Kanthi Agency Networks Vs Assessing Officer CPC (ITAT Bangalore)
Bangalore ITAT Deletes ₹36.43-Lakh PF/ESI Adjustment: CPC Cannot Decide a Debatable Issue Under Section 143(1)
The assessee deposited employees’ contributions to PF and ESI after the due dates prescribed under the respective welfare laws but before filing its return for AY 2019-20. While processing the return on 10 April 2020, CPC disallowed ₹36,42,529 under Section 143(1) based on the tax audit report. The first appellate authority dismissed the appeal for non-prosecution.
The Bangalore ITAT noted that when the intimation was issued, conflicting High Court decisions existed on the allowability of delayed employees’ contributions. Significantly, the jurisdictional Karnataka High Court had taken a view favourable to the assessee. Therefore, the issue was clearly debatable and fell outside the limited scope of prima facie adjustments permissible under Section 143(1).
The Tribunal acknowledged that the Supreme Court’s later ruling in Checkmate Services (P.) Ltd. v. CIT applies retrospectively unless expressly made prospective. However, the relevant question was whether CPC could have made the adjustment on the date of processing, when the issue was debatable and the binding jurisdictional precedent favoured the assessee. A later Supreme Court ruling could not retrospectively validate an adjustment that was beyond CPC’s jurisdiction when made.
The Tribunal also noted that the Finance Act, 2021 amendments concerning employees’ contributions and corresponding processing adjustments were expressly made applicable from AY 2021-22 onwards.
Accordingly, the Tribunal directed deletion of the entire ₹36.43-lakh adjustment.
List of Cases Discussed / Relied Upon
- Checkmate Services Private Limited Vs. Commissioner of Income Tax-11— Supreme Court — dated 12.10.2022; reported in (2022) 448 ITR 518 (SC). The supplied analysis expressly discusses this decision on the allowability of employees’ PF/ESI contributions and its retrospective application.
- Shri Chandrakant Shamappa Kontha vs. DCIT— ITAT Bangalore — ITA Nos. 2396 & 2397/Bang/2024, dated 12.2025. The supplied Tribunal order expressly follows this coordinate-bench decision.
- CIT v. Premkumar Arjundas Luthra (HUF)— Bombay High Court — [2016] 297 CTR 614 (Bombay). It is expressly cited in Ground No. 2 concerning dismissal of an appeal by the CIT(A) for non-prosecution.
- Sanjay Kumar Sharma versus Income Tax Officer— Chhattisgarh High Court — (2025) 174 com592 (Chhattisgarh). The supplied coordinate-bench decision expressly discusses this case in relation to the Section 143(1) adjustment issue.
- Principal Commissioner of Income Tax versus TV Today Network Ltd— Delhi High Court — (2022) 141 taxmann.com 275 (Delhi). The supplied coordinate-bench decision expressly refers to this decision concerning the Finance Act, 2021 amendments and their applicability from AY 2021-22. TaxGuru material also identifies the decision as ITA 227/2022, order dated 27.07.2022.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against the order of the ld. Addl/JCIT(A), Ranchi dated 08.11.2025 vide DIN & Order No. ITBA/APL/S/250/2025-26/1082408609 (1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2019-20.
