Any debatable issues should be assessed under scrutiny assessment under section 143(3) & not through summary processing under Section 143(1)(a)

Recently Chhattisgarh High Court in the case of Raj Kumar Bothra held that CPC erred in making a disallowance under Section 143(1)(a) of the Income Tax Act, as the issue involved—deductibility of delayed ESI and EPF contributions—was highly debatable.

Key points:
The Assessee had deposited employees’ ESI and EPF contributions after the due date under respective Acts but before the due date for filing return under Section 139(1).

CPC treated this as income under Section 36(1)(va) read with Section 2(24)(x) and disallowed it in intimation under Section 143(1)(a).

The Court held that such debatable issues should be assessed under scrutiny assessment (Section 143(3)), not through summary processing under Section 143(1)(a).

The Court relied on Supreme Court precedents (e.g., Vodafone Idea, Rajesh Jhaveri) stating that adjustments under Section 143(1)(a) cannot involve debatable legal issues.

Conclusion:
The High Court set aside the disallowance and ruled that the Revenue committed a serious legal error by making the adjustment under Section 143(1)(a) instead of following proper assessment procedures under Section 143(3).

As a way forward, the Assessee should ensure timely deposit of employee ESI/EPF contributions within statutory due dates to avoid disallowance. If disallowed under Section 143(1)(a), they should respond promptly, highlighting the issue as debatable per the Raj Kumar Bothra ruling. If unresolved, they may pursue rectification or appeal, asserting that such matters require scrutiny under Section 143(3), not summary assessment u/s 143(1) of the Income-tax Act, 1961.

The copy of the order is as under:

TAXC No. 56 of 2025 New