Chattisgarh High Court: Maa Harsiddhi Infra Developers P. Ltd. v. ACIT [TAXC No. 152 of 2025]
The Hon’ble High Court held that the Income Tax Department cannot invoke the limited powers under Section 143(1)(a) of the Income Tax Act to disallow claims involving debatable legal issues, such as delayed deposit of employees’ contributions towards ESI and EPF under Section 36(1)(va). In the case relating to AY 2019-20, the Assessing Officer, while processing the return under Section 143(1)(a), disallowed Rs. 32.77 lakh on account of delayed deposits of ESI/EPF contributions. The High Court noted that divergent judicial opinions at the relevant time made the issue “highly debatable” and therefore unsuitable for adjustment under Section 143(1)(a). The Court observed that Section 143(1)(a) permits only prima facie adjustments and cannot be used to adjudicate contentious legal issues, which can only be examined in a scrutiny assessment under Section 143(3). Accordingly, it held that the Assessing Officer exceeded his jurisdiction by making the disallowance at the intimation stage and clarified that the subsequent Supreme Court ruling in Checkmate Services Pvt. Ltd. could not retrospectively justify an adjustment that was beyond the scope of Section 143(1)(a) when originally made.
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