Jayesh Charanbhai Rana Vs ITO Ward 7(2)(1) (ITAT Ahmedabad)
Ignorance of a Lawful Exemption Cannot Become Revenue’s Windfall: BSNL VRS Compensation Exempt u/s 10(10B) & Delayed Claim Must Be Entertained
The Ahmedabad ITAT has once again granted relief to a former BSNL employee by holding that compensation received under the BSNL Voluntary Retirement Scheme, 2019 was eligible for exemption u/s 10(10B). The Tribunal condoned the delay in filing the appeals, entertained the exemption claim though it had not been correctly made in the original returns, and directed the AO to recompute the income & grant the consequential refund.
The assessee, an individual and former employee of BSNL, received compensation under the BSNL VRS-2019. While filing his return for AY 2020-21, he offered a portion of the compensation to tax because he was unaware of the exemption available u/s 10(10B). The employer had also deducted tax at source from the compensation, reinforcing the assessee’s bona fide belief that the amount was taxable.
During AY 2020-21, the assessee received VRS compensation of ₹6,83,603. He claimed exemption of only ₹5 lakh and consequently offered the balance amount of ₹1,83,603 to tax. The return was processed through an intimation u/s 143(1).
Subsequently, the Chandigarh ITAT, in Harish Kumar v. ITO – ITA No. 42/Chd/2025, order dated 30.05.2025, held that compensation received under the same BSNL VRS-2019 was fully exempt u/s 10(10B). On becoming aware of the legal position, the assessee filed an appeal before the CIT(A) and claimed exemption for the balance compensation.
The CIT(A), however, declined to condone the delay and dismissed the appeal at the threshold without examining the claim on merits. The assessee approached the Tribunal contending that the delay arose from his bona fide ignorance of the available exemption and that a legitimate exemption could not be denied merely because it had not been properly claimed in the original return.
The Ahmedabad ITAT found that identical claims of similarly placed BSNL employees had already been accepted in Jayeshkumar Tulsidas Sutaria v. ITO – ITA Nos. 2387 & 2388/Ahd/2025. In that case, the Tribunal condoned a similar delay, held that compensation received under BSNL VRS-2019 was exempt u/s 10(10B), and directed the AO to issue the consequential refund.
The same view had subsequently been followed in Kirtida Rajeshkumar Shah v. ITO – ITA No. 151/Ahd/2026 and Chhaganlal Bhimabhai v. ITO – ITA Nos. 2547 & 2548/Ahd/2025. The Revenue was unable to distinguish these decisions either on facts or in law.
The Tribunal observed that the approach of condoning the delay was supported by the Supreme Court judgment in Collector, Land Acquisition, Anantnag v. Katiji [1987] 167 ITR 471 (SC). Courts should adopt a justice-oriented approach while considering condonation applications, particularly where the explanation is bona fide and dismissal on a technical ground would defeat a legitimate claim.
The Tribunal also relied upon CBDT Circular No. 14 (XL-35) dated 11.04.1955, which directs income-tax authorities not to take advantage of an assessee’s ignorance of his rights. Officers are expected to assist taxpayers in claiming and securing lawful reliefs and refunds. The Department cannot retain tax that is otherwise not legally payable merely because the assessee was unaware of the exemption while filing the return.
The Revenue’s reliance on Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC) was rejected. The restriction laid down in Goetze (India), regarding a fresh claim otherwise than through a revised return, applies to the powers of the AO. It does not curtail the plenary jurisdiction of appellate authorities to entertain and adjudicate a legitimate claim raised for the first time in appellate proceedings.
Accordingly, the Tribunal held that the balance compensation of ₹1,83,603 received under BSNL VRS-2019 during AY 2020-21 was exempt u/s 10(10B). The AO was directed to recompute the taxable income and grant the refund due after verifying the details of the VRS compensation and the revised computation furnished by the assessee.
The same reasoning was applied to the assessee’s appeal for AY 2021-22. The Tribunal held that the compensation received under BSNL VRS-2019 during that year was also exempt u/s 10(10B) and directed the AO to grant the consequential relief.
Leave Encashment of DoT Employee Absorbed in BSNL
The assessee raised an additional ground for AY 2020-21 concerning the exemption of leave encashment u/s 10(10AA). In the original return, he had restricted the exemption to ₹3 lakh and inadvertently offered the balance leave encashment to tax.
The Tribunal referred to the Kerala High Court decision in Sanchar Nigam Pensioners’ Welfare Association v. Union of India – WP(C) No. 16360 of 2023. The High Court had held that employees of the Department of Telecommunications who were subsequently absorbed into BSNL, but whose pension continued to be governed by Rule 37A of the CCS (Pension) Rules, constitute a special category. Such employees are required to be treated at par with Central Government employees for the purpose of exemption u/s 10(10AA)(i).
The AO was, therefore, directed to grant the leave encashment exemption in accordance with the Kerala High Court judgment after verifying whether the assessee was originally a DoT employee absorbed into BSNL. The assessee was directed to furnish the relevant employment records and revised computation before the AO.
Since relief was granted on this basis, the Tribunal did not consider it necessary to decide the assessee’s alternative contention based on CBDT Notification No. 31/2023 dated 24.05.2023.
Author’s Comment
This decision carries a principle far wider than the exemption available to BSNL employees. An amount which is legally exempt does not become taxable merely because the assessee, out of ignorance or due to TDS by the employer, failed to claim the exemption in the original return.
An intimation u/s 143(1) accepting the returned income does not prevent an assessee from pursuing a legitimate claim through appellate proceedings. The CIT(A) is not merely a reviewing authority confined to the return; it possesses wide powers to determine the correct taxable income. The decision in Goetze (India) cannot be used as a universal barrier against genuine claims raised before appellate authorities.
The order also provides two distinct reliefs. The first is the exemption of BSNL VRS-2019 compensation u/s 10(10B). The second is the potentially wider exemption for leave encashment u/s 10(10AA)(i), but only where the claimant establishes that he was originally a DoT employee absorbed into BSNL and continued to be governed by Rule 37A.
The ruling sends a clear message: procedural omission may delay a lawful refund, but it should not permanently convert exempt income into taxable income.
Cases Discussed
- Jayeshkumar Tulsidas Sutaria v. ITO – ITA Nos. 2387 & 2388/Ahd/2025, order dated 17.02.2026.
- Harish Kumar v. ITO – ITA No. 42/CHD/2025, order dated 30.05.2025.
- Collector, Land Acquisition, Anantnag v. Mst. Katiji & Ors. – [1987] 167 ITR 471 (SC).
- Goetze (India) Ltd. v. CIT – [2006] 284 ITR 323 (SC).
- Sanchar Nigam Pensioners’ Welfare Association v. Union of India – WP(C) No. 16360 of 2023 (Kerala High Court).
Alternative SEO Titles
1. ITAT Grants BSNL VRS Exemption u/s 10(10B) and Leave Encashment Relief
2. BSNL VRS-2019 Compensation Exempt u/s 10(10B): Ahmedabad ITAT Ruling
3. Ahmedabad ITAT Allows Belated BSNL VRS Exemption Claim and Refund
4. ITAT Allows BSNL VRS Exemption and DoT Employee Leave Encashment Relief
5. BSNL VRS Compensation Exempt: ITAT Rejects Goetze Objection to Fresh Claim
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. These are two appeals filed by the same Assessee against two separate Orderspassed by the Commissioner of Income Tax, Appeal, ADDL/JCIT (A)-12, Mumbai [hereinafter referred to as the CIT(A)’] for Assessment 2020-2021 and 2021-2022. Since the issues involved in both the appeals are common and arise from the same factual matrix identical, both the appeal were heard together and are therefore, being disposed off by way of a common order.
ITA No.626/AHD/2026
2. We would first take up ITA No.626/AHD/2026 pertaining to Assessment Year 2020-2021 preferred by the Assessee against the Order, dated 29/01/2026, passed by CIT(A) whereby the Learned CIT(A) had dismissed the appeal against the Intimation Order, dated 28/11/2020, passed under Section 143(1) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’]
3. The Assessee has raised the following Grounds of Appeal:
1. The Ld. CIT(A) has erred in law and on facts in refusing to condone the delay in filing the appeal without appreciating that the delay occurred solely due to the Appellants bonafide ignorance regarding the availability of exemption under Section 10(10B) and lack of legal knowledge. These circumstances constitute a reasonable cause within the meaning of Section 249(3) of the Income-tax Act, 1961. The Ld. CIT(A) failed to apply the settled legal principles laid down by the Honorable Supreme Court in Collector, Land Acquisition vs. Katiji. and N. Balakrishnan vs. M. Krishnamurthy., wherein it has been held that substantial justice must prevail over technicalities and that the length of delay is immaterial when the explanation is bona fide.
2. The Ld. CIT(A) has erred in holding that the Appellant is making a new claim, ignoring that appellate authorities have plenary powers to grant all legitimate reliefs, even if not claimed in the return, as mandated by CBDT Circular No. 14 of 1955 and upheld by various judicial precedents including decisions of the Honorable Supreme Court and High Courts.
3. The Ld. CIT(A) has erred in dismissing the appeal at the threshold without appreciating that the Appellants case is factually identical to Harish Kumar vs. ITO. (ITA No. 42/CHD/2025), where compensation received under the same BSNL VRS-2019 was held fully exempt under Section 10(10B). The Ld. CIT(A) failed to adjudicate the merits despite the existence of a legitimate, legally sustainable, and directly applicable claim under Section 10(10B).
4. The Ld. CIT(A) has passed the impugned order without granting reasonable opportunity of hearing and without issuing statutory notice under Section 250 of the Act during appellate proceedings. The order is thus vitiated for breach of natural justice and is bad in law.
Additional Ground
5. That on the facts and in the circumstances of the case, the Lrd. AO CPC has assessed the income as returned by the Appellant, wherein the Appellant, due to lack of awareness of the legal provisions at the time of filing the return of income, inadvertently offered leave encashment to tax in excess of the amount claimed of Rs. 3,00,000/- as exempt of while furnishing the return of income. Subsequently, in view of CBDT Notification No. 31 of 2023 dated 24.05.2023, the beneficial nature of section 10(10AA), the decision of the Hon’ble ITAT Jaipur Bench in Chandra Prakash Vashisthavs ITO (ITA No. 1139/JPR/2025) and CBDT Circular No. 14 (XL-35) dated 11.04.1955, it is respectfully submitted that the entire leave encashment amount is eligible for exemption. It is therefore prayed that appropriate relief be granted and consequential refund be issued.
Ground No. 1 to 4
4. The Assessee in the present case is an individual. During the relevant previous year the Assessee received compensation under Bharat Sanchar Nigam Limited Voluntary Retirement Scheme 2019 [for short ‘BSNL VRS-2019‘]. Due to lack of awareness of the legal provisions at the time of filing the return of income and on account of the fact that the employer deducted tax at source from the said compensation received under the BSNL VRS-2019, the Assessee did not claim exemption under Section 10(10B) of the Act in respect of compensation of INR.1,83,603/- [compensation of INR.6,83,000/- received Less exemption of INR.500,000/- claimed] in the income tax return for the Assessment Year 2020-2021 which was processed under Section 143(1) of the Act. Subsequently, based on the decision of the Chandigarh Bench of the Tribunal in the case of Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025 dated 30/05/2025), wherein compensation under the BSNL VRS-2019 scheme was held to be exempt under Section 10(10B), the Assessee filed appeal before the Learned CIT(A) raising additional claim of exemption under Section 10(10B) of the Act in respect of the compensation received. It was contended by the Assessee that the compensation was not taxable and therefore, the Assessee was eligible for the refund of the amount of tax deducted at source from such compensation. However, the Learned CIT(A) dismissed the appeal declining to condone the delay in filing the appeal. Therefore, the Assessee has preferred the present appeal.
5. We find that identical issue had come up for consideration before the Tribunal in the case of Jayeshkumar Tulsidas Sutaria Vs. The Income Tax Officer, Ward 7(2)(1), Ahmedabad: ITA Nos.2387 & 2388/AHD/2025 (Assessment Years: 2020-21 & 2021-22) wherein in the case of identically placed employee of BSNL, the Tribunal accepted contentions of the Assessee; condoned similar delay in filing appeal before the Learned CIT(A) against intimation issued under Section 143(1) of the Act; and directed the Assessing Officer to grant refund to the Assessee holding that the compensation received by the assessee under the same BSNL VRS – 2019 was exempt under Section 10(10B) of the Act. The aforesaid decision of the Tribunal was followed in the case of Kirtida Rajeshkumar Shah Vs. The Income Tax Officer, Ward 7(2)(1), Ahmedabad:: ITA Nos. 151/AHD/2026 (Assessment Years: 2020-21) and Chhaganlal Bhimabhai Vs. The Income Tax Officer, Ward 1(2), Bhavnagar: ITA Nos.2547 & 2548/AHD/2025 (Assessment Years: 2020- 21 & 2021-22).
6. There is no change in the legal proposition and the factual matrix. Revenue has failed to distinguish the above decisions of the Tribunal either on facts or in law. Further, the view taken by the Tribunal finds support in the (a) judgment of the Hon’ble Supreme court in the case of Collector, Land Acquisition, Anantnag and Ors. vs. Katiji and Ors.(1987) 167 ITR 471 (SC) on the issue of condonation of delay; and (b) Circular No. 14 of 1955 issued by the Central Board of Direct Taxes directing officers not to take advantage of ignorance of an assessee as to their rights and assist them in claiming and securing reliefs/refunds. On the other hand, the reliance placed by the Revenue on the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd V CIT: 284 ITR 323 is clearly misplaced as the Learned CIT(A) could entertain a fresh claim raised by an assessee for the first time in the appellate proceedings.
7. In view of the above, accepting the claim of the Assessee we hold that compensation of INR.1,83,603/- [compensation of INR.6,83,000/- received Less exemption of INR.500,000/- claimed] received by the Assessee during the relevant previous year under BSNL VRS – 2019 is exempt under Section 10(10B) of the Act. The Assessing Officer is, therefore, directed to compute the taxable income of the Assessee accordingly and grant refund due, if any, as per law. The Assessee is directed to place before the Assessing Officer the details of compensation received under BSNL VRS 2019 and the computation of income claiming exemption under Section 10(10B) of the Act for the same.
8. Thus, in terms of the aforesaid, Ground No. 1 to 3 raised by the Assessee are allowed while Ground No. 4 is dismissed as being infructuous.
Ground No.5 (Additional Ground)
9. Ground No. 5 (raised by the Assessee as additional ground) relates to exemption claimed by the Assessee in respect of Leave Encashment under Section 10(10AA) of the Act. The Assessee has contended that the Assessee should be granted exemption under Section 10(10AA) of the Act in respect of amount exceeding 3,00,000/- inadvertently offered to tax in the return of income. On perusal of the judgment of the Hon’ble Kerala High Court in the case of Sanchar Nigam Pensioners’ Welfare Association Vs. Union of India (WP(C) No.16360 of 2023, cited by the Learned Authorised Representative for the Assessee during the course of hearing, we find that Hon’ble High Court has held that Department of Telcom (DoT) employees absorbed in BSNL, whose pension continues to be governed under Rule 37A of the CSS (Pension) Rules, constituted a special category and are required to be treated at par with Central Government employees for the purpose of exemption under Section 10(10AA)(i) of the Act. Accordingly, we direct the Assessing Officer to grant benefit of exemption under Section 10(10AA) of the Act to the Assessee in terms of the aforesaid judgment after verifying that the Assessee was an employee of DoT absorbed by BSNL. The Assessee is directed to place before the Assessing Officer the relevant details/documents andrevised computation of income claiming exemption under Section 10(10AA) of the Act of the Act for the same.
10. As regards, the alternative legal contention of the Assessee regarding the applicability of Notification No. 31 of 2023, dated 24/05/2023, issued by the Central Board of Direct Taxes is concerned, does not require consideration in view of the above directions.
11. In view of the above, the Ground No. 5 raised by the Assessee is allowed for statistical purposes.
12. In result, the present appeal preferred by the Assessee is partly allowed.
ITA No.627/AHD/2026
13. We would next take up ITA No.627/AHD/2026 pertaining to Assessment Year 2021-2022 preferred by the Assessee against the Order, dated 29/01/2026, passed by CIT(A) whereby the Learned CIT(A) had dismissed the appeal against the Intimation Order, dated 05/10/2021, passed under Section 143(1) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’]
14. During the course of hearing both the sides had agreed that our finding/adjudication in ITA No.626/AHD/2026 pertaining to the Assessment Year 2020-2021 shall apply mutatis mutandis to the present appeal for the Assessment Year 2021-2022. Therefore, adopting the reasoning given while allowing appeal for the Assessment Year 2020- 2021 hereinabove, we hold that the compensation received by the Assessee during the relevant previous year under BSNL VRS – 2019 is exempt under Section 10(10B) of the Act. The Assessing Officer is, therefore, directed to compute the taxable income of the Assessee for the Assessment Year 2021-2022 accordingly and grant refund due, if any, to the Assessee as per law. The Assessee is directed to place beforethe Assessing Officer the details of compensation received under BSNL VRS – 2019 and the computation of income claiming exemption under Section 10(10B) of the Act for the same. Thus, in terms of the aforesaid, Ground No. 1 to 3 raised by the Assessee are allowed while Ground No. 4 is dismissed as being infructuous.
15. In result the present appeal preferred by the Assessee is partly allowed
16. In conclusion both the appeal preferred by the Assessee are partly allowed.
Order is pronounced on 10.09.2026
