Prime Services vs DCIT Circle – 43 (1) Delhi

“1.

CONDONATION OF DELAY That the delay in filing the present appeal is due to "sufficient cause" arising from the Appellant's lack of technical expertise in handling the e-portal and bona fide ignorance of e-proceedings. The delay should be condoned to ensure that the cause of substantial justice is not defeated by technical constraints.

2.

INVALID ADJUSTMENT, UNDER SECTION 143(1)(a) That on the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the addition made by the CPC u/s 143(1). At the time the return was processed (March 2020), the allowability of employees' PF/ESI contributions paid before the Section 139(1) deadline was a "highly debatable issue" with conflicting judicial views. Therefore, it did not constitute a "prima facie" error and fell outside the scope of summary adjustments.

3.

BINDING JURISDICTIONAL PRECEDENT (A2Z INFRA) That the Ld. CIT(A) failed to apply the ratio of the Hon'ble ITAT Delhi in A2Z Infra Services Ltd. vs. DCIT (12025) 176 taxmann.com 639). The Hon'ble Tribunal has held that for years where processing occurred during a period of legal debate, disallowances made u/s 36(1)(va) via Section 143(1) are unsustainable in law.

4.

ERRONEOUS APPLICATION OF LAW That the Ld. CIT(A) erred in law by failing to appreciate that the CPC cannot exercise powers of a regular assessment to decide complex or debatable legal issues in a summary intimation.

5.

PRAYER The Appellant prays for the deletion of the addition and for any other relief your Honors may deem fit. The Appellant craves leave to add, amend, or alter any grounds during the course of the hearing."

SECTION II: ARGUMENTS FOR ASSESSMENT YEAR 2019–20

3.

The remaining appeal for Assessment Year 2019–20 pertains to the addition made under Section 36(1)(va) of the Income Tax Act, 1961, in respect of delayed deposit of employee contributions to EPF/ESI.

A. THRESHOLD JURISDICTIONAL ISSUE: Addition Made u/s 143(1)(a) on a Debatable Issue is Impermissible in Law

4.

Invalidity of Summary Disallowance u/s 143(1)(a): We respectfully submit that the impugned addition under Section 36(1)(va) was made summarily by CPC / Assessing Officer via Intimation under Section 143(1)(a).

5.

Directly Covered by Recent ITAT Delhi Decisions: The jurisdiction to make such an adjustment u/s 143(1)(a) is no longer res integra and stands squarely covered in favor of the Assessee by recent binding decisions of the ITAT Delhi Benches:

- Bird Airport Service Mumbai Pvt. Ltd. v. ACIT (ITA No. 2339/Del/2026, Order dated 31.08.2026)

- Mithabhi Lamps Pvt. Ltd. v. DCIT (ITA No. 8191/Del/2025, Order dated 08.07.2026)

- M/s Nippon Audiotronix Pvt. Ltd. v. CIT(A) (ITA No. 6030/Del/2024, Order dated 05.06.2026)

i.

Ratio Decidendi: In all the above decisions, the Hon'ble ITAT Delhi (relying on the Hon'ble Chhattisgarh High Court decision in Raj Kumar Bothra v. DCIT, ITA No. 56/2025) held that on the date when the return was processed u/s 143(1)(a), the issue of disallowance of delayed EPF/ESI deposits was a highly debatable issue.

7.

The Supreme Court judgment in Checkmate Services Pvt. Ltd. was rendered on 12.10.2022 and arose out of scrutiny assessments u/s 143(3), not summary processing u/s 143(1)(a). The AO could not have invoked summary adjustment power u/s 143(1)(a) on a debatable point of law. On this ground alone, the intimation / addition deserves to be quashed as illegal and void ab initio.

B. WITHOUT PREJUDICE — ON MERITS: Primary Argument 1: Section 10 General Clauses Act (Sunday / Holiday Exception)

8.

Without prejudice to the jurisdictional argument above, where statutory due dates (15th of the month) fell on a Sunday or official Public Holiday, payments made on the immediately following working day (16th) are fully compliant.

9.

This principle is governed by Section 10 of the General Clauses Act, 1897 and the legal maxim Lex non cogit ad impossibilia (the law does not compel a person to do that which is impossible). Banks and official portals being closed on Sundays/holidays makes compliance impossible on the 15th, making payment on the 16th fully valid under law.

C. WITHOUT PREJUDICE — ON MERITS: Primary Argument 2: Due Date Calculation from Date of Wage Disbursement (A.R. Industrial)

10.

In the alternative, as laid down in CIT / ACIT v. A.R. Industrial, the statutory 15-day timeline under Paragraph 38 of the EPF Scheme and ESI Regulations begins to run only from the actual date of disbursement of wages, and not mechanically from the close of the wage month.

11.

Where deposits were credited within 15 days of actual salary disbursement, there is zero default under the welfare statutes, and no disallowance under Section 36(1)(va) can be sustained.

2.

For AY 2019–20, the disallowance under Section 36(1)(va) be quashed on the threshold jurisdictional ground as held in Bird Airport Service, Nippon Audiotronix, and Mithabhi Lamps (ITAT Delhi).

3.

Alternatively, the disallowance be deleted on merits for payments made on the 16th (General Clauses Act) or within 15 days of wage disbursement (A.R. Industrial).