Rameshbhai Chhotabhai Vankar Vs ITO (ITAT Ahmedabad)
BSNL VRS Compensation Fully Exempt Under Section 10(10B) Despite No Claim in Original Return: Ahmedabad ITAT
Summary:
The appeal was filed by Rameshbhai Chhotabhai Vankar against the order dated 17.04.2026 passed by the Addl./Joint Commissioner of Income Tax (Appeals), Jodhpur under section 250 for AY 2021-22. The assessee, a salaried employee of Bharat Sanchar Nigam Limited (BSNL), had opted for BSNL’s Voluntary Retirement Scheme, 2019 and received ₹21,90,631 as compensation. The amount was disclosed in the return and tax was paid; no exemption was claimed in the original or revised return, and tax was also deducted at source. The CPC, Bengaluru processed the return under section 143(1) without granting exemption. The assessee later became aware of the ITAT Chandigarh decision in Harish Kumar v. ITO and then appealed before the CIT(A), seeking exemption under section 10(10B). The CIT(A) dismissed the appeal as time-barred and also declined to entertain the new exemption claim.
Before the Tribunal, the assessee challenged the refusal to condone a delay stated in the grounds to be approximately 1,580 days. It contended that the delay was bona fide, arising from lack of awareness of the correct legal position and absence of proper professional guidance, and that subsequent judicial pronouncements concerning BSNL VRS-2019 had clarified the position and prompted the assessee to pursue the remedy. The assessee relied on authorities concerning liberal construction of “sufficient cause”, including Collector, Land Acquisition v. Mst. Katiji and N. Balakrishnan v. M. Krishnamurthy. It also submitted that appellate authorities possess power to entertain lawful claims arising from facts already on record, relying on Jute Corporation of India Ltd. v. CIT, NTPC Ltd. v. CIT and CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd., and argued that Goetze (India) Ltd. v. CIT only restricted the Assessing Officer.
The assessee further relied on several BSNL VRS-2019 decisions, including Harish Kumar v. ITO, Jayeshkumar Tulsidas Sutaria v. ITO, Suman Nandlal Raval v. ITO, Chhaganlal Bhimabhai v. ITO, Meghmala Sudhir Pathak & Others v. ITO and Manojkumar Parmar v. ITO. It contended that these decisions demonstrated that similar delays had been condoned and that compensation under BSNL VRS-2019 was eligible for exemption under section 10(10B). The assessee also relied on CBDT Circular No. 14 (XL-35) of 1955 concerning assistance to taxpayers in securing lawful reliefs.
The Tribunal recorded that the assessee was a BSNL employee who had opted for the Government-introduced VRS and that the compensation had been offered to tax due to lack of awareness of the exemption. The assessee had not claimed exemption in the original or revised return. The Tribunal noted that the claim was first made before the CIT(A) after the assessee learned of the Harish Kumar decision, but the CIT(A) dismissed the appeal as barred by limitation and refused to entertain the new claim.
At the hearing before the Tribunal, the assessee’s counsel submitted that the receipt represented retrenchment compensation under a Government-approved scheme and was fully exempt under section 10(10B). Reliance was placed on Harish Kumar, Jayeshkumar Tulsidas Sutaria and Suman Nandlal Raval. The Tribunal found that the issue was squarely covered by the coordinate bench decision in Jayeshkumar Tulsidas Sutaria, ITA Nos. 2387 & 2388/Ahd/2025, order dated 17.02.2026. In the reproduced decision, the coordinate bench had considered a similar BSNL VRS-2019 case where the compensation had been offered to tax, exemption was later claimed, and the CIT(A) had rejected the appeal as not maintainable. The coordinate bench allowed the appeals after considering the claim for exemption and held that the assessee was eligible for refund of TDS because the income was not taxable.
The present Tribunal found no change in the legal proposition or factual matrix and respectfully followed the coordinate bench. It held that the assessee was entitled to exemption under section 10(10B) in respect of the amount in question and allowed the appeal.
The source contains a material textual inconsistency: several grounds reproduced in the order refer to section 10(108), whereas the factual discussion, the cited coordinate-bench decision, the counsel’s submissions, and the Tribunal’s final finding refer to section 10(10B). The order’s operative conclusion is expressly under section 10(10B).
Cases Discussed
- Collector, Land Acquisition v. Mst. Katiji, 167 ITR 471 (SC).
- N. Balakrishnan v. M. Krishnamurthy, (1998) 7 SCC 123.
- Jute Corporation of India Ltd. v. CIT, 187 ITR 688 (SC).
- NTPC Ltd. v. CIT, 229 ITR 383 (SC).
- CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd., 23 taxmann.com 23 (Bombay).
- Goetze (India) Ltd. v. CIT, 284 ITR 323 (SC).
- Siva Industries & Holdings Ltd. v. ACIT.
- Pathapati Subba Reddy v. Special Deputy Collector.
- Vedabai alias Vaijayantabai Baburao Patil v. Shantaram Baburao Patil.
- Harish Kumar v. ITO, ITA No. 42/CHD/2025, dated 30.05.2025.
- Jayeshkumar Tulsidas Sutaria v. ITO, ITA Nos. 2387 & 2388/Ahd/2025, dated 17.02.2026.
- Suman Nandlal Raval v. ITO, ITA Nos. 2389 & 2390/Ahd/2025, dated 18.02.2026.
- Chhaganlal Bhimabhai v. ITO, ITA Nos. 2547 & 2548/Ahd/2025, dated 17.03.2026.
- Meghmala Sudhir Pathak & Others v. ITO, ITA Nos. 290 to 308/PUN/2026 and batch, dated 24.03.2026.
- Manojkumar Parmar v. ITO, ITA Nos. 480-481/Ahd/2026, dated 23.04.2026.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the assessee against the order of the Ld. Addl / Joint Commissioner of Income Tax (Appeals), Jodhpur (hereinafter referred to as “CIT(A)”), dated 17.04.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2021-22.
2. The assessee has taken following grounds in this appeal:
“1. The appellant respectfully submits that the order passed by the learned Commissioner of Income Tax (Appeals) u/s 250 of the Income-tax Act, 1961 dated 17.04.2026 is bad in law, contrary to the facts of the case and liable to be set aside. The learned CIT(A) has grossly erred in dismissing the appeal of the appellant primarily on the ground of delay of approximately 1580 days in filing the appeal, without properly appreciating that the delay had occurred due to bona fide reasons, namely lack of knowledge of the correct legal position and absence of proper professional guidance at the relevant time. The appellant had filed the return of income under a mistaken belief that the ex-gratia compensation received from Bharat Sanchar Nigam Limited (BSNL) was taxable, and only upon subsequent awareness of the correct legal position, supported by judicial precedents, preferred the appeal. The explanation offered clearly constituted “sufficient cause within the meaning of section 249(3) of the Act and warranted liberal consideration in the interest of substantial justice; however, the learned CIT(A) failed to adopt such settled judicial approach.
“It is respectfully submitted that the expression “sufficient cause” used in section 249(3) of the income-tax Act, 1961 is not defined under the Act and is therefore to be interpreted in a liberal and justice-oriented manner. The provision confers discretionary power upon the learned CIT(A) to admit an appeal if he is satisfied that the appellant was prevented by reasonable and bona fide circumstances from filing the appeal within the prescribed time. It is well settled that “sufficient cause should receive a liberal construction so as to advance substantial justice rather than defeat it on technical grounds”.
The learned CIT(A) has failed to appreciate that the delay is continuous and attributable to absence of settled legal position at the relevant time and that the appellant acted promptly upon crystallization of the legal position through judicial pronouncements. The delay is neither deliberate nor due to negligence but is bona fide and deserves to be condoned in the interest of justice
2. The learned CIT(A) has failed to apply the well-settled principles laid down by the Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji (167 ITR 471) and N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123, wherein it has been consistently held that substantial justice should prevail over technical considerations, that a liberal approach must be adopted while considering condonation of delay, and that the length of delay is not decisive so long as the explanation offered is bona fide and reasonable.
3. The learned Addl./JCIT(A) grossly erred in holding that the appeal was not maintainable merely because the appellant had not claimed exemption under section 10(108) in the original return of income and that the present appeal constituted a “fresh claim”.
The learned authority failed to appreciate that appellate authorities under the Income tax Act possess plenary powers to entertain legal claims arising from facts already available on record, even if such claims were not made before the Assessing Officer or in the original return of income. The impugned order is contrary to the law laid down by the Hon’ble Supreme Court in Jute Corporation of India Ltd. v. CIT, NTPC Ltd. v. CIT, and the judgment of the Hon’ble Bombay High Court in CIT vs Pruthvi Brokers & Shareholders Pvt. Ltd., which unequivocally recognize the jurisdiction and duty of appellate authorities to determine the correct tax liability and grant all lawful reliefs available to an assessee.
The learned Addl./ICIT(A) further failed to appreciate that the decision in Goetze (India) Ltd. v. CIT restricts only the powers of the Assessing Officer and does not curtail the jurisdiction of appellate authorities to admit and adjudicate a lawful claim based on facts already available on record. The impugned finding is therefore contrary to settled law and liable to be quashed.
4. The learned Addl./JCIT(A) erred in relying upon the decisions in Siva Industries & Holdings Ltd. v. ACIT, Pathapati Subba Reddy v. Special Deputy Collector and other decisions relied upon in the impugned order for refusing condonation of delay, without appreciating that the facts of the appellant’s case are entirely distinguishable both on facts and in law.
In the cited cases, the Honorable Courts found absence of bona fides, negligence, deliberate inaction, lack of due diligence, or unexplained extraordinary delay unsupported by subsequent legal developments
In contrast, the appellant’s case involves a bona fide mistake regarding taxability arising from lack of clarity in law at the relevant time and subsequent emergence of authoritative judicial precedents recognizing exemption under section 10(108) in identical BSNL VRS matters. The appellant acted promptly upon becoming aware of the correct legal position and the delay was neither deliberate nor motivated by negligence or mala fides.
The learned authority further failed to appreciate that even the decision in Vedabai alias Vaijayantabai Baburao Patil relied upon in the impugned order itself recognizes that a pragmatic and justice-oriented approach must be adopted where substantial justice is involved and that the expression “sufficient cause” should receive liberal construction. The impugned order therefore proceeds on incorrect application and misinterpretation of judicial precedents and is liable to be set aside.
5. The learned Addl./JCIT(A) erred in law and on facts in dismissing the appeal without appreciating that the Income-tax authorities are duty bound to assess only legitimate tax in accordance with law and cannot retain tax which is otherwise not legally leviable merely because of procedural or technical lapses on the part of the assessee.
The learned authority failed to follow the binding CBDT Circular No. 14 (XL-35) of 1955 which mandates that tax authorities must assist taxpayers and grant all lawful reliefs available under law even if not specifically claimed. The impugned order further defeats the settled principle that substantive justice must prevail over technicalities, particularly where the amount sought to be taxed is otherwise exempt by operation of statute. The dismissal of the appeal without adjudication on merits has resulted in unjust enrichment of the Revenue by retaining tax on an exempt receipt and has caused grave prejudice and irreparable hardship to the appellant. The impugned order is therefore arbitrary, contrary to law, opposed to equity and justice, and liable to be quashed with a direction to grant exemption under section 10(108) on the compensation received under BSNL VRS-2019
6. The learned CIT(A) has erred in dismissing the appeal at the threshold without properly appreciating that the appellant’s case is on identical facts to the decision of the Hon’ble ITAT, Chandigarh Bench in Harish Kumar v. ITO (ITA No. 42/CHD/2025), wherein compensation received under the very same BSNL VRS-2019 scheme was held to be fully exempt under section 10(108). The learned CIT(A) summarily brushed aside the reliance placed on the said decision by observing that it was distinguishable and that the present issue pertained to maintainability and limitation. However, once the appellant had demonstrated that the delay was bona fide and that the claim was legally sustainable, the learned CIT(A) ought to have examined the matter on merits rather than rejecting it on technical grounds. The existence of a directly applicable and reasoned Tribunal decision on the same scheme warranted judicial consideration. The failure to do so has resulted in denial of adjudication of a legitimate claim, contrary to the settled principle that substantive justice should not be defeated by procedural technicalities.
7. The learned CIT(A) has failed to appreciate that in an identical matter concerning compensation received under the same BSNL VRS-2019 scheme, the Hon’ble ITAT, Ahmedabad Bench in Suman Nandlal Raval v. ITO (ITA Nos. 2389 & 2390/Ahd/2025, order dated 18.02.2026) has condoned similar delay and allowed full exemption under section 10(108), holding that bona fide ignorance of the legal position constitutes sufficient cause and that the assessee is entitled to lawful relief notwithstanding non-claim in the return.
Further, in the case of Chhaganlal Bhimabhai v. ITO (ITA Nos. 2547 & 2548/Ahd/2025, order dated 17.03.2026), the Hon’ble ITAT, Ahmedabad Bench, on identical facts relating to BSNL VRS-2019, condoned delay, admitted the claim raised for the first time before appellate authorities, and held that such compensation is exempt under section 10(108), directing grant of refund of taxes deducted.
Similarly, the Hon’ble ITAT, Pune Bench in a consolidated order in Meghmala Sudhir Pathak & Others v. ITO (ITA. Nos. 290 to 308/PUN/2026 and batch, order dated 24.03.2026) has categorically held that compensation received under BSNL VRS-2019 s in the nature of retrenchment compensation, being a capital receipt fully exempt under section 10(108), and further held that such claim can be entertained even if not made in the original return, and delay in filing appeal deserves to be condoned in such bona fide circumstances.
The appellant further relies upon the decision of the Hon’ble Income Tax Appellate Tribunal, Ahmedabad Bench in the case of Manojkumar Parmar v. ITO (ITA Nos. 480-481/Ahd/2026, order dated 23.04.2026), wherein on identical facts relating to compensation received under BSNL Voluntary Retirement Scheme, 2019, the Hon’ble Tribunal held that delay in filing the appeal deserves to be condoned when the same is attributable to bona fide ignorance of the correct legal position and subsequent judicial developments. The Hon’ble Tribunal further held that a legitimate claim of exemption under section 10(10B) can be entertained at the appellate stage even if not made in the original return of income, and that denial of such claim on technical grounds is unsustainable in law. The Tribunal, after condoning the delay, proceeded to adjudicate the issue on merits and allowed the exemption, holding that the compensation received under BSNL VRS is eligible for relief in accordance with settled judicial precedents.
It is respectfully submitted that the finding of the learned CIT(A) that a subsequent decision of the Hon’ble ITAT cannot constitute sufficient cause for condonation of delay is legally erroneous and contrary to settled principles governing section 249 (3) of the Act. The learned CIT(A) has failed to appreciate that the delay in the present case is not merely on account of existence of a subsequent judicial decision but arises due to bona fide lack of awareness of the correct legal position which came to light only upon such judicial pronouncements. The subsequent ITAT decisions in identical BSNL VRS matters have only clarified the comment legal position and triggered the appellant to pursue the remedy, Thus, the cause of delay is not the decision per se but the bona fide ignorance of low coupled with subsequent crystallization of legal position. It is will settled that ignorance of law when bona fide and supported by subsequent authoritative pronouncements can constitute sufficient cause particularly where the claim is otherwise legally sustainable and all material facts were already on record. Further the Hon’ble ITAT in several identical cases has condoned similar delays on the same reasoning and granted relief on merits. Therefore, the learned CITIA) has erred in treating the subsequent judicial decision in isolation without appreciating the surrounding circumstances and has wrongly concluded that sufficient cause was not made out. The rejection of condonation on this ground is thus arbitrary and unsustainable in law.
8. The impugned order is further vitiated by violation of principles of natural justice, as the learned CITIA) has not properly appreciated the submissions made by the appellant and has disposed of the appeal without meaningful consideration of the issues involved. The sunder is thus arbitrary, unjust and liable to be quashed
In view of the above facts and circumstances, the appellant humbly prays that the delay in filing the appeal be condoned, the order passed by the learned CIT(A) be set aside, and the exemption under section 10(108) of the Act in respect of ex-gratia compensation of ₹ 21,90,631/- be allowed in full, and such other relief as deemed fit in the interest of justice be granted.”
3. The assessee was a salaried employee working with BSNL. The Government introduced a Voluntary Retirement Scheme (VRS), which the assessee opted for and was duly accepted by BSNL. It is submitted that the amount received under the scheme has been disclosed in the return of income, and due tax has been paid, despite the fact that the same was exempt from tax. It is further submitted that the VRS was meant for the retrenchment of senior/old-age employees who were unable to adapt to new technology. Accordingly, the assessee contended that the entire amount of Rs.21,90,631/- received under the scheme was fully exempt from tax under the relevant provisions. The compensation amount received under the scheme was offered to tax in the return of income due to lack of awareness regarding the exemption available under section 10(10B) of the Income-tax Act, 1961. The employer had also deducted tax at source on the said amount. No exemption was claimed in the original or revised return of income. The CPC, Bengaluru issued an intimation under section 143(1) for the said year without granting any exemption, and no rectification or appeal was initiated at that time. It was only upon learning about the recent judgment of the Hon’ble ITAT Chandigarh Bench in the case of Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025, dated 30.05.2025) that the assessee became aware that the compensation received under the BSNL VRS-2019 scheme is eligible for exemption under section 10(10B), subject to compliance with Rule 2BA. The assessee, therefore, preferred appeal before the CIT(A) against the order of CPC and made the claim of exemption u/s 10(10B) for the first time. However, the Ld.CIT(A) dismissed the appeal of the assessee being barred by limitation and also refused to entertain new claim made for the first time before him.
4. Aggrieved by the order of the Ld.CIT(A), the assessee is in further appeal before us.
5. The Ld. Counsel for the assessee submitted that the amount received by the assessee represented retrenchment compensation received from the Central Government under a scheme approved by the Government. It was submitted that the said amount is fully exempt from tax under section 10(10B) of the Income-tax Act, 1961, and, therefore, the assessee is entitled to full tax exemption. The Ld. Counsel for the assessee further relied upon the following decisions of Coordinate Benches of the ITAT in support of the claim of exemption.
“1. ITA No. 42/Chd/2025 AY 2021-22 in the case of Harish Kumar V/s. ITO Chandigarh dated 30.05.2025.
2. ITA Nos.2387 & 2388/Ahd/2025 in the case Jayeshkumar Tulsidas Sutaria dated 17.02.2026
3. ITA No.2389 & 2390/Ahd/2025 in the case of Suman Nandlal Raval dated 18.02.2026
6. We note that the issue under consideration is squarely covered by the above referred decisions of the Co-ordinate benches of this Tribunal. The Co-ordinate Bench of this Tribunal in ITA Nos. 2387 & 2388/Ahd/2025 for AYs 2020-21 & 2021- 22 vide order dated 17.02.2026, has held as under:
“4. Aggrieved by the orders of the Assessing Officer, the assessee carried the matter in appeal before the Ld.CIT(A), who dismissed the appeal of the assessee by observing as follows:
“… The Appellant was employed with Bharat Sanchar Nigam Limited (BSNL), a Government of India enterprise. BSNL had notified the Voluntary Retirement Scheme (VRS) 2019 on 04.11.2019, which was duly approved and implemented by the employer. The Appellant opted for this scheme and accordingly received compensation under the VRS, as per the terms laid out by BSNL. The compensation amount received under the scheme was offered to tax by the appellant in the return of income due to lack of awareness about the availability of exemption under Section 10(10B) of the Income Tax Act. 1961. The employer had also deducted TDS on the said amount. No exemption was claimed in the original or revised return for the year by the appellant. The CPC, Bengaluru issued an intimation u/s 143(1) for the said year without granting any exemption, and no rectification or appeal was initiated at that time. The issue on this appeal pertains to exemption u/s 10(10B) of the Income Tax Act
The appellant in his written submission has stated that it was only upon learning about the recent judgment of the Hon’ble ITAT Chandigarh, in the case of Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025, dated 30.05.2025), that the Appellant came to know that the compensation received under the BSNL VRS 2019 scheme is eligible for full exemption u/s. 10(10B), subject to Rule 2BA compliance.
The grievance raised in the grounds of appeal does not emanate from the order appealed against. It is not a case where the appellant claimed exemption u/s.10(10B) and it was denied by the Assessing Officer. The appellant having omitted to claim relief in the return of income can claim the relief by filing the revised return. In cases where the time limit for filing the revised return has expired, the appellant may seek condonation of delay from the jurisdiction PCIT and then proceed with filing the revised return. The issue raised in grounds of appeal does not emanate from the order of intimation u/s.143(1), Hence, the appeal is dismissed…”
5. Aggrieved by the orders of the Ld.CIT(A), the assessee is in further appeal before us.
6. The Ld. Counsel for the assessee submitted that due to lack of awareness of the legal provisions at the time of filing the return of income, the assessee inadvertently offered the compensation received under BSNL VRS-2019 to tax. Subsequently, based on the decision of the Hon’ble ITAT Chandigarh Bench in Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025 dated 30.05.2025), wherein compensation under the same BSNL VRS-2019 scheme was held to be exempt under section 10(10B), the assessee now seeks exemption of such compensation. We find that the assessee filed the claim before the Ld. CIT(A) and since the income of the assessee is not taxable, the assessee is eligible for the refund of the TDS.
7. In the result, both the appeals of the assessee are allowed.”
7. Since, there is no change in the legal proposition and the factual matrix of the case, respectfully following the decision of the Co-ordinate Bench, the issue raised by the assessee in the present appeal is decided in favour of the assessee. It is held that the assessee is entitled to exemption u/s 10(10B) of the Act upon the amount in question.
8. In the result, the appeal preferred by the assessee is allowed.
This Order is pronounced on 25/08/2026
