Income Tax Appellate Tribunal - Delhi
Rakesh Malhotra vs Dcit Circle 5(2)(1), Noida, on 13 May, 2026
1
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E", NEW DELHI
BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
and
MS. MADHUMITA ROY, JUDICIAL MEMBER
ITA No.382/DEL/2026
(Assessment Year:2018-19)
ITA No.383/DEL/2026
(Assessment Year:2019-20)
ITA No.384/DEL/2026
(Assessment Year : 2020-21)
Rakesh Malhotra, vs. DCIT, Circle 5(2)(1),
C/o IPSO Legal, H-35, 1st Floor, Noida.
Jangpura Extension,
New Delhi - 110 014.
(PAN: ACNPM2754Q)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Dishant Sethi, Advocate
Shri Shyam Sunder, Advocate
REVENUE BY : Shri Om Prakash, Sr. DR.
Date of Hearing : 06.05.2026
Date of Order : 13.05.2026
ORDER
PER S. RIFAUR RAHMAN, AM :
1. The assessee has filed appeals against the order of the Learned Addl./JCIT (Appeals)-3, Chennai ["Ld. JCIT(A)", for short] dated 26.11.2025 for the 2 ITA Nos.382 to 384/DEL/2026 Assessment Years 2018-19 to 2020-21.
2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. We take up the assessee's appeal being ITA No.382/Del/2026 for AY 2018-19 as lead case to adjudicate the issue under consideration.
3. The only issue involved in this appeal is regarding disallowance of Rs.4,53,293 under section 36(1)(va) of the Income-tax Act relating to the late payment towards ESI & PF.
4. Brief facts of the case are, the assessee filed his return of income for AY 2018-19 on 29.04.2019 declaring total income of Rs.67,31,710/-. The case was processed u/s 143(1) on 29.04.2019 wherein addition of Rs.4,53,293/-
was made in respect of late deposit of employees contribution to PF/ESIC.
Aggrieved with the above order, assessee preferred an appeal before the ld.
CIT (A) which was dismissed vide order dated 26.11.2025. Aggrieved against the said order, assessee is in appeal before us.
5. Before us, ld. AR of the assessee submitted that the lower authorities have mainly relied on the decision of the Hon'ble Apex Court in the case of Checkmate Services (P) Ltd. Vs. CIT (2022) 448 ITR 518 which is misplaced considering the facts of the case. He has argued that the impugned addition has been made u/s 143(1) when such an adjustment is clearly 3 ITA Nos.382 to 384/DEL/2026 outside the scope of adjustments envisaged under the section. Further ld. AR has placed reliance on multiple decisions of the Hon'ble High Court and the ITAT wherein on similar facts and circumstances disallowance made in respect of late deposit of employees' contribution to PF/ESI has been deleted especially in cases pertaining to the assessment years prior to the decision of the Hon'ble Supreme Court in the case of Checkmate Services (supra). The decisions relied upon by the ld. AR of the assessee are as under :-
1. R.K. & Company Manpower Pvt. Ltd. vs. DCIT in ITA No.6600/Del/2025 order dated 29.04.2026;
2. Kota Trucks P. Ltd. vs. ACIT Circle in ITA NO.2050/De1/2023 order dated 30.01.2026.
3. O.K. Auto Components Pvt. Ltd. vs. DCIT in ITA No.3584/De1/2025 order dated 29.0l.2026
4. Rajendra Kumar Tripathi vs. ITO in ITA No. 3225/De1/2025 dated 23.07.2025
5. Servokon Systems Ltd. vs. ITO in ITA No.4509/De1/2024 order dated 09.07.2025
6. A2Z Infra Services Ltd. vs. DCIT [2025] 176 taxmann.com 639 (Delhi - Trib.)
7. Raj Kumar Bothra vs. DCIT (2025) 174 taxmann.com 1199 (Chhatisgarh).
6. Accordingly, ld. AR of the assessee pleaded that the ground raised by the assessee may be allowed.
7. On the other hand, ld. DR of the Revenue relied on the orders of the 4 ITA Nos.382 to 384/DEL/2026 authorities below.
8. Considered the rival submissions and material placed on record as well as the relevant judicial pronouncements. Admittedly, the addition u/s 143(1) has been made in the Assessment Year prior to the decision of the Hon'ble Apex Court in the case of Checkmate Services (supra). We are, therefore, of the considered view that the impugned addition was outside the scope of adjustments permissible u/s 143(1) of the Act. We further observed that coordinate Bench in the case A2Z Infra Services Ltd. (supra) decided the issue in favour of the assessee by observing as under :-
"6. We have heard learned counsel for the parties and considered their rival submissions and also went through the record with utmost circumspection.
7. Admittedly, return of the income filed by the appellant/assessee was processed by the Assessing Officer and an intimation order dated 16.12.2021 was issued exercising power under Section 143(1)(a) Act of 1961, wherein, claims for deduction of delayed deposit of employees' share of contribution towards Employees State Insurance and Provident Fund of Rs.28,21,065/- under Section 36 (1)(va) of the Act of 1961 were disallowed, inasmuch as, on the said date, the issue with regard to delayed deposit of contribution with respect to 14 ITA Nos.970/Del/2023 & 72/Del/2024 interpretation under Section 36(1)(va) of the Act of 1961 and whether the assessee is entitled to deduction of amount deposited by them, which was contribution in terms of the EPF Act, 1952 and the ESI Act, 1948 on or before the due date was pending consideration before the Supreme Court in the matter of Checkmate Services Pvt. Ltd. (supra). In the said judgment, their Lordships of the Supreme Court noticed a division of opinion on the issue of interpretation under Section 36(1)(va) of the Act of 1961, with the High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi favouring the interpretation beneficial to the 5 ITA Nos.382 to 384/DEL/2026 assessees on the one hand, and the High Courts of Kerala and Gujarat preferring the interpretation in favour of the Revenue on the other hand. Ultimately, their Lordships resolved the issue authoritatively by holding that to claim deduction under Section 36(1)(va) of the Act of 1961, the employees' contribution should be deposited on or before the due dates specified under the respective Employee Welfare Act. Their Lordships of the Supreme Court settled the issue by making the following observation: -
"62. The distinction between an employer's contribution which is its primary liability under law - in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts - the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B.
63. 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 provision 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 6 ITA Nos.382 to 384/DEL/2026 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 out. 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 of 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 deposited on or before the due date. If such interpretation were to be adopted, the non- obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction."
8. As such, their Lordships of the Supreme Court, in the above judgment rendered on 12.10.2022, settled the issues authoritatively and also clarified the legal position. In the instant case, at the time of passing of the intimation order under Section 143(1)(a) of the Act of 1961 on 16.12.2021, the decision of Supreme Court in Checkmate Service Pvt. Ltd (supra) was not available in view of the divergent view amongst the various High Courts, as it was rendered on 12.10.2022.
9. At this stage, it would be appropriate and beneficial to notice the nature of powers under subsection (1) of Section 143 as against sub-sections (2) and (3) of the Act of 1961. The power under sub- section (1) of Section 143 of the Act of 1961 is summary in nature designed to cause adjustment which is apparent from the return while that under sub-sections (2) and (3) is to scrutinize the return and cause deeper probe to arrive at correct determination of the liability (See :
Vodafone Idea Limited Vs. Assistant Commissioner of Income Tax Circle10. Para 17).
10. Further, in Section 143(1) (a) of the Act of 1961, the procedure 7 ITA Nos.382 to 384/DEL/2026 to process the return in a given case is provided. Section 143(1)(a) is produced hereunder reference:-
..................
11. In the matter of Kvavemer John Brown Engg. (India) Pvt. Ltd. (supra), their Lordships of the Supreme Court observed that when there are conflicting judgments on interpretation of Section 80-0 of the Act of 1961 prima facie adjustments contemplated under Section 143 (1) (a) is not applicable and observed as under :-
"...When there were conflicting judgments on interpretation of Section 80-0, in our view, prima facie adjustments contemplated under Section 143(1) (a) was not applicable and, therefore, consequently appellant was not liable to pay additional tax under Section 143 (1A) of the 1961 Act."
12. Similarly, in the matter of Rajesh Jhaveri Stock Brokers Pvt (supra), their Lordships of the Supreme Court held explicitly that the Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues under Section 143(1)(a) of the Act of 1961 and held as under:-
"11. What were permissible under the first proviso to section 143(1)(a) to be adjusted were, (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction allowance or relief, which was prima facie admissible on the basis of information available in the return but not claimed in the return and similarly (iii) those claims which were on the basis of the information available in the return, prima facie inadmissible, were to be rectified/ allowed/disallowed. What was permissible was correction of errors apparent on the basis of the documents accompanying the return. The Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the Assessing Officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief."
13. Coming back to the facts of the present case, while following the principles of law laid down in above stated judgments of the 8 ITA Nos.382 to 384/DEL/2026 Supreme Court for exercise of power and jurisdiction under Section 143 (1) (a) of the Act of 1961, it is quite vivid that on the date of issuance of intimation order by the Assessing Officer i.e. on 16.12.2021 under Section 143C(1)(a) of the Act of 1961, the issue as to whether the delayed deposit of employees' share of contribution towards Employees State Insurance and Employees Provident Fund, though deposited by the assessee beyond the due date prescribed under the relevant Acts, but before the due date of filing of the return of income under Section. 139(1) of the Act of 1961, could be held as the income of the appellant/assessee under Section 36(1)(va) read with Section 2(24)(x) of the Act of 1961 or not or whether it is subject to the provisions contained in Section 43-B of the of the Act of 1961, was highly debatable, which was pending consideration before the Supreme Court in Checkmate Services Pvt Ltd (supra) and subsequently, it was resolved by the Supreme Court by the judgment dated 12.10.2022. Furthermore, the assessee in its audit report had only furnished the details of delayed deposit in Column 20 (b) of the Form No.3CB and had not shown the same as disallowance. Therefore, the Assessing Officer has committed a grave legal error in processing the return of the assessee under Section 143(1)(a) of the Act of 1961., in light of principles of law laid down by their Lordships of Supreme Court in the matters of Kvaverner John Brown Engg. (India) Pvt. Ltd (supra) and Rajesh Jhaveri Stock Brokers Pvt (supra).
14. Furthermore, the orders passed in Satpal Singh Sandhu (supra) and ParvBuildcon (Supra) by the ITAT holding that Section 143 (1)
(a) of the Act of 1961 cannot be resorted to in case of highly debatable issue were challenged by the Revenue before this Court by filing two appeals and ultimately, both the appeals vide Tax No. 149/2024 (DCIT Vs. ParvBuildon) and TAX No.1.5/2024 (DCIT Vs. Satpal Singh Sandhu), were withdrawn by the Revenue by orders dated 10.02.2025 and 21.05.2025, respectively, and thereby, the Revenue has allowed the plea of the assessees therein to stand that in a highly debatable issue, the Assessing Officer ought not to have resorted to Section 143(1)(a) of the Act of 1961. Therefore, the Revenue cannot be allowed to take a different stand before different forums as it may lead to uncertainty and chaos.
15. In the instant case, the ITAT has committed a grave legal error by relying upon the decision rendered by this Court in M/s. BPS 9 ITA Nos.382 to 384/DEL/2026 Infrastructure (supra), wherein, this Court has dismissed the appeal preferred by the assessee as barred by limitation summarily without formulating any substantial question of law and as such the 20 ITA Nos.970/Del/2023 & 72/Del/2024 substantial question of law formulated herein in this appeal was neither involved, formulated and answered in M/s. BPS Infrastructure (supra).
16. Furthermore, the submission of the Revenue that the judgment passed in Checkmate Services Pvt Ltd (supra) would have retrospective effect, as held in Ramesh Prasad Verma (supra), PV George (supra) and in R.R. Kishore's case (supra), is no longer a dispute and well settled as the law declared by a Court will have a retrospective effect if not otherwise stated to be so specifically. However, the retrospective effect of the decision rendered by the Supreme Court in Checkmate Services Pvt Ltd. (supra) is not an issue involved in present case, as the question involved herein was quite different as to whether Section 143 (1) (a) of the Act of 1961 can be resorted to when there is highly debatable issue. Therefore, the case laws relied upon by the Revenue are not applicable to the facts of the present case.
17. Concludingly, we are of the considered opinion that: the Assessing Officer should not have resorted to the provisions contained under Section 143(1)(a) of the Act of 1961 and instead could have resorted to the provisions under Section 143(3) of the Act of 1961, as on the date of issuance of intimation order dated 16.12.2021 by the Assessing Officer, exercising power under Section 143(1)(a) of the Act of 1961, the subject issue was highly debatable and ultimately, that issue was resolved by their Lordships in the matter of Checkmate Services Pvt Ltd (supra) on a later date.
18. As a fallout and consequence of above-stated discussion, the prima facie disallowance of impugned contribution towards ESI and EPF under Section 36(1)(va) read with Section 2(24)(x) of the Act of 1961 made by the Assessing Officer under Section 143(1)(a) by order dated 16.12.2021 is hereby set-aside. Consequently, the order dated 15.07.2024 passed by the CIT (Appeals) and the subsequent order dated 26.09.2024 passed by the ITAT are also set-aside. However, liberty is reserved in favour of the respondent/Revenue to proceed in accordance with law.
10ITA Nos.382 to 384/DEL/2026
9. Accordingly, respectfully following the decision of the co-ordinate bench cited hereinbefore, we delete the addition of Rs.4,53,293/- u/s 36(1)(va) of the Act and allow the appeal of the assessee.
10. Since the facts in Assessment Year 2018-19 are exactly similar to Assessment Years 2019-20 & 2020-21, our above findings in AY 2018-19 are applicable mutatis mutandis in Assessment Years 2019-20 & 2020-21.
Accordingly, the appeals filed by the assessee for AYs 2019-20 & 2020-21 are allowed.
11. In the result, all the three appeals filed by the assessee are allowed.
Order pronounced in the open court on this 13th day of May, 2026.
Sd/- sd/-
(MADHUMITA ROY) (S. RIFAUR RAHMAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 13.05.2026
TS
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, NEW DELHI