Wrong Reporting of PF/ESI Deposit Dates by Tax Auditor Causes Excess Disallowance: ITAT Directs AO to Verify and Restrict Only to Late Payments [Read Order]
The Bench directed the AO to verify the records and restrict the disallowance only to the extent of actual late payments, instead of mechanically relying on the auditor’s report.
PF - ESI Deposit - Disallowance - Taxscan
PF - ESI Deposit - Disallowance - Taxscan
The Chandigarh Bench of the Income Tax Appellate Tribunal ( ITAT ), in a matter of wrong reporting of PF/ESI employees’ contribution deposit dates by the tax auditor had resulted in a higher disallowance, the AO was directed to verify records.
The Tribunal directed the Assessing Officer (AO) to verify the actual payment dates and restrict the disallowance only to the extent of genuine late payments.
An intimation issued by CPC under Section 143(1) of the Income Tax Act, 1961, disallowing employees’ contribution to PF/ESI amounting to ₹161.54 lakhs for AY 2019-20 to M/s Sunrise Facilitators Pvt. Ltd.
The disallowance was made under Section 36(1)(va) read with Section 2(24)(x), based on the details reported in the tax audit report. The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, confirmed the disallowance, relying on the clarificatory amendment introduced by the Finance Act, 2021.
On appeal, the assessee argued that due to incorrect reporting of payment dates by the tax auditor, several timely deposits were wrongly shown as delayed, thereby inflating the disallowance.
It was submitted that out of the total disallowance, only ₹58.58 lakhs related to actual delayed deposits, while the balance represented payments made within the statutory due date. Supporting challans and tabular details were furnished before the Tribunal.
The bench of Laliet Kumar (JM) and Manoj Kumar Agarwal (AM) noted that the issue of law stood settled against the assessee by the Supreme Court’s ruling in Checkmate Services Pvt. Ltd. v. CIT (2022), which clarified the distinction between employer’s contribution and employees’ contribution.
It was observed that while the legal position was clear, the assessee’s grievance on factual misreporting required consideration.
Accordingly, the Bench directed the AO to verify the records and restrict the disallowance only to the extent of actual late payments, instead of mechanically relying on the auditor’s report. The appeal was thus partly allowed for statistical purposes.
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