Case Law Details
Checkmate Services Pvt. Ltd. Vs DCIT (ITAT Ahmedabad)
Revenue Mismatch Sent Back for Verification Because Party-Wise Reconciliation Was Not Submitted; Late Deposit of Employees’ PF/ESI Contribution Results in Disallowance Under Section 36(1)(va); ITAT Upholds PF/ESI Disallowance While Ordering Fresh Review of Form 26AS Revenue Mismatch
The assessee, a private limited company engaged in providing security personnel services, filed its return of income for Assessment Year 2016-17 declaring a total income of Rs. 14,47,79,040. The return was selected for scrutiny, and the assessment under Section 143(3) resulted in total additions of Rs. 19,78,28,749. The Commissioner of Income-tax (Appeals) upheld the additions, following which the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Ahmedabad.
The first issue concerned the disallowance of Rs. 19,35,93,790 relating to employees’ contribution towards PF/ESI under Section 36(1)(va) read with Section 2(24)(x) of the Income-tax Act. The assessee argued that the contributions had been deposited before the due date for filing the return of income and, therefore, no disallowance should be made. The Tribunal noted that the issue was already covered by the judgment of the Gujarat High Court in CIT v. Gujarat State Road Transport Corporation and by the Supreme Court’s decision in the assessee’s own case, Checkmate Services (P.) Ltd. v. CIT. These decisions held that employees’ contributions to PF/ESI are deductible only if deposited within the due dates prescribed under the respective welfare statutes and not merely before the due date for filing the income tax return under Section 139(1). Relying on these binding precedents, the Tribunal found no error in the order of the CIT(A) and dismissed this ground of appeal.
The second issue related to an addition of Rs. 42,34,959 arising from an alleged mismatch between revenue reflected in the assessee’s audited books of account and Form 26AS. The Assessing Officer observed discrepancies in revenue figures, while the assessee explained that the differences resulted from factors such as different accounting methods followed by customers, deduction of TDS on gross amounts, TDS on reimbursement of expenses, timing differences between financial years, and incorrect PAN details quoted by deductors. However, both the Assessing Officer and the CIT(A) found that the assessee had not furnished a detailed reconciliation supported by documentary evidence.
The Tribunal observed that although the explanations offered by the assessee appeared reasonable and the nature of its business suggested that such mismatches might not necessarily indicate concealment of income, no party-wise reconciliation had been submitted before the lower authorities. In the interest of justice, the Tribunal restored this issue to the jurisdictional Assessing Officer for fresh examination. The Assessing Officer was directed to reconsider the matter after providing the assessee with a reasonable opportunity of being heard. The assessee was also directed to submit a complete party-wise reconciliation along with all supporting documents.
Accordingly, the Tribunal dismissed the ground relating to delayed deposit of employees’ PF/ESI contributions and restored the issue concerning the Form 26AS revenue mismatch for fresh examination. The appeal was therefore partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order dated 16.07.2025 passed by the Ld. Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (`Ld. CIT(A)’ in short), under Section 250 of the Income-tax Act, 1961 (the Act’ in short), relating to the Assessment Year 2016-17.
2. The effective grounds raised by the assessee are as follows:-
1. The CIT(A) has erred both in Law and in Fact in confirming the disallowance of Rs. 19,35,93,790/- alleged it to be delayed Payment to Employees Contribution to PPF/ESL
2. Your Appellant submit that in view of facts and circumstances of the case and as per provisions of Law as then existed the payment is made before filing Return of Income and therefore disallowance is not called for. The AO has failed to give any Show Cause Notice and the amount that he had wanted all.
3. The CIT(A) has also erred in confirming applicability of Sec.26AS and confirming addition of Rs. 42,34,959/- as alleged difference in revenue receipt between books of accounts and as per 26AS. Your Appellant a Private Ltd. Co. has been regularly maintaining Books of Accounts duly audited and also subject to Tax Audit and same method of accounting is followed from year to year by the Company and accepted by Income Tax Department regarding tax at source and payment of tax to the revenue and it is a case of “mismatch”.
4. Difference arises on account of method of accounting followed by Appellant and its constitutes & clients and suppliers and over period of time the difference is reconciled and there is no short fall as alleged.
Your Appellant submits that since the time available at the time of Assessment was short and the amount of alleged difference involved being very large reconciliation couldn’t made and it is submitted that to arrive at the correct figure of addition if any a chance of Reconstitution/Reconciliation be given as it is done in many cases.
3. The brief facts of the case are that the assessee is engaged in the business of providing security personnel services and operates as a private limited company. It filed its return of income on 17.10.2016 declaring a total income of Rs.14,47,79,040/-. The case was subsequently selected for scrutiny and the assessment was completed under Section 143(3) of the Act on 03.12.2018, making total additions of Rs.19,78,28,749/-. The assessee challenged the order before the Ld. CIT(A), who confirmed the disallowances, leading to the present appeal.
Disallowance of Employees’ Contribution to PF/ESI
4. The Assessing Officer made a disallowance under Section 36(1)(va) r.w.s. 2(24)(x) of the Act for delay in deposit of employees’ contribution to PF/ESI beyond the due date as prescribed under the statute. We find that the issue stands squarely covered against the assessee by the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation in Tax Appeal No. 637 of 2013 and the judgement of the Hon’ble Apex Court in assessee’s own case, i.e. Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178, wherein it was held that employees’ contribution to PF/ESI is allowable as deduction only if deposited within the due dates as prescribed under the respective Acts and not merely by the date of filing return under Section 139(1) of the Act.
4.1 In view of the binding precedent of the Hon’ble Supreme Court and Hon’ble High Court, we find no infirmity in the order of the Ld. CIT(A). Accordingly, this ground of appeal is dismissed.
Addition on Account of Revenue Mismatch with Form 26AS
5. This ground pertains to the addition made by the Assessing Officer and confirmed by the CIT(A) on account of alleged difference between the revenue as per books of accounts and Form 26AS. The Assessing Officer observed discrepancies to the extent of Rs.42,34,959/- in revenue reported in Form 26AS and as per the assessee’s audited books. The assessee submitted that the mismatch was due to various practical issues such as (0 different accounting methods adopted by customers, (ii) deduction of TDS on gross amount, (iii) TDS on reimbursement of expenses, (iv) timing differences due to financial year mismatches, (v) incorrect PAN quoted by deductors etc… The Ld. CIT(A) observed that the assessee has given general type of reasons for the said difference in revenue receipts as per books and Form 26AS, but failed to reconcile or justify the mismatch with supporting documents.
5.1 We have carefully considered the submissions and the documents available on record. While the assessee has offered some reasonable explanations for the discrepancies, no detailed party-wise reconciliation has been submitted either before the Assessing Officer or the CIT(A) to substantiate these claims. Given the nature of the assessee’s business, such mismatches may not be indicative of income concealment. Therefore, in the interest of justice, we consider it appropriate to restore this matter to the file of the JAO for a fresh examination. The JAO shall re-examine the reconciliation to be provided by the assessee, after affording the assessee a reasonable opportunity of being heard. The assessee is directed to submit a complete party-wise reconciliation along with all necessary supporting documents.
This ground is accordingly allowed for statistical purposes.
6. In the result, appeal of the assessee is partly allowed for statistical purposes.
The order is pronounced in the open Court on 17.06.2026.
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