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Judgment
Per Raj Kumar Chauhan, Judicial Member:
The appeal of the assessee is directed against the order dated 04.03.2024 of Id. CIT(A)/Addl./JCIT(A)-2, Bengaluru passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") wherein the appeal of the assessee against the intimation order dated 23.11.2022 issued u/s 143(1) of the Act was dismissed. The said intimation involved an adjustment of Rs.23,96,160/- on account of delayed deposit of employees' contribution towards ESI/PF.
The assessee has filed an application seeking condonation of delay of 640 days in filing the present appeal. The contents of the application are reproduced as under:
AFFIDAVIT
That I, Ranbir Singh Sorout (PAN: -AZHPS3384D) S/o of Sh. Tek Singh Sorout R/o B-49, Sector-11A, Faridabad, Haryana-121006 is solemnly declared as under: -
1.That, I Ranbir Singh Sorout (PAN: -AZHPS3384D) and I am authorized to file the petition for condonation of delay before the Commissioner of Income Tax (Appeal). In the matter of Assessment Year 2020-21 for the Order Under Section 143(1) of Income Tax Act 1961 DIN No CPC/2021/A3/187529252 dated 30.11.2021.
2.That I, the above-named petitioner, am well conversant with the facts stated too below:
a) That the income tax assessment under section 143(1) for the assessment year 2020-21 has been completed by Commissioner of Income Tax (Appeal), National Faceless Assessment Centre vide DIN No CPC/2021/A3/187529252 dated 30.11.2021.
b) That the time for filling the appeal before the Income Tax Appellate Tribunal had expired on 30/12/2021.
3.That, my counsel wrongly advised me in this matter and also lack of knowledge the appeal could not be filled.
4.That, the memo of the Appeal has been filed to office of the Commissioner of Income Tax (Appeal) on 16/02/2026, I therefore requested kindly condone the delay and oblige for the delay in appeal file from 31/12/2021 till the date to file the appeal.
(Ranbir Singh Sorout)
We have considered the contents of the condonation application and the submissions made by the Id. AR. We find that the assessee has satisfactorily explained the reasons for the delay. In view of the principles laid down by the Hon'ble Supreme Court in Collector, Land Acquisition vs. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC), wherein it has been held that a liberal approach should be adopted while considering applications for condonation of delay to substantial justice, we are satisfied that the assessee has shown sufficient cause. Accordingly, the delay of 640 days in filing the instant appeal is condoned in the larger interest of justice, and the appeal is admitted for adjudication on merits.
At the outset, the Id. Counsel for the assessee has submitted that the CPC while processing return of income u/s 143(1) made an addition on account of delayed deposit of employees contribution as per due dates prescribed under respective Acts, though such payments were admittedly deposited before the due date of filing the return of income u/s 139(1). The Id. CIT(A) has upheld the addition relying on the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT 448 ITR 519 (SC).
The Id. AR submitted that the CPC, while processing the return of income u/s 143(1) of the Act, made the aforesaid adjustment u/s 143(1)(a) on account of delayed deposit of employees’ contribution towards ESI/PF beyond the due dates prescribed under the respective ratification, notwithstanding the fact that the same had been deposited before the due date for filing the return of income u/s 139(1) of the Act. The Id. AR contended that the adjustment made by the CPC was not justified, particularly in view of the exceptional circumstances prevailing during the COVID-19 pandemic, which had caused genuine hardship and resulted in delay in depositing the employees’ contribution towards ESI/PF. It was further submitted that the issue, in the peculiar facts and circumstances of the case, required consideration in the light of the relaxation granted by the EPFO during the COVID-19 lockdown period.
The Id. AR further submitted that the unprecedented disruption caused by the COVID-19 pandemic severely affected business operations and liquidity, resulting in significant hardships for the assessee. In view of the prevailing circumstances, the Employees’ Provident Fund Organisation (“EPFO”) granted relief from the levy of damages and penalties in respect of delayed deposits of PF/ESI contributions during the lockdown period. A copy of the relevant notification has been placed on record for reference, which reads as under:
कर्मचारी भविष्य निधि संगठन (यज्ञ एवं राजस्व, भंडारण, भारत सरकार) EMPLOYEES’ PROVIDENT FUND ORGANISATION (Ministry of Labour & Employment, Govt. of India)
शिक्षा मंत्रालय / Head Office
विभाग, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 14, 10 066.
No. C-I/Misc./2020-21/Vol. 1/1112 Date: 15.05.2020
To. All Addl. CPFCs in charge of Zones All RPFCs in charge of Regional Offices All OICs in charge of District Offices
Sub: Relief to establishments and factories covered under EPF and MP Act, 1952 from levy of penal damages for delay in deposit of dues during Lockdown to prevent COVID-19.
Sir,
In view of the prolong lockdown announced by the Government to control the spread of COVID-19 pandemic and other disruptions due to Pandemic situation, the establishments covered under EPF & MP Act, 1952 are distressed and not able to function normally.
The Hon’ble Apex Court of India in McLeod Russel India Limited Vs. RPFC (2014)15 SCC 263 has underlined the broad contours and essential elements of section 14B of the Act and held that mens rea, or culpable state of mind of the employer, is a sine qua- non for inviting damages under section 14B. In other words, the provisions of section 14B would get attracted only when there is a positive evidence of mens rea on the part of the employer while committing default in timely remittances. This legal position has later been reaffirmed in Assistant Provident Fund Commissioner vs. Management of RSL Textiles. (CA 96-97 of 2017)
Considering the difficulty faced by the establishments in timely deposit of contributions during the period of lockdown due to operational and economic reasons, it is evident that such delays are without mens rea of the employer. Thus, the delay in deposit of contributions during the period of lockdown announced in terms of the Disasters Management Act, 2005 cannot be attributed to any culpable state of mind of the employer and will not, therefore, attract the provisions of section 14B of the EPF Act.
Therefore, for any delay in payment of any contributions or administrative charges due for any period during the lockdown, no proceeding should be initiated for levy of penal damages in such cases.
(This issues with the approval of the Central P F Commissioner)
Yours faithfully,
(Jag Mohan) Addl. CPFC (Hqrs.) Compliance & Legal
Thus, the Ld. AR has contended that the EPFO has issued the above circular No. C-I/Misc./2020-21/Vol.I/1112 dated 15.05.2020 in view of the prolonged lockdown announced by Government to control the spread of COVID-19 pandemic and that any delay in payment of any employer contribution or administrative charge due for any period during the lockdown, no proceedings be initiated for levy of penal damages in such cases. The appellant’s said delay has been covered under exempted period for which relaxation has been granted by EPFO from levy of damages and penalties for any delayed deposits of PF and ESI during the lockdown period under the PF and ESI Act. He accordingly, pleaded that it is a prima facie mistake, in not considering the COVID period and that it is being a debatable issue yet pending under review before the Hon’ble Apex Court for consideration.
The Id. DR, on the other hand, placed reliance on the impugned order. He submitted that although no penalty proceedings were initiated by the ESI/PF Department but the due dates were not extended. He pleaded that the impugned order may be sustained.
We have heard the rival submissions and perused the material available on record. During the course of hearing, we noted that the Jodhpur Bench of the Tribunal, in the case of Vadvendra Dhabhai vs. ITO in ITA No. 806/Jodh/2025, order dated 21.05.2026 has already considered and decided the issue in favour of the assessee and against the Revenue. For the sake of ready reference and brevity, the relevant portion of the said order is reproduced hereinbelow:
'7. Having heard both the sides and perusal of record, we find that the CPC has rejected the application filed by the assessee u/s 154 to grant relief on account of delayed payment of employer contribution to PF and ESI even brushing aside the unprecedented disruption caused by COVID-19 pandemic and that the circular issued by EPFO granting relaxation from levy of damages and penalties for delay deposits during the lockdown period. The claim of deduction on deposit of employer contribution to PF and ESI before the due date under respective Act or due date of filing of return of income u/s 139(1) of the Act is a debatable issue. Recently, the Hon'ble Supreme Court has issued a notice in the case of Woodland (Aero Club) Pvt. Ltd. SLP No. 1532 of 2026 in the month of January, 2026 to examine the issue of due date for deposit of employer contribution to PF and ESI interpretation amid lingering conflicts where the proceedings are pending and judgment is awaited.
8.Considering the EPFO aforesaid circular on granting relaxation from levy of damages and penalty for delay deposit during the lockdown period and that the issue being subjudice for review before the Supreme Court, shows that it is an issue which involves interpretation of law at the level of Hon'ble Apex Court which is out of the scope of the provisions of Section 143(1) to make prima facie adjustments by CPC to the return of income of the assessee. It is further emphasized that the EPFO vide circular dated 15.05.2020, the due dates were extended as also observed by the Ld. CIT(A) that no penalty proceedings were initiated as the due dates were extended. In our view, the relaxation from penalties makes is apparently clear that the EPFO authorities has acknowledged genuine hardship hence intended to grant relief to the appellant assessee from levy of penalty amount on acceptance of delayed payments under the exceptional circumstances like COVID-19 pandemic. Meaning thereby that the relaxation of penalty by the competent authority from Employees Fund Organization, Ministry of Labour and Employees, Government of India, acknowledges the genuine hardship and intended to grant relief. In such circumstances of COVID-19 pandemic, the non-levy of penalty tantamount to acceptance of delay under exceptional circumstances the absence of formal extension of due date does not negate the intent of relief. Therefore, such delays during the COVID-19 pandemic are deserves to be viewed pragmatically and not in a strict technical manner. Accordingly, we hold that the impugned order of the Ld. CIT(A) in rejecting the application of the assessee filed u/s 154 of the Income Tax Act is perverse to the facts on record by not appreciating the genuine hardships of COVID-19 period as duly acknowledged by EPFO authorities.
9.In the above view, we accept the grievance of the assessee as genuine and as such, delete the addition of Rs.1,85,03,917/-.
10.Thus, the appeal of the assessee is allowed."
We have noticed that Hon'ble jurisdictional Tribunal in ITA No. 1361, 1361 & 1363/Del/2026 order dated 16.06.2026 on the identical issue where same arguments were raised on behalf of the assessee has taken a contrary view while following the decision of Hon'ble Delhi High Court in Woodland (Aero Club) Pvt. Ltd. Vs. ACIT in ITA 267/2023, order dated 08.09.2025. The relevant observation of the co-ordinate bench as contained in paras 9 to 20, extracted below as under:
'9. The Id AR, without prejudice to the foregoing submissions, that the reliance, if any, placed on the judgment of the Hon'ble Delhi High Court In Woodland (Aero Club) Pvt. Ltd. Vs. ACIT (ITA NO. 267/2023 DATED 08.09.2025) is misplaced and without prejudice, is submitted to be per incuriam as it failed to consider the binding principle under article 141 of the constitution of India given by the Supreme Court In DCIT V. M/S. Raghuvir Synthetics Ltd (supra).
9.1It is further submitted that the very fact that the Hon'ble Supreme Court has admitted the Special Leave Petition arising out of the impugned judgment and order dated 08.09.2025 passed in Woodland (Aero Club) Pvt. Ltd. vs. ACIT, ITA No. 267/2023 by the Hon'ble Delhi High Court, demonstrates that substantial questions of law arise for consideration and that the issue has not attained finality. Accordingly, in view of the aforesaid facts, binding jurisdictional precedents, settled principles governing Section 143(1)(a), and the impermissibility of making adjustments on debatable issues, the impugned adjustment is unsustainable in law and deserves to be deleted in toto.
10.The Id AR further invited our attention to Income Tax Act, 2025, wherein the Finance Minister and the Income Tax Department had categorically said there is no tax policy change in drafting the section. The only change is the relevant no. of the section objective and scope of the new act and relied on the provisions of Section 29(1)(e) of the Income tax Act, 2025 which allowed for deduction of PF/ESI in case the employee contribution was deposited with in due date of filing ITR.
11.Per contra, the Id. DR relied upon the orders of Assessing Officer and the decision in the case of Checkmate Services [supra] rendered by the Hon'ble Supreme Court.
12.We have heard the rival submissions and have perused the relevant material on record. On the issue of dismissal of appeal by the CIT(A) on account of delay in filing appeal before him, we are in agreement with the assessee that once the appellate authority has rendered findings on the merits of the case, the delay is deemed to have been condoned. Ground 6 is allowed.
13.The issue of disallowance u/s 36(1)(va), being in violation of constitutional provisions of Article 14,19 and 21 of the Constitution of India, is not adjudicated as being outside our mandate. We however, shall deal with the assessee's several taxation arguments raised on the issue, one by one. Firstly, reliance of the Hon'ble jurisdictional Delhi High Court in the case of CIT v. AIMIL Ltd. and ITAT decisions is no longer valid as these decisions predate the decision of Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. vs. CIT (supra). The hon'ble Supreme Court in Checkmate Services P. Ltd. vs. CIT has authoritatively laid down the law that disallowance u/s 36(1)(va) for employee's contribution to ESI/PF, that was deposited by assessee-employer after due date prescribed in PF/ESCI Acts but before due date of filing return under section 139(1), is valid.
14.Moreover, the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT [2025] 178 taxmann.com 207 (Delhi)[08-09-2025] wherein relying on the decision of Checkmate Services P. Ltd. vs. CIT, held that for assessment year 2019-20, disallowance u/s 36(1)(va) for employee's contribution to ESI/PF that was deposited by assessee-employer after due date prescribed in PF/ESCI Acts but before due date of filing return under section 139(1), is valid. The hon'ble Delhi High Court also observed that the Supreme Court in Checkmate Services (P) Ltd. v. CIT had also considered Alom Extrusions Ltd (2009) 185 Taxman 416(SC) and distinguished the same by observing that the judgment had not considered sections 2(24)(x) and 36(1)(va), and also the separate provisions for employers' and employees' contributions under section 36(1). Ground 7 to 12 are accordingly dismissed.
15.The assessee's argument that the aforesaid disallowance does not fall within the scope of permissible prima facie adjustments and was a debatable legal issue at the time of processing, is no longer valid and res-integra as the hon'ble jurisdictional Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT [2025] 178 taxmann.com 207 (Delhi) dated 08-09-2025 has brought the aforesaid quarrel to rest. The hon'ble Delhi High Court conclusively dispelled the assessee's argument that the Assessing Officer under section 143(1) could not have passed the order dated 28-5-2020, by holding that at the time when the Assessing Officer proposed the deductions, the judgment of the Gujarat High Court in CIT v. Gujarat State Road Transport Corporation [2014] 366 ITR 170 (Gujarat) was in existence, which has been affirmed by the Supreme Court in Checkmate Services (P) Ltd. v. CIT, hence the Assessing Officer did not err in passing the order. In the instant case, the intimation u/s 143(1) was passed on 15.03.2019; 12.01.2020 and 07.05.2020 for the AYs 2017-18; 2018-19 and 2019-20 respectively, hence was much after the judgement of Gujarat High Court and therefore the disallowance u/s 36(1)(va) u/s 143(1), is legally permitted. Ground 1 to 5 are dismissed.
The second argument is that since the jurisdictional Delhi High Court in the case of CIT vs AIMIL Ltd. (2010) 321 ITR 508 (Delhi) has deleted the aforesaid disallowance u/s 36(1)(va), the issue was in favour of the assessee at the time of passing order u/s 143(1), hence as per the ratio of DCIT vs. M/s. Raghuvir Synthetics Ltd., the same cannot be disallowed under section 143(1). We find that the issue before the Hon'ble Delhi High Court in CIT vs AIMIL Ltd was disallowance u/s 36(1)((va) u/s 143(3) and not 143(1), hence distinguishable. Further, the decision of CIT vs AIMIL Ltd was superseded by the decision of the hon'ble Supreme Court in Checkmate Services (P) Ltd. v. CIT which laid the law from the date of its inception 01.04.1988. In this context, we outrightly reject the assessee's arguments that the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT is per-incuriam.
Another argument of the assessee that the decision of Checkmate (Supra) was in context of scrutiny assessment under Section 143(3) and hence it is not applicable, is also answered by the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT which held the disallowance of PF/ESI u/s 143(1) is permissible.
We do note that there are decisions on the issue in favour as well as against the assessee. We also note that the this issue was decided against the assessee by the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT; by the hon'ble Bombay High Court in the case of Rohan Korgaonkar V DCIT (2024) 159 taxmann.com 321(Bom); by the Delhi ITAT in Savleen Kaur vs. Income-tax officer [2023] 147 taxmann.com 402 (Delhi - Trib.)/[2023] 199 ITD 437 (Delhi-Trib.) [09-01-2023]; Ram Dayal Bansal (Proprietor Bansal Associates) in ITA No. 1336/Del/2026 and Novelox Softwares India Pvt Ltd in ITA 3757/Del/2023 dated 10.12.2024 wherein disallowance of PF/ESI u/s 143(1) was upheld. Whereas the Hon'ble Chhattisgarh High Court in Raj Kumar Bothra vs. DCIT (TAXC No. 56 of 2025); ITAT Delhi Bench "A" in A2Z Infra Services Ltd. vs. DCIT (ITA Nos. 970/Del/2023 & 72/Del/2024); and ITAT Delhi Bench 'B' in Hisar Metal Industries Ltd. VS Vs DCIT, Circle, Hisar (I.T.A. Nos. 2244 & 2248/Del/2022) (Date of Pronouncement: 15.05.2026) are in favour of the assessee. In such factual matrix, under the doctrine of judicial discipline, we are bound by the decision of the hon'ble Delhi High Court in the case of Woodland (Aero Club) Private Limited vs ACIT, and therefore following the binding judgement of the Hon'ble Delhi High Court, we uphold the aforesaid disallowance u/s 36(1)(va) while processing the return u/ 143(1) of the Act.
The argument that the issue has not attained finality as the Hon'ble Supreme Court has admitted the Special Leave Petition in Woodland (Aero Club) Pvt. Ltd. vs. ACIT, is also misleading and misplaced. We find that the hon'ble Supreme Court was not appraised of the 3 bench decision of the hon'ble Supreme Court in the case of Checkmate Services [Pvt] Ltd (supra) before admitting the SLP.
Another argument that the Legislature, under the provisions of Section 29(1)(e) of the Income tax Act, 2025, has allowed for deduction of PF/ESI in case the employee contribution was deposited with in due date of filing ITR, and since the Finance Minister and the Income Tax Department have said there is no tax policy change in drafting the section, the disallowance may be deleted, is again misleading. We are of the considered view that since the legislature has made the provision of section 29(1)(e) in the Income Tax Act 2025 vide the Finance Act 2026, operating with effect from 01.04.2026, the said amendment is neither curative or clarificatory to have a retrospective application. We are of the considered view therefore, that the benefit is granted from 01.04.2026 only and if the legislature had intended to dilute the rigours of the Supreme Court decision in Checkmate Services (P) Ltd. v. CIT, it would have specifically made the amendment retrospective. We therefore hold that the provision of Section 29(1)(e) of the Income-tax Act, 2025 has prospective application and does not alter the legal position as mandated by Checkmate Services (P) Ltd. v. CIT and as available in AY 2018-19. We are fortified in our view by the decision of ITAT in the case of Ram Dayal Bansal (Proprietor Bansal Associates) in ITA No. 1336/Del/2026 dated 15.06.2026."
Since, the fact and circumstances of the case before us are identical to the facts of Hon'ble jurisdictional Tribunal case referred above, hence while respectfully agreeing with the Hon'ble jurisdictional Tribunal, we do not find force the argument advanced on behalf of appellant. Accordingly, the grounds raised before us are dismissed.
In the result, the appeal of the assessee is dismissed.