The CPC disallowed my late PF under section 143(1)(a) purely because my auditor filled in clause 20(b) of Form 3CD. Is the auditor's entry enough to found the adjustment?
This order held it was not, and read down section 143(1)(a)(iv) so that an adjustment cannot be made where the audit report takes a stand contrary to the law laid down by the courts above. It is set out here because it is the most fully reasoned statement of that argument, but the reader must know at once that it no longer stands: it was recalled by the Tribunal itself under section 254(2) on 13 April 2023 and the appeals were re-decided against the assessee on 20 June 2023, following Checkmate Services.
Decided by the ITAT (Pramod Kumar, Vice President and Sandeep Singh Karhail, Judicial Member (Mumbai "H" Bench)) on 2022-04-27, reported as ITA No. 1910/Mum/2021 (AY 2019-20) and the companion order in ITA No. 1785/Mum/2021 (AY 2018-19); hearing concluded 19 April 2022. It bears on section 143(1), section 143(1)(a), section 143(1)(a)(iv), section 36(1)(va), section 2(24)(x), section 43B, section 139(1) of the Income Tax Act 1961, in Deductions & Disallowances, Assessment & Scrutiny and How Tax Law Is Read matters.
Two separate propositions sit in this order and they have had different fates. The first is that a tax auditor is an independent third party whose opinion cannot bind the auditee, so an entry in Form 3CD is not by itself a justification for a disallowance — and that where the auditor's view conflicts with the law declared by the jurisdictional High Court, section 143(1)(a)(iv) must be read subject to a rider excepting that situation. Nothing in Checkmate Services touches that reasoning as a matter of principle. The second is the application of it: the Tribunal held the Form 3CD due date to be "not decisive" because the then-binding Bombay High Court line allowed payment before the section 139(1) date. That premise was destroyed by Checkmate Services on 12 October 2022, and with it the result. What survives for a practitioner is the framework, not the outcome. The order is also the source of a point of jurisdiction worth keeping: what counts as the jurisdictional High Court depends on the location of the regular Assessing Officer, not on where the CPC sits, and the Tribunal grounded that on Rule 11(i) of the Centralised Processing of Returns Scheme 2011. Do not cite this order for the proposition that a late employees' contribution paid before the return due date is allowable — that proposition is dead.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee's returns for AY 2018-19 and AY 2019-20 were processed by the CPC, which disallowed the employees' contribution to provident fund deposited after the due date under the welfare enactment but before the due date for filing the return under section 139(1). The disallowance was made as a prima facie adjustment under section 143(1)(a)(iv), the entire basis being what the tax auditor had reported in clause 20(b) of Form 3CD as the due date and the actual date of payment. The assessee's objections to the proposed adjustment were rejected by a standard template communication which did not even delete the limb that did not apply — it did not say whether there had been no response or whether the response was unacceptable. Before the Tribunal the Departmental Representative argued that the observations in the tax audit report must prevail, all the more because the auditor is appointed by the assessee. At that date the Bombay High Court line permitted deduction where payment was made before the section 139(1) date.
The adjustment made in the course of processing under section 143(1) was vitiated in law and was deleted. A tax auditor's opinion cannot bind the auditee and cannot by itself justify a disallowance; where the opinion conflicts with the law laid down by the courts above, section 143(1)(a)(iv) must be read down as subject to a rider excepting that situation. The reporting of a payment beyond the Explanation date in Form 3CD was not, on the then-prevailing law, an indication of a disallowance of expenditure within the meaning of section 143(1)(a)(iv) at all. The Tribunal expressly confined its adjudication to the scope of adjustments permissible under section 143(1) and declined to decide whether Explanation 2 to section 36(1)(va), inserted with effect from 1 April 2021, meant that for years before AY 2021-22 section 43B could not be applied to fix the due date (ITA No.1785/Mum/2021, para 10).
A quasi-judicial order rejecting objections to a proposed section 143(1) adjustment must carry cogent and specific reasons; a template that shows no application of mind cannot pass judicial scrutiny (ITA No.1785/Mum/2021, para 7). The tax auditor, though appointed by the assessee, is an independent third party and his opinions bind no one; treating those opinions as at once a reflection of the assessee's own stand and as sacrosanct justification for a disallowance is an internally contradictory approach with no meeting ground (para 7). Section 143(1)(a)(iv) does on its face permit a disallowance on the strength of an "indication" alone, and it is for the constitutional courts to rule on its vires, but the Tribunal was bound to give it a sensible and workable interpretation (para 7). Under Article 141 and, following East India Commercial Co. Ltd. v. Collector of Customs, under the supervisory scheme of Articles 226 and 227, a tribunal cannot ignore the law declared by the jurisdictional High Court; the CPC cannot take a view contrary to it, particularly where its attention was drawn to the binding precedents (para 8). The jurisdictional High Court is fixed by the location of the regular Assessing Officer, not the CPC, because Rule 11(i) of the Centralised Processing of Returns Scheme 2011 places the appeal with the Commissioner (Appeals) having jurisdiction over the jurisdictional Assessing Officer (para 8). Finally, what the auditor reports in clause 20(b) is a factual report of the date of payment and the Explanation due date, not an expression of opinion on allowability, and on the then-prevailing law that due date was not decisive, so the report could not be the "indication" that section 143(1)(a)(iv) requires (para 9).
When the opinion expressed by the tax auditor is contrary to the correct legal position, the tax audit report has to make way for the correct legal position.
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Handle my notice → Ask a CA on WhatsAppThis order held it was not, and read down section 143(1)(a)(iv) so that an adjustment cannot be made where the audit report takes a stand contrary to the law laid down by the courts above. It is set out here because it is the most fully reasoned statement of that argument, but the reader must know at once that it no longer stands: it was recalled by the Tribunal itself under section 254(2) on 13 April 2023 and the appeals were re-decided against the assessee on 20 June 2023, following Checkmate Services. This was decided by the ITAT (Pramod Kumar, Vice President and Sandeep Singh Karhail, Judicial Member (Mumbai "H" Bench)) and bears on section 143(1), section 143(1)(a), section 143(1)(a)(iv), section 36(1)(va), section 2(24)(x), section 43B, section 139(1) of the Income Tax Act 1961. It is reported as ITA No. 1910/Mum/2021 (AY 2019-20) and the companion order in ITA No. 1785/Mum/2021 (AY 2018-19); hearing concluded 19 April 2022. Two separate propositions sit in this order and they have had different fates. The first is that a tax auditor is an independent third party whose opinion cannot bind the auditee, so an entry in Form 3CD is not by itself a justification for a disallowance — and that where the auditor's view conflicts with the law declared by the jurisdictional High Court, section 143(1)(a)(iv) must be read subject to a rider excepting that situation. Nothing in Checkmate Services touches that reasoning as a matter of principle. The second is the application of it: the Tribunal held the Form 3CD due date to be "not decisive" because the then-binding Bombay High Court line allowed payment before the section 139(1) date. That premise was destroyed by Checkmate Services on 12 October 2022, and with it the result. What survives for a practitioner is the framework, not the outcome. The order is also the source of a point of jurisdiction worth keeping: what counts as the jurisdictional High Court depends on the location of the regular Assessing Officer, not on where the CPC sits, and the Tribunal grounded that on Rule 11(i) of the Centralised Processing of Returns Scheme 2011. Do not cite this order for the proposition that a late employees' contribution paid before the return due date is allowable — that proposition is dead. If it applies to you, the first step is this: Do not rely on this order for the merits of a section 36(1)(va) disallowance. After Checkmate Services a late employees' contribution is not deductible whatever the audit report says.
The assessee's returns for AY 2018-19 and AY 2019-20 were processed by the CPC, which disallowed the employees' contribution to provident fund deposited after the due date under the welfare enactment but before the due date for filing the return under section 139(1). The disallowance was made as a prima facie adjustment under section 143(1)(a)(iv), the entire basis being what the tax auditor had reported in clause 20(b) of Form 3CD as the due date and the actual date of payment. The assessee's objections to the proposed adjustment were rejected by a standard template communication which did not even delete the limb that did not apply — it did not say whether there had been no response or whether the response was unacceptable. Before the Tribunal the Departmental Representative argued that the observations in the tax audit report must prevail, all the more because the auditor is appointed by the assessee. At that date the Bombay High Court line permitted deduction where payment was made before the section 139(1) date. The matter was decided on 2022-04-27 by the ITAT (Pramod Kumar, Vice President and Sandeep Singh Karhail, Judicial Member (Mumbai "H" Bench)). On those facts the ITAT held as follows. The adjustment made in the course of processing under section 143(1) was vitiated in law and was deleted. A tax auditor's opinion cannot bind the auditee and cannot by itself justify a disallowance; where the opinion conflicts with the law laid down by the courts above, section 143(1)(a)(iv) must be read down as subject to a rider excepting that situation. The reporting of a payment beyond the Explanation date in Form 3CD was not, on the then-prevailing law, an indication of a disallowance of expenditure within the meaning of section 143(1)(a)(iv) at all. The Tribunal expressly confined its adjudication to the scope of adjustments permissible under section 143(1) and declined to decide whether Explanation 2 to section 36(1)(va), inserted with effect from 1 April 2021, meant that for years before AY 2021-22 section 43B could not be applied to fix the due date (ITA No.1785/Mum/2021, para 10).
A quasi-judicial order rejecting objections to a proposed section 143(1) adjustment must carry cogent and specific reasons; a template that shows no application of mind cannot pass judicial scrutiny (ITA No.1785/Mum/2021, para 7). The tax auditor, though appointed by the assessee, is an independent third party and his opinions bind no one; treating those opinions as at once a reflection of the assessee's own stand and as sacrosanct justification for a disallowance is an internally contradictory approach with no meeting ground (para 7). Section 143(1)(a)(iv) does on its face permit a disallowance on the strength of an "indication" alone, and it is for the constitutional courts to rule on its vires, but the Tribunal was bound to give it a sensible and workable interpretation (para 7). Under Article 141 and, following East India Commercial Co. Ltd. v. Collector of Customs, under the supervisory scheme of Articles 226 and 227, a tribunal cannot ignore the law declared by the jurisdictional High Court; the CPC cannot take a view contrary to it, particularly where its attention was drawn to the binding precedents (para 8). The jurisdictional High Court is fixed by the location of the regular Assessing Officer, not the CPC, because Rule 11(i) of the Centralised Processing of Returns Scheme 2011 places the appeal with the Commissioner (Appeals) having jurisdiction over the jurisdictional Assessing Officer (para 8). Finally, what the auditor reports in clause 20(b) is a factual report of the date of payment and the Explanation due date, not an expression of opinion on allowability, and on the then-prevailing law that due date was not decisive, so the report could not be the "indication" that section 143(1)(a)(iv) requires (para 9). In the words reproduced by the source cited on this page: "When the opinion expressed by the tax auditor is contrary to the correct legal position, the tax audit report has to make way for the correct legal position." The decision followed or applied East India Commercial Co. Ltd. v. Collector of Customs [1963] 3 SCR 338 (SC) — relied upon.
It was decided by the ITAT on 2022-04-27 and is reported as ITA No. 1910/Mum/2021 (AY 2019-20) and the companion order in ITA No. 1785/Mum/2021 (AY 2018-19); hearing concluded 19 April 2022. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 143(1), section 143(1)(a), section 143(1)(a)(iv), section 36(1)(va), section 2(24)(x), section 43B, section 139(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The adjustment made in the course of processing under section 143(1) was vitiated in law and was deleted. A tax auditor's opinion cannot bind the auditee and cannot by itself justify a disallowance; where the opinion conflicts with the law laid down by the courts above, section 143(1)(a)(iv) must be read down as subject to a rider excepting that situation. The reporting of a payment beyond the Explanation date in Form 3CD was not, on the then-prevailing law, an indication of a disallowance of expenditure within the meaning of section 143(1)(a)(iv) at all. The Tribunal expressly confined its adjudication to the scope of adjustments permissible under section 143(1) and declined to decide whether Explanation 2 to section 36(1)(va), inserted with effect from 1 April 2021, meant that for years before AY 2021-22 section 43B could not be applied to fix the due date (ITA No.1785/Mum/2021, para 10). It arises in Deductions & Disallowances, Assessment & Scrutiny and How Tax Law Is Read matters, on section 143(1), section 143(1)(a), section 143(1)(a)(iv), section 36(1)(va), section 2(24)(x), section 43B, section 139(1) of the Income Tax Act 1961, and was decided by Pramod Kumar, Vice President and Sandeep Singh Karhail, Judicial Member (Mumbai "H" Bench). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the CPC has made some other prima facie adjustment resting on nothing but a Form 3CD entry, and the entry is contrary to a binding decision, use paragraphs 7 and 8 of the order in ITA No.1785/Mum/2021 for the reading-down argument — but tell the appellate authority that the order was recalled on other grounds, or the Departmental Representative will. Check whether the CPC gave reasons for rejecting your response to the section 143(1)(a) intimation. Paragraph 7 attacks template rejections that do not even delete the inapplicable limb, and that criticism is untouched by Checkmate. Identify your jurisdictional High Court by reference to the regular Assessing Officer's location, not the CPC's, before arguing that a binding precedent was ignored. If you have a favourable Tribunal order of this vintage that the Revenue is now trying to recall, read the two miscellaneous-application entries in this library — the Mumbai Benches have gone both ways.
Overruled. The premise of the result — that the jurisdictional High Court line permitted deduction of a late employees' contribution paid before the section 139(1) date — was destroyed by Checkmate Services P. Ltd. v CIT (SC, 12 October 2022). Beyond that, the orders themselves were formally recalled: on the Revenue's applications, M.A. Nos. 9 and 10/Mum./2023, a coordinate bench (B.R. Baskaran AM and Sandeep Singh Karhail JM) recalled both orders of 27 April 2022 under section 254(2) on 13 April 2023 for a fresh hearing, and on 20 June 2023 a differently constituted bench (Prashant Maharishi AM and N.K. Choudhry JM) dismissed both appeals following Checkmate Services. The general proposition in paragraphs 7 and 8 about the status of a tax auditor's opinion and the reading down of section 143(1)(a)(iv) has not itself been disapproved in anything I located, but I did not run a systematic later-treatment search on that proposition. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
There are two separate orders of the same date and the same coram, one in ITA No.1910/Mum/2021 for AY 2019-20 and one in ITA No.1785/Mum/2021 for AY 2018-19, reported at indiankanoon /doc/46609580/ and /doc/86162778/ respectively. The substantive order is the one in ITA No.1785/Mum/2021 for AY 2018-19, whose paragraphs run 1 to 11; the order in ITA No.1910/Mum/2021 for AY 2019-20, which is the document at the source URL, has five paragraphs only and reproduces the whole of the 1785 order inside its para 3. Every paragraph number cited in this entry — 7, 8, 9 and 10 — is a paragraph of the ITA No.1785/Mum/2021 order as so reproduced, not of the 1910 order. The disposal numbered '5' seen on one retrieval of the 1910 order is correct for that order and is not an error. The recall order of 13 April 2023 records that the appeals recalled were ITA Nos. 1910 and 1785/Mum./2021, while the later order in DCIT v ANI Integrated Services refers to the Kalpesh Synthetics decision as ITA No.2587/Mum/2021 — a third appeal number I could not reconcile. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The adjustment made in the course of processing under section 143(1) was vitiated in law and was deleted. A tax auditor's opinion cannot bind the auditee and cannot by itself justify a disallowance; where the opinion conflicts with the law laid down by the courts above, section 143(1)(a)(iv) must be read down as subject to a rider excepting that situation. The reporting of a payment beyond the Explanation date in Form 3CD was not, on the then-prevailing law, an indication of a disallowance of expenditure within the meaning of section 143(1)(a)(iv) at all. The Tribunal expressly confined its adjudication to the scope of adjustments permissible under section 143(1) and declined to decide whether Explanation 2 to section 36(1)(va), inserted with effect from 1 April 2021, meant that for years before AY 2021-22 section 43B could not be applied to fix the due date (ITA No.1785/Mum/2021, para 10).
TaxSphere, “Kalpesh Synthetics Pvt Ltd v DCIT, CPC”, https://taxnotice.vittsphere.com/caselaw/case/kalpesh-synthetics-143-1-a-iv-tax-audit-report-adjustment/ (validity last checked 2026-09-08)
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CPC disallowed my late-deposited PF and ESI under 143(1)(a). Was a summary adjustment even open to them?
My Tribunal order on employees' contributions became final before Checkmate and no appeal was filed. The department now wants it recalled under section 254(2). Is finality any answer?
My PF due date fell on Independence Day and I remitted the next working day. Checkmate says nothing about that. Can I still save the deduction?
You deposited employees' PF late but before filing the return. Is the deduction saved?
