Abhilakh Singh Sikarwar Vs ITO (ITAT Agra)
The Agra Bench of the Income Tax Appellate Tribunal (ITAT), in Abhilakh Singh Sikarwar v. ITO, held that disallowance of employees’ contribution towards EPF and ESI under Section 36(1)(va) of the Income-tax Act could not be made while processing the return under Section 143(1), as the issue was highly debatable on the date the intimation was issued. Accordingly, the Tribunal quashed the disallowance and allowed the assessee’s appeal.
The appeal arose from an order passed by the JCIT(A), which had upheld the adjustment made by the Centralised Processing Centre (CPC) under Section 143(1). The assessee’s appeal before the Tribunal was filed with a delay of 54 days. Considering the reasons furnished in the condonation petition and in the interest of substantial justice, the Tribunal condoned the delay and admitted the appeal for adjudication.
The sole issue before the Tribunal concerned the disallowance of employees’ contributions to Provident Fund (PF) and Employees’ State Insurance (ESI) under Section 36(1)(va). It was not disputed that the contributions had been deposited after the due dates prescribed under the respective welfare enactments, though they had been remitted before the due date for filing the return of income.
The Tribunal noted that the return had been processed under Section 143(1), resulting in disallowance of ₹33,47,986 on account of delayed remittance of employees’ contributions to PF and ESI. The assessee had challenged this adjustment before the appellate authority. Meanwhile, scrutiny assessment proceedings under Section 143(3) were completed, and the returned income was accepted without making any disallowance under Section 36(1)(va), based on the judicial precedents prevailing at that time in favour of the assessee. The Tribunal observed that, by virtue of the scrutiny assessment, the intimation under Section 143(1) stood merged with the assessment order under Section 143(3). However, since the original intimation had created a tax demand that was the subject matter of appeal, the assessee continued to pursue the appellate remedy.
