Bhargab Engineering Works Vs PCIT (ITAT Kolkata)
AO’s Non-Application of the Checkmate Ruling on Late PF/ESI Renders Reassessment Unsustainable — ITAT Upholds PCIT’s Section 263 as “Erroneous and Prejudicial to Revenue”
The Tribunal delivered a decisive blow to the assessee’s challenge, holding that the ld. PCIT rightly invoked Section 263 to revise the reassessment u/s 147 r.w.s. 143(3) dated 30.03.2023, which stood “erroneous in so far as it was prejudicial to the interests of the revenue.” The assessee’s argument that the 263 order was time-barred fell flat, with the Bench reiterating that the reassessment order is a separate order, independently revisable until 31.03.2025 under section 263(2). Thus, the PCIT’s order dated 25.03.2025 was indisputably within limitation. On natural justice, the Tribunal noted that notices dated 20.12.2024 and 15.01.2025 and replies dated 24.01.2025 & 28.01.2025 satisfied the statutory requirement of “opportunity of being heard” as clarified in Amitabh Bachchan (SC).
The knockout factor was the AO’s complete failure to apply the binding Supreme Court ruling in Checkmate Services Pvt. Ltd. v. CIT, pronounced on 12.10.2022, which categorically held that employees’ contribution of PF/ESI paid beyond the statutory due date cannot be allowed u/s 36(1)(va). Despite this law being available before passing the reassessment, the AO allowed ₹17,03,551 without inquiry. This omission, coupled with the deeming provisions of Explanation 2 to section 147, made it a textbook case of an order passed “without making enquiries or verification” and “not in accordance with a decision… rendered by the Hon’ble Supreme Court”, attracting Explanation 2(a) & 2(d) to section 263.
The Tribunal also affirmed the disallowance of ₹45,236 debited as ‘Fine Penalty on Custom Duty’, since Explanation 1 to section 37(1) forbids allowance of expenditure incurred for an offence or prohibited act—an issue the assessee did not even press. Reliance on Jainsons Agrochem Industries and Hotel Babylon Continental was brushed aside as irrelevant once the AO’s failure to apply Checkmate was established.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
