A2Z Infra Services Limited Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, adjudicated two appeals concerning assessment years 2017–18 and 2019–20 involving disallowance of employees’ and employer’s contributions to Provident Fund (PF) and Employees’ State Insurance (ESI). The primary issue was whether disallowance under Section 36(1)(va) read with Section 2(24)(x) could be made while processing returns under Section 143(1). The assessee contended that, at the time of issuance of intimations under Section 143(1) (dated 28.03.2019 and 07.07.2020), the issue of allowability of delayed employee contributions was highly debatable, with divergent judicial views and a binding jurisdictional High Court ruling in favour of the assessee allowing deduction if payment was made before the due date of filing the return.
The Tribunal noted that the Supreme Court decision in Checkmate Services Pvt. Ltd., which clarified that such contributions must be deposited within the due dates prescribed under relevant statutes, was delivered only on 12.10.2022. Therefore, prior to this ruling, the issue remained unsettled and debatable. Relying on the decision of the Chhattisgarh High Court, the Tribunal held that such debatable issues could not be subject to adjustment under Section 143(1), which is limited to prima facie errors.
Accordingly, the Tribunal directed deletion of disallowances made under Section 36(1)(va) for both assessment years. Other grounds on merits were not adjudicated as they became academic. Additionally, issues relating to alleged double additions were restored to the Assessing Officer for verification, with directions to delete additions if found correct. The appeals were partly allowed.
