Regarding ESIC and EPFO non compliance

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This discussion clarifies that non-compliance with ESIC and EPFO regulations, such as failing to register or make contributions, does not automatically lead to the disallowance of all salary and wages during a tax audit. Auditors are expected to report factual non-compliance to fulfil their professional obligations and protect themselves, rather than automatically disallowing expenses.

Jaswinder singh

Jaswinder singh (Querist)
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23 October 2025 Respected Colleagues,
A proprietor running restaurant business in himachal with labour and staff above 20 persons, till date no ESI and EPF compliances have been done (Registration also not done) , 70% payment in cash but below 10k and 30% online,
Now my ques is, Whether due to non compliance all the salary & wages disallow in tax audit report by auditor or auditor just mention about non compliance in TAR in order to safe guard own.

Please advice

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2025 No automatic disallowance of all salary and wages under tax audit merely because ESI/EPF registration was not done.

The auditor’s duty is to report the non-compliance factually to safeguard their responsibility.

Jaswinder singh

Jaswinder singh (Querist)
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23 October 2025 Ok sir thank you so much

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2025 You are welcome.

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