M/S. BAKSHI SECURITY AND PERSONNEL SERVICES P. LTD ,MUMBAI V. INCOME TAX OFFICER 12(1)(1), MUMBAI

ITA 8004/MUM/2025

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The case involves M/s. Bakshi Security & Personnel Services P. Ltd., which appealed against the order of the Learned Commissioner of Income Tax (Appeals) concerning the Assessment Year 2020-21. The primary contention was regarding the disallowance of Rs.3,07,41,124 under section 36(1)(va) of the Income Tax Act, which was initially disallowed due to delayed payment of employees' contributions to PF & ESIC. The Tribunal had to decide whether the order under section 143(1) of the Act, which made the disallowance, merged with the subsequent scrutiny assessment under section 143(3), and whether the disallowance was correctly applied to both employer's and employees' contributions. The Tribunal dismissed the initial grounds related to the merger of the orders but allowed the additional ground for further verification of the nature of the contributions.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839933 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Appeal Filed On: 28-11-2025
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT, Innovsource Services Pvt. Ltd. vs DCIT, Areca Trust vs. CIT(A), National Thermal Power Co. Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARI
• Assessee Lawyers: HARESH SHAH
• Keywords: Set aside; Additional evidence
• Section: 143(3); 142(1); 139; 43B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No.8004/Mum/2025 (Assessment Year: 2020-21) M/s. Bakshi Security & Personnel Services P. Ltd., Unit No.234/235, New Sonal Link Industrial Estate, Buildg 02, Link Road, Malad West, Mumbai- 400064 Vs. Income Tax Officer– 12(1)(1), Income Tax Appellate Tribunal, Mumbai Benches, 101 Maharishi Karve Marg, Mumbai – 400 020 PAN: AAACB3456A (Appellant) : (Respondent) Assessee by : Shri Haresh Shah, AR Respondent by : Shri Swapnil Choudhari, Sr. AR Date of Hearing : 11.02.2026 Date of Pronouncement : 24.02.2026 O R D E R Per Kavitha Rajagopal, JM: This appeal has been filed by the assessee, challenging the order of the Learned Commissioner of Income Tax [‘Ld. CIT(A)’ for short] passed u/s. 250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2020-21. 2. The assessee has raised the following grounds of appeal along with additional grounds of appeal both legal as well as on the merits of the case: “(1) Without prejudice to the grounds hereunder, the learned CIT(A) erred in holding that the appeal arising out of section 143(1) is independent from subsequent assessment u/s. 143(3) of the Act. (2) On the facts and circumstances and in law, the learned CIT(A) ought to have appreciated, legally, that the subsequent scrutiny assessment order under 143(3) is Printed from counselvise.com ITA No.8004/Mum/2025 M/s. Bakshi Security & Personnel Services P. Ltd. 2 enforceable/binding under the law as it is finality of the assessment, so effectively the intimation u/s. 143(1) is not finality of assessment. (3) The learned CIT(A) In other words the learned CIT(A) ought to have appreciated that subsequent scrutiny assessment order u/s. 143(3) is the final and effective order under the Act which automatically replaces and supersedes the earlier intimation u/s. 143(1) of the Act and, legally, it ceases to exist immediately thereafter. (4) On the facts & circumstances and in law, the learned CIT(A) erred in confirming the disallowance of Rs.3.07,41,124/- under the provisions of section 36(1)(va) of the Act disregarding the scrutiny assessment under the provisions of section 143(3) of the Act in which there was no disallowance as such. (5) On the facts and circumstances and in law, it is humbly prayed that the alleged addition may be deleted & oblige. (6) Your Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal. (II) Additional ground of Appeal arising out of the record - Without prejudice to the above Ground (I), above, the Appellant humbly states that they are purely legal in nature and arising on the facts and record. It is humbly stated that they were not raised out of inadvertence and without any malafide intention to defraud revenue. On the facts and circumstances and in law, the Appellant craves leave to raise the following Additional Grounds of Appeal. However, the Appellant humbly prays that the following Additional Grounds may be admitted and adjudicated in the interest of justice & oblige. (1) On the facts and circumstances & in law, A.O. [CPC] erred in disallowing of Rs.3,07,41,124/- under the provisions of section 36(1)(va) of the Act merely relying on the Tax Audit Report Clouse 20(b) which mistakenly reported the contribution towards PF & ESIC as \"Sum received from employees\" whereas the alleged disallowed amount was actually comprised of Employer's Contribution and Employees' contribution towards PF & ESIC. (2) Your Appellant humbly states that, as per law, the Employer's contribution is legally disallowable if not paid on or before the due date as per the provisions of section 43B and Employees contribution is legally disallowable if not paid on or before the due date as per the provisions of section 36(1)(va) of the Act. Printed from counselvise.com ITA No.8004/Mum/2025 M/s. Bakshi Security & Personnel Services P. Ltd. 3 (3) On the facts and circumstances and in law, it is humbly prayed that the alleged disallowance may be decided as per the applicable provisions of section 43B and 36(1)(va) of the Act, respectively & oblige. (4) Your Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal.” 3. Brief facts of the case are that the assessee is a private limited company engaged in the business of security services and housekeeping. The assessee had filed its return of income for the year under consideration dated 22.01.2021 declaring total income at Rs.39,59,740/- and the same was processed u/s 143(1) of the Act. The CPC vide intimation u/s 143(1) of the Act dated 24.12.2021 made a disallowance of Rs.3,07,41,120/- u/s 36(1)(va) of the Act towards delayed payment of employees’ contribution to PF & ESIC paid after the due date prescribed under the relevant Acts but before filing of the return of income. 4. Aggrieved by the intimation order passed u/s 143(3) of the Act, the assessee was in appeal before the first appellate authority who vide order dated 29.09.2025 dismissed the appeal filed by the assessee by relying on the decision of the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT in Civil Appeal No.2833 of 2016 order dated 12.10.2022 wherein it was held that delayed payment of PF & ESIC after the due date prescribed under the relevant Act is not an allowable deduction as per section 36(1)(va) of the Act. 5. Aggrieved, the assessee is in appeal before us challenging the order of the Ld. CIT(A) on the abovementioned grounds. Printed from counselvise.com ITA No.8004/Mum/2025 M/s. Bakshi Security & Personnel Services P. Ltd. 4 6. The Learned Authorized Representative (“Ld. AR” for short) for the assessee commenced his arguments on ground No.1, 2, 3 & 4 stating that there was a scrutiny assessment in the assessee ‘s case u/s 143(3) of the Act where the Learned Assessing Officer (“Ld. AO” for short) did not make any addition/disallowance and hence the order u/s 143(1) of the Act ceases to exist subsequent to the scrutiny assessment passed u/s 143(3) of the Act. The Ld. AR contended that section 143(1) order would merge automatically with the section 143(3) order though the Ld. AO has not commenced the section 143(3) proceeding on the basis of the income determined by the CPC in the section 143(1) proceeding. The Ld. AR placed his arguments on the additional grounds stating that the CPC/Ld. AO has failed to verify that the disallowance was towards employer’s contribution or employees’ contribution and stated that in the assessee’s own case for the earlier year i.e. A.Y. 2019-20 the Tribunal has set aside this issue to the Ld. AO for verifying whether the PF & ESIC deposited belatedly was for employer’s or employees’ contribution i.e. in accordance with section 43B or section 36(1)(va) of the Act respectively. The Ld. AR prayed for similar direction be granted for the impugned year as well. 7. The Learned Departmental Representative (“Ld. D.R.” for short), on the other hand, controverted the said fact and contended that on the first issue the section 143(1) order does not merge with the 143(3) order automatically and only when the issues are common there would be merger of the section 143(1) order with the subsequent scrutiny proceeding. The Ld. DR stated that there are several decisions on this proposition that there will not be an automatic merger of the two proceedings. On the second issue the Ld. DR contended that Printed from counselvise.com ITA No.8004/Mum/2025 M/s. Bakshi Security & Personnel Services P. Ltd. 5 the disallowance made u/s 36(1)(va) of the Act by the CPC was only on the basis of the assessee’s return of income, tax audit report etc. and when the assessee has not bifurcated the same there can be no fault with the order of the CPC/AO. The Ld. DR relied on the order of the Ld. CIT(A). 8. We have heard the rival submissions and perused the materials available on record. The issue with regard to whether or not section 143(1) order would merge with section 143(3) automatically as alleged by the Ld. AR. It is observed that the provision of section 143(1) of the Act states that where a return has been made u/s 139 of the Act or in response to notice u/s 142(1) of the Act the said return shall be processed determining total income or loss by making adjustment on any arithmetical error, an incorrect claim if any, any inconsistency in the return, disallowance of loss, expenditure, deduction etc. which are only prima-facie adjustments made on the basis of the return of income filed by the assessee. The scrutiny assessment u/s 143(3) of the Act on the other hand is subject to the evidences produced by the assessee as required by the Ld. AO on any issue specified by the Ld. AO, considering which the Ld. AO shall pass a speaking order determining the total income/losses of the assessee on the basis of the evidences. The issue here is whether section 143(1) order would merge with the section 143(3) proceeding is the debatable issue where various decisions have held that the same does not merge automatically and only in circumstances where the issues are common in both 143(1) as well as 143(3), there would be merger and more so when the Ld. AO in the scrutiny assessment commences the proceeding with the income determined by the CPC in the section 143(1) intimation. Further, we place reliance in the decision of the co-ordinate Bench in the case Innovsource Printed from counselvise.com ITA No.8004/Mum/2025 M/s. Bakshi Security & Personnel Services P. Ltd. 6 Services Pvt. Ltd. vs DCIT in ITA No. 3424/M/2024 decided on 29.01.2025 where it was held that only where there are common issues in both the 143(1) intimation order and the 143(3) order, the doctrine of merger would be applicable and not in a case where the issues are different where the co-ordinate Bench had again relied on the decision in the case of Areca Trust vs. CIT(A) (2024) 117 ITR (Trib.) 264 (ITAT – Bang.) which held that the Ld. AO’s action in merely reproducing the figure of income which was mentioned in the intimation order does not tantamount to merger of the orders u/s 143(1) & 143(3) of the Act. We, therefore, decline to accept the contention raised by the assessee on this issue and hereby deem it fit to dismiss grounds No.1 to 4 raised by the assessee. 9. Grounds No.5 & 6, being general in nature, require no adjudication and are also hereby dismissed. 10. The second issue pertains to the additional grounds raised by the assessee where it is contended that there was a mistake crept in the tax audit report at clause 20(b) of the Act where the disallowance made to the contribution towards PF & ESIC is not merely the employees’ contribution but it also comprises the employer’s contribution which is governed by the provisions of section 43B of the Act. We are conscious of the fact that the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. (supra) is to the extent of delayed payment of employees’ contribution deposited after the due date prescribed under the relevant Acts nevertheless paid before filing of return of income and the same does not relate to the delayed payment of employer’s contribution. Though the assessee has raised this in the nature of additional ground, we hereby admit the same in terms of the proposition laid down by the Hon’ble Supreme Court in the case of National Thermal Printed from counselvise.com ITA No.8004/Mum/2025 M/s. Bakshi Security & Personnel Services P. Ltd. 7 Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC) which emphasizes that legal ground which does not require any verification can be admitted by the appellate authority and can be adjudicated. In the present appeal, though the factual details are to be verified by the Ld. AO, we are conscious of the fact that in a 143(1) proceeding there is no scope of explaining the details by the assessee nor is there a circumstance where the Ld. AO can call for details in case of any discrepancy in the details furnished by the assessee. For the reason that the assessee should not be remediless, we deem it fit to restore this issue to the Ld. AO for the limited purposes of verifying whether the impugned disallowance pertains to both employer as well as employees’ contribution for which we direct the assessee to furnish all relevant details before the Ld. AO and having considered the fact that the Tribunal in assessee’s own case for earlier year has also remanded this issue to the Ld. AO, we give relief to that extent. We direct the Ld. AO to decide the issue and admit any additional evidences proposed to be filed by the assessee in accordance with law on the merits of the case. 11. We, therefore, allow the additional grounds of appeal raised by the assessee for statistical purposes. 12. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 24.02.2026 Sd/- Sd/- (OM PRAKASH KANT) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 24.02.2026 * Kishore, Sr. P.S. Printed from counselvise.com ITA No.8004/Mum/2025 M/s. Bakshi Security & Personnel Services P. Ltd. 8 Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "