Faridayasmin G Khatib Vs ITO (ITAT Bangalore)
BSNL VRS Compensation Eligible for Full Exemption Under Section 10(10B); Legitimate Relief Cannot Be Denied on Technical Grounds: Bangalore ITAT
The assessee, a former BSNL employee, received ex-gratia compensation under the BSNL Voluntary Retirement Scheme, 2019 in two instalments—₹14.17 lakh in FY 2019-20 and ₹31.10 lakh in FY 2020-21. Following Form 16 issued by BSNL, she offered the second instalment entirely to tax without claiming exemption. Upon learning of Tribunal decisions holding such compensation exempt under section 10(10B), she filed a rectification application under section 154. The AO and CIT(A) rejected the claim on the ground that it had not been made in the original return and was not a mistake apparent from the record.
The Bangalore ITAT observed that, in the assessee’s own case for the preceding assessment year, the Tribunal had already allowed exemption under section 10(10B) in respect of compensation arising from the same VRS. Several Tribunal benches had also consistently held that BSNL employees were entitled to this exemption.
The Tribunal reiterated that the restriction laid down by the Supreme Court in Goetze (India) Ltd. applies to the AO and does not curtail the powers of appellate authorities to entertain a legitimate claim. A lawful exemption could not be denied merely because the assessee had either omitted the claim or claimed relief under an incorrect provision in the original return. Accordingly, the CIT(A)’s order was set aside and the entire retrenchment compensation received under the BSNL VRS-2019 was held eligible for exemption under section 10(10B).
Cases Discussed:
- Jayeshkumar Tulsidas Sutaria v. ITO
- Harish Kumar v. ITO
- Narendra Kumar Mishra v. ITO
- Goetze (India) Ltd. vs. CIT, 284 ITR 323
- Maneka Gandhi(Supreme Court), (1978) 1 SCC 248
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal filed at the instance of the assessee is directed against the order of the learned Commissioner of Income Tax (Appeal) (hereafter, Ld. CIT(A)) passed under section 250 of the Income Tax Act, 1963 (hereafter, the Act), pertaining to A.Y. 2021-22.
2. The effective issue raised by the assessee is that the Ld. CIT(A) erred in not allowing the exemption of the full value of ex-gratia compensation received from BSNL on opting for BSNL VRS-2019.
3. The facts in brief are that the assessee was initially employed under the Department of Telecommunication and later absorbed under BSNL, a government undertaking. The assessee retired from BSNL after opting for the Voluntary Retirement Scheme-2019 (BSN-LVRS- 2019). The ex-gratia compensation under the scheme was payable to the assessee in two financial years, viz F.Y. 2019-20 and 2020-21, for Rs. 14,16,806/- and Rs. 31,09,730/- respectively.
2.1 In the return filed for the year under consideration, i.e. F.Y. 2020-21, the assessee offered the entire amount of Rs. 31,09,730/- to tax without claiming exemption, following the tax treatment of the same in the Form-16 issued by the employer, BSNL. The return was processed by the CPC accepting the returned income.
2.2 Subsequently, the assessee came to know that several benches of the Tribunal, including Ahmedabad Bench in Jayeshkumar Tulsidas Sutaria v. ITO (order dated 17.02.2025) and Indore Bench in Narendra Kumar Mishra v. ITO (order dated 27.02.2025) and Chandigarh Bench in Harish Kumar v. ITO (order dated 30.05.2025), have examined the nature and implementation of the same Scheme and taxability of the compensation received thereunder. Accordingly, it was held that the compensation received under the scheme is eligible for exemption under section 10(10B) of the Act.
2.3 Hence, the assessee filed a rectification application before the AO on 6th March 2026 requesting the AO to rectify the return of income and allow exemption under section 10(10B) of the Act.
2.4 The AO dismissed the assessee’s application vide order under section 154 of the Act dated 11th March 2026. In dismissing the assessee’s application, the AO held that the assessee did not claim the compensation amount in the return and CPC has processed the return income. So, it is seen that there is no mistake apparent from the record. Hence, rectification under section 154 is not applicable in this case.
3. The aggrieved assessee preferred an appeal before the learned CIT(A) who dismissed the assessee’s appeal by observing as under:
Through the said application, the assessee has prayed for allowance of certain exemptions which were admittedly not claimed in the Return of Income originally filed for the relevant assessment year. The claim for such exemptions has now been made on the basis of certain judicial pronouncements rendered subsequent to the processing of the return under section 143(1) of the Act.
The power of rectification under section 154 of the Act is a limited and specific power. It is intended to enable correction of mistakes which are apparent from the record, such as clerical, arithmetical or patent errors that are self-evident and do not require elaborate arguments or detailed examination. The provision does not confer a power of review, nor does it permit re-adjudication of issues or reconsideration of claims on the basis of fresh legal interpretations or subsequent judicial developments.
It is a settled position of law that a “mistake apparent from the record” must be obvious, clear and patent and not something which can be established only by a process of reasoning, debate or interpretation. In the present case, the assessee seeks to introduce new claims of exemption which were not made in the original return. The basis of such claims is reliance on judicial pronouncements rendered after the completion of processing under section 143(1) of the Act. Where two views are possible or where the issue requires interpretation of legal provisions, judicial precedents or factual verification, the matter falls outside the scope of section 154 of the Act.
In view of the above facts and the legal position governing the scope of section 154 of the Act, it is held that the issues raised by the assessee do not constitute a mistake apparent from the record. The claims now sought to be allowed involve fresh adjudication and interpretation of law, which is beyond the limited jurisdiction of rectification proceedings.
In view of the above discussion, it is stated that there is no need to interfere in the rectification order passed u/s.154 of the Income Tax Act,1961.
4. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
5. The learned AR before us submitted that the deduction to be claimed u/s 10(10B) of the Act was considered by the various Tribunals and all the Tribunals took a view that the retrenchment compensation received by the employees of the BSNL are eligible for deduction u/s. 10(10B) of the Act. The Ld. AR further submitted that if the appeals are not allowed on technicalities, it would amount to unjust enrichment to the revenue since the levies are made against the provisions of the Act and therefore prayed to allow the appeals. The Ld. AR also submitted and prayed to take a uniform view since the assessee also belonged to the same category of employees employed by BSNL. The Ld. AR submitted that, on the ground of equity, the present assessee is also entitled to the benefits similar to those granted by several ITAT benches. The Ld. AR further submitted that the issue has to be looked into based on the provisions and cannot be rejected on technicalities. The Ld. AR further submitted that the assessee had claimed the deduction u/s 10(10C) of the Act in the first year of receipt (F.Y. 2019- 20), and thereby the deduction has been granted for Rs. 5 Lakhs only, whereas he is entitled to deduction of the entire amount u/s. 10(10B) of the Act. Therefore, it is not the case of the revenue that the assessee had not claimed the deduction in their return of income. The Ld. AR further submitted that the assessee had claimed the deduction under a wrong provision since the employer had deducted the TDS and if the said claim is not in order, in order to render justice, the AO can modify the said claim and grant the deduction under the correct provision and therefore prayed us to consider the said facts and allow the appeals filed by the assessee. The Ld. AR submitted that even if the AOs are not authorised to grant the deduction other than the one claimed in the return of income and also not filed a revised return, the appellate authorities i.e. this Tribunal, have enormous powers to entertain a plea and, if it is in order, grant the benefit to the assessee.
6. The learned DR, on the contrary, vehemently supported the finding of the authorities below.
7. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the ex-gratia retrenchment compensation on opting for the scheme was paid by the employer BSNL over two years after deducting TDS. The first instalment of the compensation was paid in F.Y. 2019-20 relevant to A.Y. 2020-21 for Rs. 14,16,806/-. The assessee, as per income computation in Form-16 issued by the employer, offered the said receipt to tax after claiming maximum exemption of Rs. 5 lakhs under section 10(10C) of the Act. Subsequent to the various decisions of different benches of the Tribunals regarding the taxability of receipt of retrenchment compensation from BSNL under the 2019 scheme. The assessee preferred an appeal before the ld. CIT(A). However, the Ld. CIT(A) dismissed the assessee’s appeal for A.Y. 2020-21 on similar grounds as observed for the year under consideration, i.e. the CPC did not make any adjustments in the intimation made u/s. 143(1) and limitation. Against the Ld. CIT(A) finding for A.Y. 2020-21, the assessee preferred an appeal before this Tribunal in ITA No. 1664/Bang/2016. The appeal of the assessee for A.Y. 2020-21 was heard together with the appeal of several other employees of BSNL claiming identical exemption under section 10(10B) of the Act on receipt of retrenchment compensation as well as deduction under section 10(10AA)(i) of the Act on receipt of leave encashment. The assessee’s appeal in ITA No. 1664/Bang/2026, along with the appeal of the other employees of BSNL, was decided by the coordinate bench of this Tribunal on 22nd July 2026, allowing the assessee’s appeal. As the issue involved in the present assessment year under appeal before us, as well as for A.Y. 2020-21, is identical and arising from the same receipt of retrenchment compensation. Therefore, in our considered opinion, the finding of the coordinate bench vide order dated 22nd July 2026 shall be applied to the current appeal also. The finding of the Tribunal vide order dated 22nd July 2026 for the reference is extracted as under:
11. In all the appeals, the merits involved are that the assessees were not granted the benefit u/s. 10(10B) of the Act since the assessees themselves voluntarily filed their return of income and claimed the deduction only u/s. 10(10C) of the Act. The said return was processed and the return was accepted as such. Now the assessees had claimed the deduction under the correct provision 10(10B) of the Act based on the order of the Chandigarh Bench of this Tribunal and the said claims were rejected by the Ld.CIT(A)s on the ground of delay and maintainability. In some cases, the Ld.CIT(A)s hold that there is no mistake in the intimation made u/s. 143(1) and therefore, the proper course of action to be taken by the assessees are that they have to file a revised return by claiming the deduction and got the delay condoned from the authorities. In some cases, the Ld.CIT(A)s had rejected the appeals on the ground that the new plea cannot be raised for the first time before them.
12. We have considered the facts and also the order of the Chandigarh Bench of this Tribunal in which the Tribunal had granted the deduction u/s. 10(10B) of the Act on the retrenchment compensation received by the BSNL employees pursuant to the Voluntary Retirement Scheme, 2019. Similarly, the assessees had restricted their claim of deduction on the leave encashment at Rs. 3,00,000/- as per the limit prescribed during such period. Before us, it was demonstrated that the issues have been decided by the several benches of this Tribunal and therefore the benefits could not be denied to the same set of employees by citing the delay in filing the appeals. We have also considered the various orders pronounced by the several Tribunals in which the Tribunals had condoned the similar delays in filing the appeals and also granted exemption u/s. 10(10B) of the Act on the compensation received on retrenchment. The Tribunals also accepted that the claim was made by the assessees mistakenly since the employer had deducted the TDS while making the said payments.
13. We have also considered the order of the Coordinate Bench of this Tribunal in ITA No. 992/Bang/2026 dated 29/05/2026 wherein the Tribunal had given the findings as follows:
“15. However, with respect to condonation of delay, the ld. AR submitted that the ld. CIT(A) should have condoned the delay as in the case of 72 cases before the Coordinate Benches across the country in the case of BSNL employees on identical facts and circumstances, delay has been condoned by the ld. CIT(A) itself ranging from 900 to 2000 days. The assessee has produced the list of 72 cases where the delay is condoned by the ld. CIT(A). Further in case of 144 appeals, the Coordinate Benches have condoned the delay in the case of BSNL employees on identical facts and circumstances. Thus on the parity itself, the appeal of the assessee should have been admitted by the ld. CIT(A). Accordingly, I reverse the order of the ld. CIT(A) in not condoning the delay.”
14. We have also considered the reasoning given by the Ld.CIT(A)s in some of the appeals that the assessees had not claimed such deductions in their return of income and also not filed any revised return or application u/s. 154 before the AO and therefore the appeals are not maintainable. It is not the case of the revenue that the assessees are not entitled for such deduction but on technical grounds, the revenue had denied the deductions. Further, the Ld.CIT(A) had also relied on the judgment of the Hon’ble Supreme Court reported in 284 ITR 323 in the case of Goetze (India) Ltd. vs. CIT and rejected the appeals on the ground of maintainability. We have also gone through the above cited judgment and we do not find that the Hon’ble Supreme Court had restricted the powers of the appellate authorities. In fact, the judgment had restricted the power of the AO and therefore the above said judgment would not be applicable to the facts of the present case. Further, the assessees had mistakenly claimed the deduction in the original return of income and therefore there is no question of saying that the assessees cannot raise the issue for the first time before the Ld.CIT(A). Further, the department had accepted that the benefit should be granted in respect of the employees of BSNL and therefore the plea that they are not workman to get the benefit is not correct. Therefore, the orders of the Ld.CIT(A)s are liable to be interfered.
15. Similarly, the other issue of exemption claimed on the leave encashment was also addressed by the Hon’ble Kerala High Court in the above referred judgment by holding that the retired employees from BSNL under the Voluntary Retirement Scheme, 2019 are entitled for the leave encashment tax exemption as they are deemed to be Central Government employees. We have also considered the decisions of the Hon’ble Jaipur and Indore Benches in ITA No. 1139/JPR/2025 dated 07/10/2025 and ITA No. 233/IND/2025 dated 27/02/2026 wherein it was held that the enhanced limit of exemption of Rs. 25,00,000/- introduced by the Gazette Notification No.31/2023 dated 24.05.2023 w.e.f. 01/04/2023 u/s. 10(10AA) is a beneficial one and it should be applied at the time of the appellate jurisdiction. In all the appeals, the assessees had on the wrong understanding, had claimed a deduction of Rs. 3 Lakhs u/s. 10(10AA) of the Act whereas they are entitled for the entire leave encashment as eligible for deduction u/s. 10(10AA) of the Act. This dispute was also accepted by the various Tribunals and also by the Ld.CIT(A)s and by following the principle of equity, we are also allowing the entire leave encashment as eligible for deduction u/s. 10(10AA) of the Act. Further, the Hon’ble Patna High Court in its judgment in Civil Writ Jurisdiction Case Number 12326 of 2017 dated 26/02/2024 had decided about the provision that whether the same would be equally applicable to the employees of the State Bank of India or not since it discriminates between the employees of State Bank of India and government employees. In that context, the Hon’ble Patna High Court had held that there is no discrimination and therefore it is not ultra virus to the Constitution of India. Therefore, the said principles could not be applied to the facts of the present case.
16. Therefore, both the issues are covered by the earlier orders of the Coordinated Benches of this Tribunal and against which no further proceedings were taken up by the revenue and therefore the said orders have become final and in that circumstances, we are also taking the same view. Insofar as the delay in filing the appeals before the Ld.CIT(A), we have taken note of the fact that the Ld.CIT(A)s had condoned the delay in filing the appeals of 72 assessees on identical facts in which the delays are ranging from 900 to 2000 days. We have also taken note of another fact that the Coordinated Benches had condoned the similar delays in the 144 appeals filed by the employees on similar facts and circumstances. In view of the above said facts, we are of the view that the Ld.CIT(A) ought to have condoned the delay and entertained the appeals and decided the appeals on merits instead of dismissing the appeals. Similarly, the orders of the Ld.CIT(A)s dismissing the appeals on the ground of maintainability is also not correct. Therefore, in the interest of justice, instead of condoning the delays and remitting this issue back to the Ld.CIT(A), we are passing these orders on merits after condoning the said delays and allow the appeals filed by the assessees and granted the relief of exemption u/s. 10(10B) and also granted the entire leave encashment received as eligible for exemption u/s. 10(10AA) of the Act. Considering the several orders of the Coordinated Benches of this Tribunal as well as the orders of the Ld.CIT(A), we are allowing the appeals filed by the assessees insofar as the claims made u/s. 10(10B) and 10(10AA) of the Act.
17. In the result, the appeals filed against the dismissal orders of the Ld.CIT(A) are allowed and the benefits of exemption u/s. 10(10B) as well as benefit of the entire leave encashment is allowed u/s. 10(10AA) of the Act.
7.1 Respectfully following the order of the Tribunal in the above-mentioned cases involving identical facts and circumstances in the case of several employees of BSNL, including the assessee’s own case, we hereby set aside the finding of the learned CIT(A) and hold that the assessee is eligible for benefits provided under section 10(10B) of the Act in respect of retrenchment compensation under 2019 retirement scheme. Hence, the ground of appeal raised by the assessee is hereby allowed.
8. In the result, the appeal of the assessee is hereby allowed.
Order pronounced in the open court on 12th August, 2026
