Dondapati Sudhakara Rao Vs ITO (ITAT Hyderabad)
The Income Tax Appellate Tribunal (ITAT), Hyderabad, considered an appeal against an order of the CIT(A) arising from an intimation issued under Section 143(1) for assessment year 2020–21. The assessee, engaged in providing security services, had filed a return declaring income of Rs. 11,11,250. The Centralized Processing Centre (CPC) disallowed a deduction of Rs. 36,63,930 relating to delayed deposit of employees’ contribution to Provident Fund (PF) and Employees’ State Insurance (ESI), resulting in assessed income of Rs. 50,83,778. The CIT(A) upheld the disallowance in an ex parte order.
Before the Tribunal, the assessee argued that the disallowance was made on a debatable issue at the time of processing under Section 143(1), as the legal position regarding allowability of delayed deposits was unsettled prior to the Supreme Court decision in Checkmate Services Pvt. Ltd. dated 12.10.2022. It was contended that such debatable issues fall outside the scope of adjustments permissible under Section 143(1). The Revenue supported the lower authorities, relying on statutory provisions clarifying due dates.
The Tribunal observed that the core issue was whether delayed employee contributions could be disallowed through a summary intimation under Section 143(1) before the Supreme Court had settled the law. Relying on the decision of the Chhattisgarh High Court, the Tribunal held that prior to the Supreme Court ruling, the issue was highly debatable due to divergent High Court views. It reiterated that adjustments under Section 143(1) are limited to apparent errors and cannot extend to debatable matters requiring detailed examination.
