PF & ESI Disallowance in Section 143(1) Intimation Quashed by ITAT Kolkata: Issue Held Debatable in Light of Pending Supreme Court Review
Background and Case Overview
The Income Tax Appellate Tribunal, Kolkata Bench, recently delivered a significant ruling in Atibari Tea Company Ltd. Vs DCIT (ITAT Kolkata) pertaining to Assessment Year 2024-25. The core question before the Tribunal was whether the disallowance of employees' contribution towards Provident Fund (PF) and Employees' State Insurance (ESI) could be validly made through an intimation issued under Section 143(1) of the Income-tax Act, 1961, particularly when the underlying legal issue had become the subject of fresh judicial examination before the Supreme Court of India.
The Tribunal's ruling carries considerable practical significance for assessees across India who have faced similar disallowances through automated CPC processing, without any scrutiny assessment being undertaken.
Facts of the Case
Atibari Tea Company Ltd. filed its return of income for AY 2024-25. The return was processed at the Centralized Processing Centre (CPC), which issued an intimation dated 02.06.2025 under Section 143(1) of the Income-tax Act, 1961. Through this intimation, the CPC disallowed an amount of ₹61,35,025/- representing the employees' contributions towards PF and ESI.
Aggrieved by this disallowance, the assessee preferred an appeal before the ADDL/JCIT(A), Ranchi. However, the JCIT(A) upheld the CPC's action by placing reliance on the Supreme Court's binding decision in Checkmate Services (P) Ltd. vs. CIT, 454 ITR 518 (SC), which had broadly held that employees' contributions deposited beyond the due date prescribed under the respective labour statutes were not deductible.
Dissatisfied with the outcome, the assessee approached the ITAT, Kolkata, raising the contention that the issue had since transformed into a debatable one and therefore could not form the basis of an adjustment under Section 143(1).
Assessee's Contentions Before the Tribunal
The learned Authorised Representative for the assessee advanced a focused and legally significant argument. It was submitted that while Checkmate Services (P) Ltd. vs. CIT, 454 ITR 518 (SC) did lay down the law on the subject, the issue could no longer be treated as settled and beyond debate, for the following reason:
The Supreme Court, in Woodland (Aero Club) Pvt. Ltd. v. ACIT, SLP No. 1532/2026, had taken up the very same issue — pertaining to employees' contributions towards PF and ESI — for fresh consideration, having noted conflicting judicial opinions across various High Courts. The SLP was filed on 27.01.2026, and the Supreme Court issued notice returnable in four weeks, signalling that the issue warranted a fresh look.
Since the matter was now sub-judice before the highest court of the land, the issue of employees' PF and ESI contributions had to be treated as debatable. The assessee's representative argued that a debatable legal question cannot lawfully be the subject of an adjustment made through an intimation under Section 143(1), which is intended only for prima facie and undisputed adjustments.
The prayer was accordingly made for quashing of the intimation dated 02.06.2025 to the extent it disallowed employees' PF and ESI contributions.