[Cites 23, Cited by 0]
Chattisgarh High Court
M/S Varsha Construction vs Assistant Commissioner Of Income Tax ... on 16 April, 2026
Author: Sanjay K. Agrawal
Bench: Sanjay K. Agrawal
Page 1 of 14
(TAXC No.133/2025)
2026:CGHC:17457-DB
Digitally
signed by
SISTA NAFR
SISTA SOMAYAJULU
SOMAYAJULU Date:
2026.04.16
18:07:40
+0530 HIGH COURT OF CHHATTISGARH AT BILASPUR
TAXC No. 133 of 2025
{Arising out of order dated 22-1-2025 passed by the Income Tax
Appellate Tribunal, Raipur Bench, Raipur in ITA No.5/RPR/2023}
M/s Varsha Construction, Second Floor-25, 26, Millenium Plaza, Raipur,
Chhattisgarh-492001
... Appellant
versus
Assistant Commissioner of Income Tax, Circle-1(1), Central Revenue
Building, Civil Lines, Raipur, Chhattisgarh-492001
... Respondent
For Appellant : Mr. Nikhilesh Begani and Mr. Apurv Goyal, Advocates.
For Respondent : Mr. Ajay Kumrani, Advocate on behalf of Mr. Amit
Chaudhari, Standing Counsel for the Income Tax
Department.
Division Bench: -
Hon'ble Shri Sanjay K. Agrawal and
Hon'ble Shri Sachin Singh Rajput, JJ.
Judgment On Board
(16/04/2026)
Sanjay K. Agrawal, J
1. This appeal preferred under Section 260A of the Income Tax Act,
1961 (for short, 'the Act of 1961') was admitted for hearing on 2-9-
2025 by formulating the following substantial question of law:-
"Whether the CIT (appeals) and the Income Tax Appellate
Tribunal are justified in dismissing the appeals holding that
the Assessing Officer has rightly processed the return of the
appellant herein under Section 143(1)(a) of the Act ignoring
the fact that in light of conflicting judgments on the issue of
due date the Assessing Officer was required to resort to the
(TAXC No.133/2025)
provisions contained in Section 143(3)/Section 147 of the Act,
by recording a finding which is perverse to the record?"
2. The aforesaid question of law arises for consideration on the
following factual backdrop:-
3. The appellant/assessee filed the return of income for Assessment
Year 2019-20 declaring a total income of Rs.1,27,98,874/- and paid
tax to the tune of Rs.44,72,437/-. 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.4,64,728/- under Section 36(1)(va) of the Act of
1961 was disallowed by the order dated 3-1-2021. Feeling aggrieved
by the said order, the assessee preferred an appeal under Section
246A of the Act of 1961 before the Commissioner of Income Tax
(Appeals) {for short, 'the CIT(Appeals)'} by submitting Form No.35
and challenging the aforesaid intimation order. In the meanwhile,
on 12-10-2022, in the case of Checkmate Services Private
Limited v. Commissioner of Income Tax-1 1 judgment was
delivered by the Supreme Court, settling the issue with regard to
claim of deduction under Section 36(1)(va) of the Act of 1961,
wherein, it was held that to claim deduction under the aforesaid
provision, employees' contribution should be deposited on or before
the due dates specified under the respective employees welfare Acts.
Ultimately, the CIT (Appeals) passed the order on 10-11-2022
1 (2023) 6 SCC 451
(TAXC No.133/2025)
dismissing the appeal of the assessee, against which, the assessee
preferred an appeal before the Income Tax Appellate Tribunal
(ITAT), which was dismissed by the impugned order dated 22-1-2025
leading to filing of the present appeal, in which, the above-stated
substantial question of law has been formulated for consideration.
4. Mr. Nikhilesh Begani, learned counsel appearing for the appellant/
assessee, submits that though the Assessing Officer has processed the
return of the income of assessee, however, on the date when the
intimation order was issued exercising powers under Section 143(1)
(a) of the Act 1961, the issue with regard to claim of deduction under
Section 36(1)(va) of the Act of 1961 i.e. as to whether the employees'
contribution should be deposited on or before the due dates in terms
of Employees' Provident Fund and Miscellaneous Provisions Act,
1952 (for short, 'the EPF Act 1952') and Employees' State Insurance
Act, 1948 (for short, 'the ESI Act 1948'), was pending consideration
before the Supreme Court in Checkmate Services Pvt Ltd (supra) and
only on 12-10-2022, the issue with regard to claim of deduction
under Section 36(1)(va) of the Act of 1961 was settled holding that
employees' contribution should be deposited on or before the due
dates specified under the respective employees welfare Acts.
Therefore, on the date of passing the intimation order, the issue with
regard to deposit of contribution on or before the due date under
Section 36(1)(va) of the Act of 1961, was highly debatable and
contentious. Learned counsel further submits that the scope and
ambit of Section 143(1)(a) of the Act of 1961 only permits prima facie
adjustments to be carried out and the highly debatable issues cannot
(TAXC No.133/2025)
be adjusted/disallowed while processing return under Section 143(1)
(a) of the Act 1961. In support of the contention, learned counsel
would rely upon the decisions rendered by the Supreme Court in the
matters of Kvaverner John Brown Engg. (India) Pvt. Ltd. v.
Assistant Commissioner of Income Tax 2 and Assistant
Commissioner of Income Tax v. Rajesh Jhaveri Stock
Brokers Pvt. Ltd.3. He further submits that since on the relevant
date of passing of intimation order, the issue being highly debatable,
the Assessing Officer ought not to have resorted to the provision
under Section 143(1)(a) of the Act of 1961, which was completely
unsustainable and bad in law and the same was neither considered
by the CIT (Appeals) nor the ITAT. He would also submit that the
reliance placed by the ITAT in the matter of M/s. BPS
Infrastructure v. ITO, Ward-1(3), Raipur 4 would not be
applicable, as in that case, this Court has considered the issue of
delay in filing the appeal and dismissed the same as barred by
limitation by holding that no sufficient cause has been shown in
filing the appeal and further the substantial question of law
formulated in this tax appeal was neither involved nor considered at
all in that appeal. As such, the ITAT committed a grave legal error in
applying the decision of M/s. BPS Infrastructure (supra) while
passing the impugned order. He would finally submit that the ITAT
in the matters of Satpal Singh Sandhu v. DCIT5 and Parv
Buildcon v. DCIT6 had already held that claim of deduction in
2 (2008) 305 ITR 103 (SC)
3 (2008) 14 SCC 208
4 [2024] 164 taxmann.com 270 (Chhattisgarh)
5 ITA No.04/RPR/2023 delivered on 11.05.2023 (ITAT Raipur Bench 'SMC')
6 [2024] 159 taxmann.com 1574 (Raipur-Trib.)
(TAXC No.133/2025)
respect of delayed deposit in respect of employees' share of
contribution towards ESI and EPF could not be summarily
disallowed by Assessing Officer under the provisions contained in
Section 143(1)(a) of the Act of 1961 and negated disallowance of
delayed deposit of employees' share of contribution towards ESI and
EPF holding that the decision of the Supreme Court in Checkmate
Services Pvt. Ltd. (supra) was not available at the time when the
intimation under Section 143(1)(a) of the Act of 1961 was issued in
this case on 3-1-2021 and against the aforesaid orders of the ITAT,
tax appeals vide TAXC No.149/2024 (The Deputy Commissioner of
Income Tax v. Parv Builcon) and TAXC No.158/2024 (The Deputy
Commissioner of Income Tax v. Satpal Singh Sandhu) respectively
were preferred before this Court by the Revenue, however, both the
appeals were withdrawn by the Revenue and as such, the Revenue
cannot be allowed to take a different stand in different forums.
Learned counsel for the appellant/assessee finally submits that the
intimation order under Section 143(1)(a) of the Act of 1961, the order
passed by CIT(Appeals) and the order passed by the ITAT, affirming
the order of CIT (Appeals), deserve to be set-aside by granting this
appeal.
5. Mr. Ajay Kumrani, learned counsel for the respondent, would
support the impugned order and submit that the contention of the
appellant that the subject adjustment/disallowance is beyond the
power of Assessing Officer in view of Section 143(1)(a) of the Act of
1961 is not correct. The adjustment made towards delayed deposit of
employees' contribution is very much within the powers of Assessing
(TAXC No.133/2025)
Officer to prima facie make adjustment at the time of processing of
return. He further submits that in view of the decision of the
Supreme Court in the matter of Checkmate Services Pvt. Ltd.
(supra), the issue is now well settled. He further submits that in the
present case, it is an admitted position that the appellant/assessee
has deposited the employees' contribution under the heads of ESI
and EPF after the due date. He would also submit that the
clarificatory judgment of the Supreme Court in Checkmate Services
Pvt Ltd (supra) would have the retrospective effect as held in the
decisions rendered by the Supreme Court in the matters of State of
Bihar and Ors v. Ramesh Prasad Verma (Dead) through
LR7, P.V. George and Ors v. State of Kerala and Ors 8 and also
Central Bureau of Investigation v. R.R. Kishore9. He finally
submits that the judgments upon which learned counsel for the
appellant has placed reliance are clearly distinguishable to the facts
of the present case, therefore, they are of no help to the appellant. In
view of such submission, learned counsel for the respondent prays
that this appeal be dismissed.
6. We have heard learned counsel for the parties and considered their
rival submissions made hereinabove and also gone 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 3-
1-2021 was issued exercising power under Section 143(1)(a) of the
7 (2017) 5 SCC 665
8 (2007) 3 SCC 537
9 (2023) 15 SCC 339
(TAXC No.133/2025)
Act of 1961, wherein, claims for deduction of delayed deposit of
employees' share of contribution towards Employees State Insurance
and Provident Fund of Rs.4,64,728/- 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
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 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
(TAXC No.133/2025)
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 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."
(TAXC No.133/2025)
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 3-1-2021, 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 sub-section (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 v. Assistant Commissioner of
Income Tax Circle10, Para 17}.
10. Further, in Section 143(1)(a) of the Act of 1961, the procedure to
process the return in a given case is provided. Section 143(1)(a) is
reproduced hereunder reference:-
"Assessment
143. (1) Where a return has been made under section 139, or
in response to a notice under sub-section (1) of section 142,
such return shall be processed in the following manner,
namely:--
(a) the total income or loss shall be computed after making
the following adjustments, namely:--
10 (2020) 19 SCC 12
(TAXC No.133/2025)
(i) any arithmetical error in the return;
(ii) an incorrect claim, if such incorrect claim is apparent
from any information in the return;
(iii) disallowance of loss claimed, if return of the previous
year for which set off of loss is claimed was furnished
beyond the due date specified under sub-section (1) of
section 139
(iv) disallowance of expenditure or increase in income
indicated in the audit report but not taken into account in
computing the total income in the return;
(v) disallowance of deduction claimed under [section 10AA
or under any of the provisions of Chapter VI-A under the
heading "C.--Deductions in respect of certain incomes", if]
the return is furnished beyond the due date specified
under sub-section (1) of section 139; or
(vi) addition of income appearing in Form 26AS or Form
16A or Form 16 which has not been included in computing
the total income in the return:
Provided that no such adjustments shall be made
unless an intimation is given to the assessee of such
adjustments either in writing or in electronic mode:
Provided further that the response received from the
assessee, if any, shall be considered before making any
adjustment, and in a case where no response is received
within thirty days of the issue of such intimation, such
adjustments shall be made:
Provided also that no adjustment shall be made under
sub-clause (vi) in relation to a return furnished for the
assessment year commencing on or after the 1st day of April,
2018."
11. In Kvaverner 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-O of the Act of
1961 prima facie adjustments contemplated under Section 143 (1) (a)
is not applicable and observed as under :-
(TAXC No.133/2025)
"... When there were conflicting judgments on interpretation
of Section 80-O, 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 Rajesh Jhaveri Stock Brokers Pvt. Ltd. (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 observed 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 to the facts of the present case, while following the principles
of law laid down in above stated judgments of the 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 3-1-2021 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
(TAXC No.133/2025)
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 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. Ltd. (supra).
14. Furthermore, 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 v. Parv Buildon) and TAX No.15/2024 (DCIT v. Satpal Singh
Sandhu), were withdrawn by the Revenue by orders dated 10-2-2025
and 21-5-2025, 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
(TAXC No.133/2025)
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
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
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), P.V.
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
(TAXC No.133/2025)
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 3-1-2021 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 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
3-1-2021 is hereby set-aside. Consequently, the order dated 10-11-
2022 passed by the CIT (Appeals) and the subsequent order dated
22-1-2025 passed by the ITAT are also set-aside. However, liberty is
reserved in favour of the respondent/Revenue to proceed in
accordance with law.
19. The substantial question of law is answered in favour of the
appellant/assessee and against the respondent/Revenue.
20. In the result, the appeal is allowed to the extent indicated herein-
above leaving the parties to bear their own cost(s).
Sd/- Sd/-
(Sanjay K. Agrawal) (Sachin Singh Rajput)
Judge Judge
Soma
