Kaushal Kumar Vs ITO (ITAT Kolkata)
Summary: The Kolkata Bench of the Income Tax Appellate Tribunal considered two appeals filed by the assessee for Assessment Years 2019-20 and 2020-21 against separate orders of the Commissioner of Income Tax (Appeals)-NFAC, Delhi dated 09.03.2023. Since the issues involved in both appeals were common, the Tribunal heard them together and disposed of them through a common order.
The Registry reported that both appeals were barred by limitation by 866 days. The assessee, however, filed petitions seeking condonation of delay of 851 days. The assessee explained that the delay arose against the backdrop of the change in the legal position concerning deduction of belated employees’ ESI and EPF contributions following the Supreme Court’s decision in Checkmate Services (P.) Ltd. Vs. Commissioner of Income Tax-1. The assessee stated that subsequent decisions of the Mumbai ITAT in Master Polisher and the jurisdictional Kolkata ITAT in Payal Enterprise Vs DCIT gave rise to the belief that relief could still be available on a different legal basis. The assessee also relied upon the decision in Collector of Land Acquisition Vs. Mst. Katiji for condonation of delay.
After considering the petition, the Tribunal was satisfied that the assessee had a reasonable and sufficient cause and had been prevented from filing the appeals within the statutory period. The delay was accordingly condoned and the appeals were admitted for adjudication.
In the lead appeal, ITA No. 2618/KOL/2025 for AY 2019-20, the assessee had filed its return of income which was processed under section 143(1) of the Income Tax Act, 1961. Employees’ contribution towards ESIC/EPF amounting to ₹22,89,194/- was disallowed by CPC, Bengaluru under section 36(1)(va) on the ground that the payments had been deposited after the due dates prescribed under the respective legislation.
The CIT(A) dismissed the assessee’s appeal after considering the amendment to section 43B and relying upon the Supreme Court decision in Checkmate Services (P.) Ltd. The CIT(A) recorded that, under section 2(24)(x), employees’ contributions were treated as deemed income and that deduction under section 36(1)(va) was available only where the contribution was credited to the employees’ account in the relevant fund within the applicable due date.
Before the Tribunal, the assessee raised several grounds. It contended, among other things, that most payments were made within the due date and that the few delayed payments were attributable to technical glitches in the EPF official portal. The assessee further challenged the validity of the adjustment under section 143(1), contending that no notice inviting objections against the proposed disallowance had been issued. It also contended that CPC could make the adjustment only in the circumstances contemplated under section 143(1)(a)(iv), including where the auditor had suggested the relevant disallowance.
The assessee also advanced an argument concerning the computation of the statutory due date under the PF Scheme, 1952. According to the assessee, the expression “every month” in section 38 of the PF Scheme referred to the month in which salary or wages were actually paid rather than the month for which salary or wages were due. On that basis, the assessee contended that the payments were within the applicable due dates. The assessee further relied upon the principle stated in National Thermal Power Co. Vs. CIT for raising legal grounds before the Tribunal.
The Tribunal noted the submissions concerning the Supreme Court’s decision in Checkmate Services and was specifically referred to paragraph 6.1 of Payal Enterprise Vs DCIT, ITA No. 1203/KOL/2024, order dated 25.11.2024, as well as Kamakshi Jute Industries Ltd. Vs. DCIT, CPC, [2024] 162 taxmann.com 196 (Kolkata – Trib.), order dated 22.02.2024.
For AY 2019-20, the Tribunal also noted that the show cause notice was stated to have been issued on 18.02.2020 and the intimation was issued on 14.07.2020.
After considering the facts, submissions and documents filed, the Tribunal held that, in view of the decisions in Payel Enterprise and Kamakshi Jute Industries Ltd., the matter required further examination. It therefore set aside the CIT(A)’s order and remanded the matter to the Assessing Officer.
The Assessing Officer was directed to examine the challans and dates of payment and allow the deduction as per law. The assessee was required to file details of the challans and establish before the Assessing Officer that the facts of its case were similar to those in Payel Enterprise. The Assessing Officer was also directed to examine whether CPC had issued a show cause notice before making the adjustment and to take necessary action in accordance with law.
Thus, the Tribunal did not finally adjudicate the allowability of the disputed PF/ESI contributions on the merits. The relevant grounds were allowed for statistical purposes, with the matter restored for verification and fresh action by the Assessing Officer. The remaining grounds were treated as general in nature and did not require separate adjudication.
For AY 2020-21, the Tribunal found the facts to be identical and directed that its findings for AY 2019-20 would apply mutatis mutandis. The appeal for AY 2020-21 was also partly allowed for statistical purposes.
Consequently, both appeals filed by the assessee were partly allowed for statistical purposes. The order was pronounced in the open Court on 24th February, 2026.
Cases Discussed
- Checkmate Services (P.) Ltd. Vs. Commissioner of Income Tax-1, [2022] 143 taxmann.com 178 (SC)/[2023] 290 Taxman 19 (SC)/[2022] 448 ITR 518 (SC) — relied upon by the CIT(A) for the proposition concerning the allowability of employees’ PF/ESI contributions deposited after the statutory due date.
- Payal Enterprise Vs DCIT, ITA No. 1203/KOL/2024 — considered by the Tribunal in directing fresh examination of the assessee’s challans, payment dates and similarity of facts.
- Kamakshi Jute Industries Ltd. Vs. Deputy Commissioner of Income-tax, CPC, [2024] 162 taxmann.com 196 (Kolkata – Trib.) — considered along with Payal Enterprise while deciding to set aside the CIT(A)’s order and restore the matter for examination.
- Collector of Land Acquisition Vs. Mst. Katiji — referred to by the assessee in support of its petition seeking condonation of the substantial delay in filing the appeals.
Appellant was represented by: Shuvo Chakraborty, Adv.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
These appeals filed by the Assessee are against the separate orders of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AYs 2019-20 & 2020- 21 dated 09.03.2023. Since the issues are common, both the appeals were heard together and are being decided vide this common order for the sake of convenience and brevity.
1.1 The Registry has informed that both the appeals are barred by limitation by 866 days. However, the assessee has filed a petition for condonation of delay for 851 days explaining the reasons as under:
“That the honest and bonafide reason of said substantial delays for filing this second appeal before the Hon’ble ITAT rest on most convincing issue of a paradigm shift in the mandate of section 43B under which all employers in the PAN INDIA used to get deduction of belated payment of statutory ESI and EPF payments before the due date of filing of the original return u/s 139(1) in view of Hon’ble Apex court judgment in the Checkmate Services Put. Ltd. Vs. Commissioner of Income Tax-1 which for million of assesses shut the door of opportunity to claim deduction u/s 43B for belated EPF and ESI payments accordingly. So similarly present appellant was in bonafide belief of not getting any relief from the higher judicial forum on said addition/disallowance. However that legal perspective took an interesting turn due to passing of Honble ITAT, MUMBAI Bench judgment in the MASTER POLISHER wherein Honble ITAT MUMBAI taking full consideration of the said legal development allowed the belated EPF, ESI payments on different legal angle and Honble jurisdictional ITAT following the said order allowed belated EPF, ESI payments in PAYEL ENTERPRISE case in 2024. However due to long delay of reporting of said two decisions in the journals lower consultant of the appellant and even the Ld. CIT(A) passing the impugned appellate order were in completely dark about such important legal development and for that reason appellant accepted the said first appellate order as sacrosanct. But after reporting of said two important judgments in the different tax journals lower consultant of your appellant came to know about such important legal development post of CKECKMATE Judgment but was unable to obtain any contact link with the LD. Advocate who was A/R of the appellant in the said jurisdictional case and was at last able to obtain it in the fag end of OCTOBER, 2025 and his whereabouts.
In view of afore delineated facts and circumstance appellant is hopeful that Hon’ble Bench will appreciate the genuineness and bonafide reason of said delay orbited with the continuous judicial legal development thus instilling confidence on your appellant mind to take the issue to the higher judicial forum for ends of justice. In view of settled law of Honble Apex court in COLLECTOR OF LAND ACQUISITION VS MST, KARJI, your appellant prays before the Honble Bench to condone this unintended delay beyond the control of your appellant in the interest of substantive justice. Appellant will file affidavit along with the paper book to be filed for this end.”
1.2 After perusing the petition seeking condonation of delay, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication.
2. The Assessee is in appeal before the Tribunal raising the following grounds of appeal:
I. ITA No. 2618/KOL/2025; AY 2019-20:
“l. For that confirmation of disallowance of ESI and EPF expenses of Rs.22,89,19 by the Ld.CIT(A) NFAC of the intimation order passed by CPC u/s 143(1) for belated payments is bad in law and unjust.
2. For that most of the payments were made within due date and only few were beyond the due date with little delay and that too for PAN INDIA technical glitches in the EPF official portal and several Honble ITAT Benches granted relief for the said selfsame cause.
3. For that the very intimation order of CPC U/ S 143(1) is invalid in law for the reasons of firstly non sending any notice to the appellant inviting objection against the proposed disallowance per mandate of section 143(1)(a) by passing a simple template order, secondly CPC can effect such disallowance only if appellant auditor suggested the disallowance for delayed payments under section 143(1) (a)(iv) which is not in case of appellant. Therefore CPC patently violated two explicit and clear mandates of section 143(1)(a).
4. For that both the A.O, CPC and CIT(A) failed to appreciate the settled legal position that the said belated payments of EPF and ESIC are allowable on the strength of section 38 of PF Scheme, 1952 whereby the employer is required to deposit the EPF/ ESI contribution of the assessee within 15 days of the close of every month and that ‘every month’ is the month of payment of salary or wages due to the employee and not the month for which salary or wages are due to the employees. If the month 1s taken as the month of payment of the wages to the employees then the all the belated payments are within the due dates. Appellant case is fully covered by the recent order of jurisdictional ITAT post of Honble Apex court judgment in Checkmate Services Put. Ltd. Hence allowable deduction for being the timely deposits per the due dates of EPF and ESIC ACTS.
5. For that all the grounds are purely legal issues going root of this appeal can be raised before the Honble ITAT first time in view of Honble Apex court settled law in NTPC VS CIT.
6. For that appellant may modify the grounds.”
II. ITA No. 2619/KOL/2025; AY 2020-21:
“1. For that confirmation of disallowance of ESI and EPF expenses of Rs.22,89,19 by the Ld.CIT(A) NFAC of the intimation order passed by CPC u/s 143(1) for belated payments is bad in law and unjust.
2. For that most of the payments were made within due date and only few were beyond the due date with little delay and that too for PAN INDIA technical glitches in the EPF official portal and several Honble ITAT Benches granted relief for the said selfsame cause.
3. For that the very intimation order of CPC U/ S 143(1) is invalid in law for the reasons of firstly non sending any notice to the appellant inviting objection against the proposed disallowance per mandate of section 143(1)(a) by passing a simple template order, secondly CPC can effect such disallowance only if appellant auditor suggested the disallowance for delayed payments under section 143(1)(a) (iv) which is not in case of appellant. Therefore CPC patently violated two explicit and clear mandates of section 143(1)(a).
4. For that both the A.O, CPC and CIT(A) failed to appreciate the settled legal position that the said belated payments of EPF and ESIC are allowable on the strength of section 38 of PF Scheme, 1952 whereby the employer is required to deposit the EPF/ ESI contribution of the assessee within 15 days of the close of every month and that ‘every month’is the month of payment of salary or wages due to the employee and not the month for which salary or wages are due to the employees. If the month is taken as the month of payment of the wages to the employees then the all the belated payments are within the due dates. Appellant case is fully covered by the recent order of jurisdictional ITAT post of Honble Apex court judgment in Checkmate Services Put. Ltd. Hence allowable deduction for being the timely deposits per the due dates of EPF and ESIC ACTS.
5. For that all the grounds are purely legal issues going root of this appeal can be raised before the Honble ITAT first time in view of Honble Apex court settled law in NTPC VS CIT.
6. For that appellant may modify the grounds.”
II. ITA No. 2619/KOL/2025; AY 2020-21:
“ 1 For that confirmation of disallowance of ESI and EPF expenses of Rs.22,89,19 by the Ld.CIT(A) NFAC of the intimation order passed by CPC u/s 143(1) for belated payments is bad in law and unjust. 2 For that most of the payments were made within due date a nd only few were beyond the due date with little delay and that too for PAN INDIA technical glitches in the EPF official portal and several Honble ITAT Benches granted relief for the said selfsame cause.
3. For that the very intimation order of CPC U/S 143(1) is invalid in law for the reasons of firstly non sending any notice to the appellant inviting objection against the proposed disallowance per mandate of section 143(1)(a) by passing a simple template order, secondly CPC can effect such disallowance only if appellant auditor suggested the disallowance for delayed payments under section 143(1)(a) (iv) which is not in case of appellant. Therefore CPC patently violated two explicit and clear mandates of section 143(1)(a).
4. For that both the A.O, CPC and CIT (A) failed to appreciate the settled legal position that the said belated payments of EPF and ESIC are allowable on the strength of section 38 of PF Scheme, 1952 whereby the employer is required to deposit the EPF/ESI contribution of the assessee within 15 days of the close of every month and that ‘every month’ is the month of payment of salary or wages due to the employee and not the month for which salary or wages are due to the employees. If the month is taken as the month of payment of the wages to the employees then the all the belated payments are within the due dates. Appellant case is fully covered by the recent order of jurisdictional ITAT post of Honble Apex court judgment in Checkmate Services Pvt. Ltd. Hence allowable deduction for being the time ly deposits per the due dates of EPF and ESIC ACTS.
5. For that all the grounds are purely legal issues going root of this appeal can be raised before the Honble ITAT first time in view of Honble Apex court settled law in NTPC VS CIT.
6. For that appellant may modify the grounds.”
3. We shall take up ITA No. 2618/KOL/2025 for AY 2019-20 as the lead case. Brief facts of the case are that the assessee had filed its return of income for the AY 2019-20 which was processed u/s 143(1) of the Act in which employees’ contribution of ESIC/EPF of ₹22,89,194/- was disallowed by the CPC, Bengaluru u/s 36(1)(va) of the Act as the same was deposited after due dates of the respective legislation. Aggrieved with the intimation, the assessee filed an appeal before the Ld. CIT(A) who has considered the facts of the case, the amendment to section 43B of the Act and has relied upon the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. vs. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC)/[2023] 290 Taxman 19 (SC)/[2022] 448 ITR 518 (SC)[12-10-2022] dismissed the appeal of the assessee. The relevant extract from the appeal order is as under:
“5.7. The Hon’ble Supreme Court in its recent decision in Civil Appeal No.2833 of 2016 in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-1 dated 13.10.2022 overruled all the verdicts given by the other Hon’ble Courts and held that the employees’ contributions are deductible if paid before the statutory due date. The Hon’ble Supreme Court ruling effectively endorses the amendments made by Finance Act, 2021 with effect from tax year 2020- 21 in line with the minority view and makes it clarificatory in nature having retrospective effect to all past tax years. The relevant extract of the judgement reproduce as under:-
“In the opinion of this Court, the reasoning in the impugned judgment that the non- obstante clause would not in any manner dilute or override the employer’s obligation to deposit the amounts retained by it or deducted by it from the employee’s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non- obstante clause has to be understood in the context of the entire pro vision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay o ut. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms o f those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are depos ited on or before the due date. If such interpretation were to be adopted, the non- obstante clause under Section 438 or anything contained in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or befo re the due date as a condition for deduction.
55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.”
5.8 Therefore, under the provisions of section 2(24)(x) of the Act, the contributions from employees are, firstly treated as deemed income and subject to tax in the hand of the employer. It is further stated under section 36(1) (va) of the Act that the employer will not get deduction unless the employer credits such contribution to the employee’s account in the relevant fund within the due date applicable for the relevant fund. In the instant case, the appellant stated that he had not claimed any deduction in respect of contribution of EPF/ESI collected from the employees. But as pe r the provisions, the collected contributions firstly treated as deemed income and then, the assessee may claim the deductions only in respect of contributions which were deposited before the due date of respective legislation. In the instant case, as per the Tax Audit Report, the appellant collected the EPF/ESI contributions of Rs.22,89,194/- and all of these contributions of Rs.22,89,194/- were deposited after due date of respective legislation. It is clear that if the appellant claims the deduction of employee’s contribution, he will get no deduction as all the contributions were deposited after the due date and his income would has been increased by Rs.22,89,194/- . The claiming of deductions in the return of income is voluntary act of the appellant but c ontributions collected from the employees is obligatory in nature and is considered as deemed income as per provisions of the section 2(24)(x) of the Act. Therefore, in view of the above discussions, the AO is directed to make addition of Rs.22,89,194/- in appellant’s total income and re- compute the income after allowing deductions as claimed in the return of income, if any. Thus, the grounds of appeal No.1&2 raised by the appellant are dismissed.
6. In the result, the appeal is dismissed.”
4. Aggrieved with the order of the Ld. CIT(A), the Assessee has filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made have been examined. It was stated before us that the order in Checkmate Services (P.) Ltd. (supra) was passed on 12.10.2022 and our attention was drawn to para 6.1 in the case of Payel Enterprise vs. DCIT in No. 1203/KOL/2024 order dated 25.11.2024 which is at page 54 of the paper book filed and also the decision in the case of Kamakshi Jute Industries Ltd. vs. Deputy Commissioner of Income-tax, CPC [2024] 162 taxmann.com 196 (Kolkata – Trib.)[22-02-2024] which appears at page 49 of the paper book and also to para 6.2 at page 52 of the paper book. For AY 2019-20, the show cause notice was issued on 18.02.2020 and the intimation was issued on 14.07.2020.
6. We have considered the facts of the case, the submissions made and the documents filed. Considering the decision in Payel Enterprise (supra) and Kamakshi Jute Industries Ltd. (supra), in the interest of justice and fair play we hereby set aside the order o f the Ld. CIT(A) and remand the matter to the Ld. AO who shall examine the challans and the date of payment and shall allow the deduction as per law as the assessee contends that no show cause notice was issued prior to making the adjustment and as per the details filed before us, the payments are appearing as belated. The assessee shall file the details of the challans and also establish before the Ld. AO that the facts of the case of the assessee are similar to the facts of the case of Payal Enterprise (supra). The Ld. AO shall also examine whether the CPC had issued in the show cause notice prior to making adjustment and take necessary action as per law. Hence, Ground Nos. 3 and 4 are allowed for statistical purposes, while other grounds of appeal being general in nature do not require any separate adjudication.
7. Since the facts in the appeal in ITA No. 2619/KOL/2025 for AY 2020-21 are identical, our findings in AY 2019-20 shall mutatis mutandis also apply in the appeal for AY 2020-21. The grounds by the assessee in this appeal are also partly allowed for statistical purposes.
8. In the result, both the appeals filed by the Assessee are partly allowed for statistical purposes.
Order pronounced in the open Court on 24th February, 2026.
