ITAT Deletes PF/ESI Disallowance as Section 143(1) Adjustment Held Beyond Scope

R. K. & Company Manpower Pvt. Ltd. Vs DCIT (ITAT Delhi)

The appeals relate to three assessment years—2018–19, 2019–20, and 2020–21—filed against a common appellate order dated 20.08.2025 passed under Section 250 of the Income Tax Act, 1961. The primary issue in all appeals concerns disallowances made on account of delayed deposit of employees’ contributions towards Provident Fund (PF) and Employees’ State Insurance (ESI), along with bonus payments, under Section 36(1)(va).

For Assessment Year (A.Y.) 2018–19, taken as the lead case, the assessee filed its return declaring income of Rs. 1,35,79,360. The return was processed under Section 143(1), resulting in an addition of Rs. 2,55,73,010 due to delayed deposit of employees’ PF/ESI contributions. On appeal, the Commissioner of Income Tax (Appeals) partly allowed relief for bonus payments but sustained disallowance of Rs. 2,38,15,146 related to PF/ESI.

The assessee challenged this before the Tribunal, which earlier remanded the matter to the Assessing Officer (AO) for reconsideration, specifically directing examination of whether the “due date” for deposit should be reckoned from the actual date of salary disbursement rather than the due date of salary. However, in the remand proceedings, the AO reiterated the disallowance, holding that the due date must be calculated from when salary was due, not when it was paid, and confirmed the addition due to lack of response and supporting evidence from the assessee.