Sanjay Kumar Sharma Vs ITO (Chhattisgarh High Court)
Summary: The Chhattisgarh High Court allowed the appeal concerning Assessment Year 2020-21 and held that the Assessing Officer could not make a prima facie adjustment under Section 143(1)(a) of the Income Tax Act, 1961 in respect of delayed employees’ contribution towards ESI and EPF when the legal issue was highly debatable on the date of processing the return. The assessee’s return had been processed and an intimation dated 30.11.2021 disallowed ₹44,46,494/- under Section 36(1)(va). At that time, conflicting judicial views existed regarding whether employees’ contributions deposited after the statutory due dates but before the due date for filing the return could qualify for deduction. The Supreme Court subsequently settled the issue in Checkmate Services Pvt. Ltd. on 12.10.2022. Following the principles laid down in Kvaverner John Brown Engg. (India) Pvt. Ltd. and Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., the High Court held that Section 143(1)(a) is intended for summary adjustments and does not permit adjudication of debatable issues. The disallowance and subsequent orders were set aside, with liberty reserved to the Revenue to proceed in accordance with law.
Issue Before the Chhattisgarh High Court
The appeal under Section 260A of the Income Tax Act, 1961 was admitted on 09.04.2025 on the substantial question whether the CIT(A) and ITAT were justified in upholding processing of the assessee’s return under Section 143(1)(a), despite the existence of conflicting judgments on the issue of the due date for depositing employees’ contributions and whether the Assessing Officer ought instead to have proceeded under Section 143(3) or Section 147.
₹44.46 Lakh ESI/EPF Disallowance Under Section 143(1)(a)
The assessee filed its return for Assessment Year 2020-21. The return was processed by the Central Processing Centre, Bengaluru/Assessing Officer and an intimation dated 30.11.2021 was issued under Section 143(1)(a).
