ITAT Restores PF/ESI Disallowance Issue For Limited Verification, Dismisses Appeal For Earlier Year

Tribunal Limits Recalled Proceedings To Prevent Procedural Overreach

The Delhi Benches of the Income Tax Appellate Tribunal recently dealt with two connected appeals filed by VMS Bathware Private Limited relating to Assessment Years 2018–19 and 2019–20. The Tribunal noted that while recalling its earlier common dismissal order, only the appeal for AY 2019–20 was the subject matter of the rectification application. Since the assessee had not sought recall for AY 2018–19, the Tribunal held that the appeal for that year stood finally concluded and dismissed it outright, observing that the recall could not extend beyond the scope of the mistake application.

Double Disallowance Under Section 36(1)(va) Sent Back For Verification

For AY 2019–20, the dispute concerned disallowance of employees’ PF and ESI contributions under Section 36(1)(va). While the assessee accepted the legal position following the Supreme Court’s ruling in Checkmate Services, it contended that the same amounts had been inadvertently reported twice in Form 3CD, leading to duplicate additions. Taking note of this clerical claim and with the Revenue raising no objection, the Tribunal restored the matter to the Assessing Officer for factual verification.

The AO has been directed to examine whether double disallowance was indeed made and grant appropriate relief to prevent unjust enrichment of the Revenue, while maintaining the disallowance where legally warranted. The appeal for AY 2019–20 was thus allowed for statistical purposes.