Revenue Can’t Take Different Stand Before Different Forums As It May Lead To Uncertainty & Chaos: Chhattisgarh High Court

The appeal before the High Court was preferred under Section 260A of the Income Tax Act, 1961 on the issue of whether the CIT (Appeals) and the Income Tax Appellate Tribunal were justified in dismissing the appeals holding that the Assessing Officer had rightly processed the return of the appellant under Section 143(1)(a) ignoring the fact that there were conflicting judgments on the same issue.

The Division Bench of Justice Sanjay K. Agrawal and Justice Deepak Kumar Tiwari said, “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.”

It further observed, “...the orders passed in Satpal Singh Sandhu (supra) and Parv Buildcon (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. Parv Buildon) and TAX No.15/2024 (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 Satpal Singh Sandhu), were withdrawn by the Revenue by orders dated 10.02.2025 and 21.05.2025, respectively, and thereby, the Revenue has allowed the plea of the assessees therein to stand that in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.”

Advocate Nikhilesh Begani represented the Appellant while Advocate Apurv Goyal represented the Respondent.

Factual Background

The appellant/assessee filed the return of income for Assessment Year 2020-21 declaring a total income of Rs 3,76,34,910 and paid tax to the tune of Rs 1,44,33,865. The return of the assessee was processed by Central Processing Centre (CPC), Bengaluru/Assessing Officer and an intimation order was issued exercising the powers under Section 143(1) (a) of the Act of 1961, wherein, claim for deduction of delayed deposit of employees' share of contribution towards Employees' State Insurance (ESI) and Employees Provident Fund (EPF) of Rs.28,21,065 under Section 36(1)(va) of the Act of 1961 was disallowed.

The assessee’s appeal against the said order before the Commissioner of Income Tax (Appeals) {CIT(Appeals)} was dismissed. It was noted that in the year 2022, in the case of Checkmate Services PrivateLimited Vs. Commissioner of Income Tax (2023), the judgment was delivered by the Supreme Court, wherein, it was held that to claim a deduction, employees' contributions should be deposited on or before the due dates specified under the respective employees’ welfare Acts. The assessee’s appeal before the Income Tax Appellate Tribunal (ITAT) was also dismissed, leading to the filing of the appeal before the High Court.

Reasoning

Referring to section 143, the Bench explained that the power under Section 143(1) 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. Reference was also made to the judgment in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd (2024), wherein it was held explicitly that the Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues under Section 143(1).

On a perusal of the facts of the case, the Bench noted that the on the date of issuance of intimation order by the Assessing Officer i.e. on December 16, 2021 under Section 143(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), 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 was highly debatable, which was pending consideration before the Supreme Court in Checkmate Services Pvt Ltd (supra).

Subsequently, this issue was resolved by the Supreme Court. Moreover, 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 Officer had committed a grave legal error in processing the return of the assessee under Section 143(1)(a). The Bench was of the view that the Assessing Officer should not have resorted to the provisions contained under Section 143(1)(a) and instead could have resorted to the provisions under Section 143(3), 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.

“...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”, the Bench ordered while allowing the appeal and answering the issue in favour of the assessee.

Cause Title:Raj Kumar Bothra v. Deputy Commissioner Of Income Tax (Neutral Citation: 2025:CGHC:21262-DB)

Appearance:

Appellant: Advocates Nikhilesh Begani, Apurv Goyal

Respondent: Advocate Ajay Kumrani, Standing Counsel Amit Chaudhari

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