Manoj kumar Parmar Vs ITO (ITAT Mumbai)
The captioned two appeals were filed by the assessee against orders passed by the learned Addl/Jt. Commissioner of Income Tax (Appeals)-2, Coimbatore, both dated 24.12.2025, for Assessment Years 2020-21 and 2021-22. Since the issues involved were common and identical, the Tribunal extracted the grounds raised in ITA No. 480/Ahd/2026 for AY 2020-21 and stated that its decision in that appeal would apply mutatis mutandis to ITA No. 481/Ahd/2026 for AY 2021-22.
The assessee challenged the denial of exemption under Section 10(108) in the grounds reproduced in the order, while the substantive factual and adjudicatory discussion refers to exemption under Section 10(10B). The assessee contended that compensation received under the BSNL Voluntary Retirement Scheme, 2019 was exempt and that the claim should not be denied merely because it was not made in the original return.
The assessee was an employee of Bharat Sanchar Nigam Limited (BSNL), a Government of India undertaking. BSNL introduced the Voluntary Retirement Scheme, 2019, which was approved on 04.11.2019 as part of a restructuring exercise. The assessee opted for voluntary retirement and received ex gratia compensation of ₹14,30,421/- under the scheme. The assessee stated that BSNL was facing severe financial hardship, including prolonged delay in payment of salaries, and contended that the compensation was in substance separation/retrenchment-cum-compensation arising from organisational restructuring and downsizing.
The assessee further contended that the compensation satisfied the conditions under Rule 2BA and was compensatory and capital in nature. However, while filing the returns for AYs 2020-21 and 2021-22, the assessee inadvertently offered the VRS compensation to tax, stating that this occurred due to lack of professional advice and a bona fide mistaken belief. The assessee also pointed to deduction of tax at source by BSNL as reinforcing the belief that the receipt was taxable. Consequently, the exemption was not claimed either in the original returns under Section 139(1) or through revised returns under Section 139(5).
The assessee relied upon several authorities concerning the powers of appellate authorities to entertain additional claims, including Jute Corporation of India Ltd. v. CIT, National Thermal Power Co. Ltd. v. CIT, CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd. and Goetze (India) Ltd. v. CIT. The assessee also relied upon CBDT Circular No. 14 (XL-35) of 1955, contending that tax authorities should grant lawful relief even where it had not been specifically claimed.
After considering the records, the Tribunal condoned the delay and proceeded to adjudicate the issue on merits. Both parties fairly submitted that the issue was covered by the Tribunal’s order in Jayeshkumar Tulsidas Sutaria Vs. ITO, ITA Nos. 2387 & 2388/Ahd/2025 datedd 17.02.2026, concerning AYs 2020-21 and 2021-22.
In the reproduced operative portion of that coordinate bench order, the assessee had submitted that the BSNL VRS-2019 compensation was inadvertently offered to tax because of lack of awareness of the legal provisions. The coordinate bench considered the decision in Harish Kumar vs. ITO Ward 5(5), Chandigarh, ITA No. 42/CHD/2025 dated 30.05.2025, concerning compensation under the same BSNL VRS-2019 scheme. The coordinate bench allowed both appeals and held that the assessee was eligible for refund of TDS because the income was not taxable.
In the present appeals, the Tribunal found no change in the factual matrix or legal proposition brought to its notice. It therefore followed the coordinate bench decision and allowed the assessee’s appeal. Consequently, both appeals filed by the assessee were allowed.
Cases Discussed
- Jayeshkumar Tulsidas Sutaria Vs. ITO, ITA Nos. 2387 & 2388/Ahd/2025 dated 17.02.2026 — followed as the coordinate bench decision covering the issue concerning BSNL VRS-2019 compensation.
- Harish Kumar v. ITO, ITA No. 42/CHD/2025 dated 30.05.2025 — referred to in the reproduced coordinate bench order concerning exemption of compensation received under the BSNL VRS-2019 scheme.
- Suman Nandlal Raval v. ITO, ITA Nos. 2389 & 2390/Ahd/2025 dated 18.02.2026 — identified in the assessee’s grounds as another Ahmedabad ITAT decision concerning similar BSNL VRS-2019 compensation.
- Jute Corporation of India Ltd. v. CIT — relied upon by the assessee in support of the contention that appellate authorities can entertain additional legal grounds.
- National Thermal Power Co. Ltd. v. CIT — relied upon by the assessee concerning the appellate authority’s jurisdiction to entertain a legal claim arising from facts already on record.
- CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd. — relied upon by the assessee concerning the power of appellate authorities to entertain an additional legal claim.
- Goetze (India) Ltd. v. CIT — relied upon by the assessee in contending that the restriction concerning fresh claims applies to the Assessing Officer and does not curtail the jurisdiction of appellate authorities.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The captioned two appeals have been filed by the Assessee against the orders passed by the learned Addl/Jt. Commissioner of Income Tax (Appeals)-2, Coimbatore vide orders both dated 24.12.2025 for the Assessment Years 2020-21 and 2021-22. Since the issues involved in both the appeals are common and identical, we extract the grounds of appeal raised in ITA No.480/Ahd/2026 for Assessment Year 2020-21 for the purpose of adjudication. The decision rendered in the said appeal shall apply mutatis mutandis to the other appeal bearing ITA No. 481/Ahd/2026 for Assessment Year 2021-22.
ITA No.480/Ahd/2026 for Assessment Year 2020-21
2. The Assessee has taken the following ground of appeal:-
1. That the Ld. CIT(A) has erred in law and on facts in dismissing the appeal without adjudicating the claim of exemption under Section 10(108) of the Income-tax Act. 1961 on merits. The action of the Ld. CIT(A) in denying the exemption on mere technical grounds is arbitrary, unjustified, and contrary to the settled principle that substantive justice must prevail over procedural technicalities.
2. That the Ld. CIT(A) has erred in law and on facts in denying exemption under Section 10(108) in respect of compensation received under the Voluntary Retirement Scheme 2019 of Bharat Sanchar Nigam Limited (BSNL), though the scheme satisfies the conditions prescribed under Rule 2BA. The Appellant had specifically relied before the Ld. CIT(A) on Harish Kumar v. ITO, ITA No. 42/CHD/2025, order dated 30.05.2025 wherein identical compensation under BSNL VRS-2019 was held exempt under Section 10(108); however, the Ld. CIT(A) failed to consider and follow the same. The issue now stands consistently affirmed by the Hon’ble ITAT, Ahmedabad in Jayeshkumar Tulsidas Sutaria v. ITO (order dated 17.02.2026) andSuman Nandlal Raval v. ITO (order dated 18.02.2026). The impugned order is therefore contrary to settled judicial precedent and liable to be set aside.
3. That the impugned finding of the Ld. CIT(A) is contrary to the binding decisions of the Hon’ble Supreme Court in Jute Corporation of India Ltd. v. CIT and National Thermal Power Co. Ltd. v. CIT, as well as the judgment of the Hon’ble Bombay High Court in CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd., which categorically hold that appellate authorities are competent to entertain additional legal grounds and grant relief even if such claim was not made before the Assessing Officer. The Ld. CIT(A) has further misapplied the decision of the Hon’ble Supreme Court in Goetze (India) Ltd. v. CIT, without appreciating that the said decision restricts only the powers of the Assessing Officer and does not curtail the jurisdiction of appellate authorities to entertain a legal claim arising from facts already on record. The impugned order is therefore illegal and liable to be set aside.
4. That the Ld. CIT(A) has erred in refusing the exemption merely because it was not claimed in the return of income, in complete disregard of CBDT Circular No. 14 (XL-35) of 1955, which mandates that tax authorities must grant all lawful reliefs due to an assessee even if not specifically claimed.
The impugned order is thus contrary to binding CBDT instructions and opposed to the principles of equity, justice, and good conscience, and is liable to be quashed.
3. The Appellant was an employee of Bharat Sanchar Nigam Limited (BSNL), a Government of India undertaking. BSNL introduced the Voluntary Retirement Scheme, 2019 (VRS-2019), which was duly approved on 04.11.2019 as part of a restructuring exercise necessitated due to the severe financial distress of the organisation. Under the said scheme, the Appellant opted for voluntary retirement and received an ex gratia compensation of ₹14,30,421/- strictly in accordance with the terms and conditions of the approved scheme. At the relevant time, BSNL was undergoing acute financial hardship, including prolonged delay in payment of salaries to employees, thereby compelling employees to accept separation under the VRS-2019 scheme. The scheme, though styled as “Voluntary Retirement Scheme,” is in substance a separation/retrenchment-cum-compensation scheme introduced in the course of organisational restructuring and downsizing. The compensation received by the Appellant squarely falls within the ambit of exemption provided under Section 10(10C) of the Income-tax Act, 1961, and fulfils all conditions prescribed under Rule 2BA of the Income-tax Rules, 1962. The nature and character of the payment is clearly compensatory and capital in nature, intended to provide relief on separation from service. However, while filing the return of income for Assessment Years 2020–21 and 2021–22, the Appellant, being a lay taxpayer without the benefit of professional advice and under a bona fide mistaken belief, inadvertently offered the said VRS compensation to tax. This belief was further reinforced by the fact that tax was deducted at source by BSNL on the said amount, creating a genuine impression in the mind of the Appellant that the receipt was taxable. Due to ignorance of the correct legal position and absence of proper guidance at the relevant time, the Appellant could not claim the exemption under Section 10(10C) either in the original return filed under Section 139(1) or by way of a revised return under Section 139(5). The Appellant respectfully submits that mere erroneous treatment in the return cannot extinguish a substantive statutory exemption, particularly when all mandatory conditions for eligibility stand fully satisfied.
4. I have gone through the records and considering the merits of the case, we condoned the delay and proceed to adjudicate the issue.
5. At the outset, both the parties fairly submitted that the issue raised by the assessee in the present appeals stands covered by the order of the Tribunal in the case of Jayeshkumar Tulsidas Sutaria Vs. ITO for A.Ys 2020-21 & 2021-22 in ITA Nos.2387 & 2388/Ahd/2025 dated 17.02.2026. For the sake of ready reference, the operative portion of said order is reproduced as under:
“…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. …”
6. In the absence of any change in factual matrix and legal proposition brought to our notice, the appeal of the assessee is hereby allowed.
7. In the result, both the appeals filed by the assessee are allowed.
This Order pronounced in Open Court on 23.04.2026.
