January 01, 2026 : The Delhi Bench of the Income Tax Appellate Tribunal has dismissed two appeals filed by Rational Business Corporation Private Limited for Assessment Years 2018–19 and 2019–20, reaffirming that employees’ contributions to Provident Fund and Employees’ State Insurance deposited after the statutory due dates are not allowable as deductions, even if paid before filing the income-tax return. The Tribunal also upheld the authority of the Centralised Processing Centre to make such disallowances at the return processing stage under Section 143(1) of the Income-tax Act, 1961.

The appeals arose from adjustments made by the CPC while issuing intimations under Section 143(1), disallowing delayed employees’ PF and ESI contributions for both years. For Assessment Year 2018–19 alone, the disallowance exceeded ₹51 lakh. The assessee challenged these adjustments before the Tribunal.

The appeals were filed with delays of 289 days and 166 days. The assessee sought condonation citing incorrect initial legal advice, a subsequent change in legal opinion, and personal difficulties, including health issues of a senior director and a family wedding. After examining affidavits filed by the assessee and its tax consultant, the Tribunal was satisfied that sufficient cause had been shown and condoned the delay, admitting the appeals for adjudication.

On merits, the core issue was whether the CPC could disallow employees’ PF and ESI contributions under Section 143(1)(a) when such contributions were paid after the due dates prescribed under the relevant welfare laws but before the due date for filing the return under Section 139(1). The assessee argued that at the time of processing, the issue was debatable since several High Courts had earlier taken a view favourable to taxpayers, prior to the Supreme Court’s ruling in Checkmate Services Pvt. Ltd. v. CIT. It was contended that a debatable issue fell outside the scope of summary adjustments under Section 143(1).

Rejecting these submissions, the Tribunal relied extensively on the Supreme Court’s decision in Checkmate Services, which conclusively settled the law. The Bench noted that employees’ contributions are governed exclusively by Section 36(1)(va) and must be deposited within the due dates prescribed under the PF and ESI laws. Section 43B, it held, applies only to employer contributions and has no bearing on employees’ share. Any payment beyond the statutory due date results in permanent disallowance, regardless of whether the amount is paid before filing the return.

The Tribunal further observed that the Supreme Court’s ruling is clarificatory in nature and therefore applies retrospectively. It emphasized that judicial interpretation by the Supreme Court declares the law as it has always stood, rather than creating new law from the date of judgment. As a result, the issue could not be treated as debatable merely because the Supreme Court ruling was delivered after the processing of returns in the present case.

Addressing the objection to CPC’s jurisdiction, the Tribunal relied on decisions of the Bombay and Gujarat High Courts to hold that once the Supreme Court has settled the legal position, the distinction between assessments under Sections 143(1) and 143(3) becomes irrelevant. Adjustments under Section 143(1)(a)(iv) are permissible where a claim is contrary to the express provisions of the statute, and after the Supreme Court’s clarification, any such claim becomes an incorrect claim apparent from the record.

The Tribunal categorically rejected the argument that subsequent judicial decisions cannot validate earlier adjustments. It reiterated that Supreme Court judgments have retrospective effect and eliminate any scope for debate, irrespective of when the return was processed or assessed.

In light of the settled legal position, the Tribunal held that the CPC was fully justified in disallowing delayed employees’ PF and ESI contributions at the processing stage. It concluded that the appellate authorities were correct in relying on the Supreme Court’s ruling and dismissed both appeals.

Cause Title: Rational Business Corporation Private Limited Versus DCIT
Case No.: I.T.A. Nos. 4402 & 4403/Del/2025
Coram: Shrimahavir Singh (Vice President) and Shrisanjay Awasthi (Accountant Member)