Govardhan Deepchand Bhambhani Vs ITO (ITAT Ahmedabad)
The appeal before the Income Tax Appellate Tribunal (ITAT), Ahmedabad, arose from an order dated 9 December 2023 passed by the Additional Commissioner of Income Tax (Appeals)-9, Delhi, relating to Assessment Year 2020-21. The dispute concerned the assessee’s claim for exemption of leave encashment amounting to ₹7,65,404 under Section 10(10AA)(ii) of the Income Tax Act. The assessee, a retired employee of Punjab National Bank, had filed the return of income declaring total income of ₹5,82,970 and claimed exemption of the entire leave encashment amount received on retirement. However, while processing the return under Section 143(1), the claim was restricted to ₹3,00,000.
The assessee challenged the adjustment before the CIT(A), contending that the exemption limit under Section 10(10AA)(ii) had not been revised since 2002 and that the Central Government had subsequently increased the limit to ₹25 lakh through Notification No. 31/2023 dated 24 May 2023. The assessee argued that the benefit of the revised limit should be available and relied upon the explanatory memorandum accompanying the notification, which stated that no person would be adversely affected by giving retrospective effect to the notification.
The CIT(A) rejected the claim. The appellate authority referred to Notification No. 31/2023, which increased the exemption limit to ₹25 lakh with effect from 1 April 2023, and relied upon a decision of the Patna High Court which observed that although the revision was delayed, the enhanced limit did not benefit persons who had retired before its effective date. On this basis, the CIT(A) held that the assessee, having retired during FY 2019-20, was not entitled to the benefit of the enhanced exemption limit and upheld the restriction of exemption to ₹3 lakh.
