misuse, mechanical disallowance defeats the legislative intent and is unsustainable in law. 13. That the Central Processing Centre, Bengaluru without calculating the due dates of deposit as per prescribed law from the date of disbursement of salary as per the judgement of Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal) was bad in both law and facts of the case. 14. That the assessee being a contractor/sub-contractor providing manpower and facility management services to PSUs/Government organisations, the primary statutory liability under the PF & ESI Acts rests with the Principal Employer, and therefore section 36(1)(va) is not applicable on the facts of the present case. 15. That even otherwise, the employees' contribution, though alleged to be deposited belatedly, is allowable as business expenditure under section 37(1), there being no violation of law, no mens rea, and no misuse of funds. 16. That the reliance placed on the decision of....
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....been condoned, and therefore the subsequent dismissal of the appeals solely on the ground of delay is unsustainable in law. Reliance is placed on the judgment of the Hon'ble Madras High Court in the case of Vijayeswari Textiles Ltd. v. Commissioner of Income Tax (decided on 01.10.2001, MANU/TN/0708/2001). 7. On the issue of disallowance u/s. 36(1)(va), the ld counsel of the assessee submitted that the aforesaid disallowance does not fall within the scope of permissible prima facie adjustments and was a debatable legal issue at the time of processing. It was submitted that the subsequent decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. v. CIT [143 Taxmann.com 178 (SC)] cannot retrospectively validate an adjustment that was not permissible under Section 143(1)(a) on the date of issuance of the impugned intimation. Assessment Year Date of Intimation u/s. 143(1)(a) Checkmate Order Date 2017-18 15.03.2019 12.10.2022 2018-19 12.01.2020 12.10.2022 2019-20 07.05.2020 12.10.2022 8. The ld AR stated that the disallowance of employees' PF/ESI contribution under section 143(1)(a) is unsustainable in view of the binding ....
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....ument that the reliance on Checkmate (Supra) is misplaced as it arose from a scrutiny assessment under Section 143(3), which involves a wider scope of examination, whereas Section 143(1)(a) is limited to prima facie adjustments only. Therefore, a disallowance permissible under Section 143(3) cannot be mechanically extended to justify an adjustment under Section 143(1)(a). 8.3. The ld AR placed reliance on the judgment of the Hon'ble Chhattisgarh High Court in Raj Kumar Bothra vs. DCIT (TAXC No. 56 of 2025), wherein it was held that such disallowance on a debatable issue is beyond the scope of Section 143(1)(a) and was on the principle of the judgment of DCIT vs. M/s. Raghuvir synthetics ltd. [civil appeal no. 2315 of 2007), and was accordingly set aside. The said view has also been followed by the ITAT Delhi Bench "A" in A2Z Infra Services Ltd. vs. DCIT (ITA Nos. 970/Del/2023 & 72/Del/2024), directing deletion of similar disallowance, observing that the issue stood settled only subsequently by the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (12.10.2022). Therefore, the addition deserves to liable to be quashed. The ld AR further relied on the ITAT Delhi Bench &....
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....lation of constitutional provisions of Article 14,19 and 21 of the Constitution of India, is not adjudicated as being outside our mandate. We however, shall deal with the assessee's several taxation arguments raised on the issue, one by one. Firstly, reliance of the Hon'ble jurisdictional Delhi High Court in the case of CIT v. AIMIL Ltd. and ITAT decisions is no longer valid as these decisions predate the decision of Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. vs. CIT (supra). The hon'ble Supreme Court in Checkmate Services P. Ltd. vs. CIT has authoritatively laid down the law that disallowance u/s. 36(1)(va) for employee's contribution to ESI/PF, that was deposited by assessee-employer after due date prescribed in PF/ESCI Acts but before due date of filing return under section 139(1), is valid. 14. Moreover, the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT [2025] 178 taxmann.com 207 (Delhi)[08-09-2025] wherein relying on the decision of Checkmate Services P. Ltd. vs. CIT, held that for assessment year 2019-20, disallowance u/s. 36(1)(va) for employee's contribution to ESI/PF that was deposited by assess....
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.... the decision of CIT vs AIMIL Ltd was superseded by the decision of the hon'ble Supreme Court in Checkmate Services (P) Ltd. v. CIT which laid the law from the date of its inception 01.04.1988. In this context, we outrightly reject the assessee's arguments that the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT is per-incuriam. 17. Another argument of the assessee that the decision of Checkmate (Supra) was in context of scrutiny assessment under Section 143(3) and hence it is not applicable, is also answered by the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT which held the disallowance of PF/ESI u/s. 143(1) is permissible. 18. We do note that there are decisions on the issue in favour as well as against the assessee. We also note that the this issue was decided against the assessee by the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT; by the hon'ble Bombay High Court in the case of Rohan Korgaonkar V DCIT (2024) 159 taxmann.com 321(Bom); by the Delhi ITAT in Savleen Kaur vs. Income-tax officer [2023] 147 taxmann.com 402 (Delhi - Trib.)/[2023] 199 ITD 437 (Delh....
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....ection 29(1)(e) of the Income-tax Act, 2025 has prospective application and does not alter the legal position as mandated by Checkmate Services (P) Ltd. v. CIT and as available in AY 2018-19. We are fortified in our view by the decision of ITAT in the case of Ram Dayal Bansal (Proprietor Bansal Associates) in ITA No. 1336/Del/2026 dated 15.06.2026. 21. The ground 13,14 and 15 is regarding the deposit of employees' contribution should be reckoned from the month in which the salary has been actually disbursed rather than the month for which the salary relates. The law on this subject as available in relevant provisions of section 38(1) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, reads as under: "(1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the ....