DCIT-2(2)(1), MUMBAI, MUMBAI V. MODERN VEER RAYS SECURITY FORCE (INDIA) PVT. LTD., MUMBAI

ITA 7886/MUM/2025

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The case involves the Revenue's appeal against the CIT(A)'s decision which deleted an addition made by the Centralized Processing Centre (CPC) under section 143(1) of the Income Tax Act, 1961. The addition was initially made on the grounds of alleged delayed deposit of employees' contributions towards PF and ESIC by Modern Veer Rays Security Force (India) Pvt. Ltd. The CIT(A) found that the contributions were not delayed when considering the specific contractual and operational context of the assessee's business, which involved certification of attendance and salary payments in the subsequent month. The Tribunal upheld the CIT(A)'s decision, emphasizing the need to consider the actual practices and contractual terms of the assessee in determining the due dates for statutory contributions.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 837940 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2020-2021
• Appeal Filed On: 26-11-2025
• Other Referred Cases: Checkmate Services Pvt. Ltd. v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAMKOSURI; LD
• Assessee Lawyers: RAKESH JOSHI; LD

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 7886/Mum/2025 (Assessment Year: 2020-21) DCIT Circle-2(2)(1) Room No. 417, 4th floor, Aayakar Bhavan, Churchgate, M. K. Road, Mumbai- 400 020 Vs. Modern Veer Rays Security Force (India) Pvt. Ltd. 6th floor, Atlanta Centre, Sonawala Road, Goregaon East, Mumbai-400 063 PAN/GIR No. AAACM3692H (Applicant) (Respondent) Revenue by Shri Annavaram Kosuri, Ld. DR Assessee by Shri Rakesh Joshi, Ld. AR Date of Hearing 19.02.2026 Date of Pronouncement 20.02.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal by the Revenue is directed against the order dated 19.09.2025 passed by the learned Commissioner of Income Tax (Appeals), Addl./JCIT (A)-2, Surat [hereinafter referred to as “CIT(A)”] under section 250 of the Income Tax Act, 1961[hereinafter referred to as “the Act”] for A.Y. 2020-21, Printed from counselvise.com 2 ITA No. 7886/Mum/2025 Modern Veer Rays Security Force (India) Pvt. Ltd whereby the learned CIT(A) deleted the addition made on account of alleged delayed deposit of employees’ contribution towards PF and ESIC vide order passed under section 143(1) of the Act by the Centralised Processing Centre, Income Tax Department [hereinafter referred to as “CPC”]. Facts in Brief 2. The facts, in brief, are that the assessee is a private limited company engaged in providing security services across India. The return of income for A.Y. 2020-21 was filed on 27.10.2020 declaring total income of Rs. 34,71,98,330/-. The return was processed by the Centralized Processing Centre under section 143(1) of the Act vide intimation dated 24.12.2021, wherein total income was determined at Rs. 52,17,18,940/- after making, inter alia, an addition of Rs. 17,45,20,610/- under section 36(1)(va) on account of employees’ contribution to PF/ESIC allegedly deposited beyond the due date prescribed under the respective Acts. The adjustment was made on the basis of reporting in Form 3CD reflecting delay in deposit of employees’ contribution. 3. Aggrieved by the said adjustment, the assessee preferred appeal before the learned CIT(A) under section 250 of the Act. Before the learned CIT(A), the assessee contended that there was no delay in deposit of employees’ contribution as per the statutory due dates under the EPF Scheme and ESIC Regulations. It was explained that the assessee deploys employees at clients’ premises and that attendance is certified by the client at the end of the month. Salary becomes due and Printed from counselvise.com 3 ITA No. 7886/Mum/2025 Modern Veer Rays Security Force (India) Pvt. Ltd payable only in the subsequent month upon such certification and in terms of the service agreements. Accordingly, both salary payable and salary paid fall in the subsequent month and, therefore, the due date for deposit of PF/ESI contribution has to be reckoned from the subsequent month. It was further submitted that the discrepancy in the original tax audit report was an inadvertent reporting error, which was subsequently rectified by the tax auditor through a revised Form 3CD dated 08.03.2023. 4. The learned CIT(A), after examining the statutory provisions of section 36(1)(va) and Explanation thereto, section 38 of the Employees’ Provident Fund Scheme, 1952 and Regulation 31 of the Employees’ State Insurance (General) Regulations, 1950, recorded a finding that in the case of the assessee salary becomes due and payable only in the subsequent month after client certification and that the due date for deposit of employees’ contribution would accordingly fall in the subsequent month. The learned CIT(A) further held that the revised audit report was admissible in appellate proceedings and, upon verification of challans and supporting documents, concluded that there was no delay in deposit beyond the statutory due dates. The addition of Rs. 17,45,20,610/- made under section 36(1)(va) was thus deleted. 5. Aggrieved by the order of CIT(A), the revenue is in appeal before us raising following grounds of appeal: Printed from counselvise.com 4 ITA No. 7886/Mum/2025 Modern Veer Rays Security Force (India) Pvt. Ltd 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of ₹17,45,20,610/- made u/s 36(1)(va) on account of delayed deposit of employees’ contribution to PF/ESI, ignoring the statutory provisions of the EPF Act and ESI Act, which mandate that such contribution must be deposited within the due date prescribed under the respective Acts. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) further erred in holding that salary becomes “due” only after attendance certification by the assessee’s clients, without appreciating that salary accrues at the end of the wage period under the PF/ESI laws and under the mercantile system of accounting regularly followed by the assessee, and therefore statutory due dates cannot be postponed based on employer’s internal administrative processes. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in accepting a revised tax audit report, which is not legally permissible for AY 2020–21 under Rule 6G of the Income-tax Rules, and in relying on such a revised report to conclude that no delay occurred, contrary to the auditor’s original Form 3CD which clearly reported delayed payments. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring and distinguishing the binding judgment of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. v. CIT (2022), which mandates disallowance of employees’ contribution deposited even a day beyond the due date prescribed under PF/ESI Acts. 6. The learned Departmental Representative (DR) submitted that the learned CIT(A) erred in deleting the disallowance ignoring the statutory mandate that employees’ contribution must be deposited within the due date prescribed under the EPF and ESI Acts. It was contended that salary accrues at the end of the wage period under the mercantile system of accounting followed by the assessee and statutory due dates cannot be postponed based on internal administrative processes. It was further argued that the revised tax audit report dated 08.03.2023 was issued much after Printed from counselvise.com 5 ITA No. 7886/Mum/2025 Modern Veer Rays Security Force (India) Pvt. Ltd the intimation under section 143(1) dated 24.12.2021 and is an afterthought. 7. The learned DR also submitted that the learned CIT(A) granted relief without calling for a remand report from the Assessing Officer despite relying upon revised audit report and other supporting documents, thereby violating Rule 46A of the Income-tax Rules. Reliance was placed on the judgment of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. v. CIT [143 taxmann.com 178]to contend that employees’ contribution deposited even a day beyond the statutory due date is liable to disallowance. 8. Per contra, the learned Authorised Representative submitted that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench in the assessee’s own case for A.Ys. 2018-19 and 2019-20 in ITA Nos. 1166/Mum/2023 and 1167/Mum/2023, order dated 23.08.2023, wherein under identical facts the Tribunal held that the due date for deposit of PF/ESI contribution has to be reckoned from the month in which salary becomes due and payable, which in the assessee’s case is the subsequent month. It was submitted that the learned CIT(A) has co-terminus powers with that of the Assessing Officer and is empowered to examine the material placed on record. It was argued that processing under section 143(1) is purely based on audit report entries and the assessee had no opportunity to explain the factual position before CPC. Therefore, there is no violation of Rule 46A. It was further contended that once it is Printed from counselvise.com 6 ITA No. 7886/Mum/2025 Modern Veer Rays Security Force (India) Pvt. Ltd demonstrated on facts that there was no delay as per statutory due dates, no disallowance under section 36(1)(va) can be sustained. 9. We have considered the rival submissions and perused the material on record. The short issue for our consideration is whether the deletion of addition made under section 36(1)(va) on account of alleged delayed deposit of employees’ contribution towards PF/ESI is sustainable in law and on facts. It is not in dispute that the adjustment under section 143(1) was made solely on the basis of reporting in Form 3CD. It is also a matter of record that the assessee has explained the peculiar nature of its business, the contractual terms with clients and the timing of salary accrual and payment. The learned CIT(A) has recorded a categorical finding that salary becomes due and payable only in the subsequent month after client certification and that the due date under the respective welfare legislations has to be reckoned accordingly. The learned CIT(A) has also recorded that challans and revised auditor’s certificate were examined before granting relief. 10. As regards the contention of the Revenue regarding violation of Rule 46A, we find that the appellate authority is vested with wide co-terminus powers and is competent to examine additional material for proper adjudication of the issue. The order of the learned CIT(A) reflects that he has examined the statutory framework and the evidences placed on record before arriving at his conclusion. In the facts of the present case, the adjustment Printed from counselvise.com 7 ITA No. 7886/Mum/2025 Modern Veer Rays Security Force (India) Pvt. Ltd under section 143(1) having been made without any opportunity to the assessee to explain the factual position, the first appellate authority was justified in examining the relevant material. No specific prejudice has been demonstrated by the Revenue on account of non-calling of remand report. 11. Further, we note that in the assessee’s own case for earlier assessment years under identical factual matrix, the co-ordinate Bench has accepted the principle that the due date for deposit of employees’ contribution has to be reckoned from the month in which salary becomes due and payable in terms of contractual arrangement and business model of the assessee. The Revenue has not brought any distinguishing facts for the year under consideration. Judicial discipline requires that a consistent view be adopted unless there is a material change in facts or law. 12. In so far as reliance on the decision of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. (supra) is concerned, the said judgment lays down that employees’ contribution deposited beyond the due date prescribed under the respective Acts is not allowable. However, in the present case the learned CIT(A) has recorded a finding of fact that there was no delay beyond the statutory due date when reckoned in accordance with the correct month of accrual of salary. The said finding has not been rebutted by any cogent material on record. 13. In view of the above discussion and in the absence of any material to controvert the factual findings recorded by the learned CIT(A), we do not find any infirmity in the order of the learned Printed from counselvise.com 8 ITA No. 7886/Mum/2025 Modern Veer Rays Security Force (India) Pvt. Ltd CIT(A) deleting the addition of Rs. 17,45,20,610/- made under section 36(1)(va). 14. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 20.02.2026. Sd/- Sd/- (SAKTIJIT DEY) (MAKARAND VASANT MAHADEOKAR) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 20/02/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT 5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai Printed from counselvise.com "