The Jaipur Bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the disallowance of Provident Fund (PF) and Employees’ State Insurance ( ESI ) contributions on the grounds that they were deposited after the statutory deadlines, making them ineligible for deduction under income tax law. Sanjiv Prakashan, the assessee operates in the educational publishing industry.

The assessee initially declared an income of Rs. 5,41,03,200 for the assessment year 2020-2021. The Assessing Officer revised the income to Rs. 5,61,08,400 due to disallowed deductions. Know Practical Aspects of Tax Planning, Click Here The assessing officer disallowed Rs. 16,46,879 under section 36(1)(va) of the Income Tax Act, 1961, including Rs. 15,51,701 for Provident Fund (PF) and Rs. 95,178 for Employees’ State Insurance ( ESI ) contributions. The disallowed amount represented employees’ contributions to PF/ ESI that were deposited after the due date under the respective laws, although before the return filing deadline under section 139(1). The assessee appealed before the National Faceless Appeal Center which upheld the disallowance. Aggrieved, the assessee challenged the NFAC’s order before the ITAT arguing that adjustments made under section 143(1) required prior notification which was not provided, thus voiding the adjustments.

The assesee’s counsel claimed that employee contribution adjustments were outside permissible adjustments under section 143(1)(a), arguing it was not an error apparent on the record. The assessee relied on multiple cases where similar adjustments were overturned due to lack of prior notification or applicability under section 143(1) of the Income Tax Act, 1961 On the contrary, the revenue counsel supported the adjustments with Delhi Tribunal’s ruling in Salveen Kaur, which upheld that such adjustments could be made under section 143(1) without specific prior intimation. Know Practical Aspects of Tax Planning, Click Here

The two member bench comprising Sandeep Gosain ( Judicial Member ) and Rathod Kamlesh Jayantbhai ( Accountant Member ) referenced Supreme Court ruling in the case of Checkmate Services (P) Ltd., which held employees’ contributions to PF/ESI must meet strict compliance with the due date set by respective laws, with late deposits being non-deductible. The Tribunal acknowledged the assessee’s argument on lack of prior intimation but ruled it irrelevant, referring to Salveen Kaur and the Bombay High Court in Rohan Korgaonkar which supported adjustments without prior intimation for employee contributions under section 143(1) of the Income Tax Act, 1961. Therefore, the tribunal confirmed the disallowance of the delayed PF/ESI contributions. The assessee’s appeal was dismissed. To Read the full text of the Order CLICK HERE