PF/ESI Paid After Statutory Due Date Not Deductible, Sectiom 143(1)(a) Adjustment Sustained

SRC Projects Pvt. Ltd. Vs ACIT (ITAT Chennai)

Chennai ITAT Upholds Disallowance of Delayed PF/ESI Employees’ Contribution Based on Checkmate; Adjustment u/s 143(1)(a) Held Valid

 Background

• Assessee filed ROI declaring income of ₹10.16 crore.
• CPC processed return u/s 143(1) & disallowed ₹17,28,945 being delayed employees’ PF/ESI contribution, resulting in total income of ₹10.33 crore.
• Assessee filed 154 petition, which was rejected.
• CIT(A) relied on Supreme Court decision in Checkmate Services (2022).
• Held that delayed employees’ contribution beyond statutory due dates is not allowable u/s 36(1)(va).
• Confirmed CPC’s disallowance.

Assessee’s Arguments before ITAT

• PF/ESI paid before filing the return → should be allowable.
• Issue was debatable at time of processing; CPC cannot make 143(1)(a) adjustment.
• Relied on Raj Kumar Bothra (Chhattisgarh HC, 2025) holding that 143(1)(a) cannot be used for debatable issues.
• Checkmate decision should not apply retrospectively for 143(1) adjustments.

Revenue’s Arguments

• Checkmate lays down correct law from inception; applies retrospectively.
• Adjustment possible under 143(1)(a)(ii) & 143(1)(a)(iv) even prior to amendment.
• Audit report (Form 3CD) provides clear data – prima facie quantifiable adjustment.
• Relied on Chennai ITAT rulings: Amazing Export Corporation (2023) & TalentPro HR Pvt. Ltd. (2025)

ITAT’s Findings

• Checkmate Services SC ruling is binding & clarifies that: (i)Employees’ contribution governed by 36(1)(va) r/w 2(24)(x), (ii) Must be paid within due date under respective Acts &(iii)Section 43B applies only to employer’s contribution
• Therefore, delayed payment is disallowable, even if paid before filing ROI.
• Adjustment u/s 143(1)(a) permissible:
  • Disallowance is clear, factual & quantifiable from tax audit report.
  • Chennai ITAT’s own consistent view allows such adjustments.
• Raj Kumar Bothra (Chhattisgarh HC) distinguishable:
  • That case dealt with a period before Checkmate decision.
  • Here appellate stage occurs after SC settling law, which applies retrospectively.

Conclusion

• Disallowance of ₹17,28,945 upheld.
• CIT(A)’s order confirmed.
• Appeal dismissed.

FULL TEXT OF THE ORDER OF ITAT CHENNAI