The Chhattisgarh High Court has held that the disallowance under section 36(1)(va) Of Income Tax Act is not permissible as prima facie adjustment prior to Supreme Court’s Checkmate ruling.
The bench of Justice Sanjay K. Agrawal and Justice Deepak Kumar Tiwari has observed that the prima facie disallowance of contribution towards Employees’ State Insurance (ESI) and Employees Provident Fund (EPF) under Section 36(1)(va) read with Section 2(24)(x) of the Act of 1961 made by the Assessing Officer under Section 143(1)(a) by order is set-aside.
The appellant/assessee filed the return of income for Assessment Year 2020-21 declaring a total income of Rs.3,76,34,910 and paid tax to the tune of Rs.1,44,33,865.
The return of the assessee was processed by Central Processing Centre (CPC), Bengaluru/Assessing Officer and an intimation order was issued exercising the powers under Section 143(1) (a), in which claim for deduction of delayed deposit of employees’ share of contribution towards Employees’ State Insurance (ESI) and Employees Provident Fund (EPF) under Section 36(1)(va) was disallowed by the order.
The assessee preferred an appeal under Section 246A before the Commissioner of Income Tax (Appeals) by submitting Form No.35 and challenging the intimation order.
In the meanwhile, in the case of Checkmate Services Private Limited Vs. Commissioner of Income Tax-1 judgment was delivered by the Supreme Court, settling the issue with regard to claim of deduction under Section 36(1) (va), wherein, it was held that to claim deduction under the aforesaid provision, employees’ contribution should be deposited on or before the due dates specified under the respective employees welfare Acts.
Ultimately, the CIT (Appeals) passed the order dismissing the appeal of the assessee, against which, the assessee preferred an appeal before the Income Tax Appellate Tribunal (ITAT), which was dismissed by the order leading to filing of the present appeal, in which, the substantial question of law has been formulated for consideration.
The assessee contended that though the Assessing Officer has processed the return of the income of assessee, however, on the date when the intimation order was issued exercising powers under Section 143(1)(a) of the Act 1961, the issue with regard to claim of deduction under Section 36(1)(va) of the Act of 1961 i.e. as to whether the employees’ contribution should be deposited on or before the due dates in terms of Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 and Employees’ State Insurance Act, 1948, was pending consideration before the Supreme Court in Checkmate Services Pvt Ltd and only on 12.10.2022, the issue with regard to claim of deduction under Section 36(1)(va) of 1961 was settled holding that employees’ contribution should be deposited on or before the due dates specified under the respective employees welfare Acts.
The assessee contended that 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 scope 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 adjusted/disallowed while processing return under Section 143(1)(a) of the Act 1961.
The court opined that the Assessing Officer should not have resorted to the provisions contained under Section 143(1)(a) and instead could have resorted to the provisions under Section 143(3), as on the date of issuance of intimation order by the Assessing Officer, exercising power under Section 143(1)(a), the subject issue was highly debatable and ultimately, that issue was resolved by Supreme Court in the matter of Checkmate Services Pvt Ltd on a later date.
Case Details
Case Title: Raj Kumar Bothra Versus Deputy Commissioner Of Income Tax
Case No.: TAXC No. 56 of 2025
Date: 08/05/2025
Counsel For Petitioner: Nikhilesh Begani and Apurv Goyal, Advocates
Counsel For Respondent: Ajay Kumrani, Advocate
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