Kishorkumar Maganlal Shirodaria Vs ITO (ITAT Rajkot)
BSNL VRS Exemption Claim Restored for Examination—ITAT Condones Appeal Delays of 1,860 and 1,553 Days
Background
The appeals concerned former BSNL employees seeking exemption for ex-gratia compensation received under the BSNL Voluntary Retirement Scheme, 2019.
In the lead case of Visheswar Shivdayal Yadav, the assessee had filed his return declaring total income of ₹6,17,510, including VRS ex-gratia compensation of ₹1,48,821. The CPC processed the return under section 143(1) and accepted the returned income.
Subsequently, the assessee contended that the compensation qualified for exemption under section 10(10B), although no such exemption had been claimed in the original return. He stated that he became aware of the legal position following the Chandigarh Tribunal’s decision in Harish Kumar, ITA No. 42/Chd/2025, dated 30 May 2025.
The CIT(A), however, declined to condone the delay in filing the appeal. Consequently, the claim did not receive adjudication on its merits.
Claim Omitted from the Original Return
The assessee argued that the ex-gratia payment under the BSNL scheme had the character of retrenchment compensation and was eligible for exemption under section 10(10B).
He also raised the contention that an appellate authority can entertain a fresh claim even where it was not made in the return, provided the relevant facts are available on record.
Thus, the dispute involved both the admissibility of the fresh exemption claim and its substantive eligibility. Before either question could be effectively examined, however, the procedural obstacle created by the delayed appeal had to be addressed.
Before the Tribunal, counsel requested condonation and restoration of the matter to the CIT(A) for fresh adjudication.
BSNL Scheme Required Examination
The Tribunal followed its recent decision in Bhimji Bhikhabhai Tukadiya, ITA No. 1072/RJT/2026, dated 1 October 2026, which had dealt with similar claims by BSNL employees.
In that decision, reproduced in the present order, the Tribunal had emphasised that the CIT(A) ought to examine the BSNL retirement scheme approved by the Central Government, together with the supporting evidence and decisions cited by the employees.
The employees’ contention was that the compensation fell within the second proviso to section 10(10B) concerning specified Central Government-approved schemes. The earlier Tribunal order nevertheless restored the matters for examination rather than finally granting the exemption.
Following that approach, the present Bench considered it appropriate to give the assessees another opportunity to substantiate their claims before the first appellate authority.
Substantial Delays Condoned
The Tribunal expressly condoned a delay of 1,860 days in the first appeal relating to ITA No. 1190/RJT/2026, and 1,553 days in the appeal relating to ITA No. 1197/RJT/2026.
It recorded that the assessees had been pursuing an alternative remedy and obtaining opinions on the issue. In these circumstances, it held that the delays deserved condonation.
The Tribunal also noted that the Revenue had not brought material to distinguish the coordinate bench decision relied upon. It therefore restored the appeals to the CIT(A) for fresh adjudication.
Decision
All four appeals were allowed for statistical purposes, and the matters were restored to the CIT(A).
The immediate relief was therefore condonation of delay and revival of the opportunity to have the claims examined. The Tribunal did not finally hold that the entire BSNL VRS compensation was exempt under section 10(10B), nor did it direct an immediate refund.
Author’s Comments
A long delay need not necessarily close the appellate door, but its explanation remains crucial. In this case, the Tribunal accepted the pursuit of an alternative remedy and the process of obtaining advice as reasons supporting condonation. The order should therefore be cited with its factual explanation, rather than as a general proposition that all delayed BSNL appeals must be admitted.
The distinction between restoration of a claim and allowance of a claim is equally important. A caption declaring that “BSNL VRS compensation is fully exempt” would go beyond what this order actually decides. The CIT(A) must still examine the scheme, the applicable statutory conditions and the evidence produced by the employees.
The reproduced earlier order contains assertions about complete exemption and also refers to leave encashment. Those passages include the parties’ submissions; they should not be treated as final findings granting every exemption claimed.
For an employee who originally offered the compensation to tax, this order provides useful support for seeking an examination of the claim through the appellate process. The case presented on remand should explain why section 10(10B) applies to the particular payment and how the scheme satisfies the conditions of the proviso relied upon. Central Government approval of a VRS scheme must be examined in the context of the statutory requirement being invoked.
Cases Discussed
- Kishorkumar Maganlal Shirodaria v. ITO — ITA Nos. 958 & 959/RJT/2026, AYs 2020-21 and 2021-22, ITAT Rajkot.
- Visheswar Shivdayal Yadav v. ITO — ITA Nos. 1190 & 1197/RJT/2026, AYs 2020-21 and 2021-22, ITAT Rajkot.
- Bhimji Bhikhabhai Tukadiya v. ITO — ITA No. 1072/RJT/2026, AY 2020-21, order dated 1 October 2026.
- Harish Kumar — ITA No. 42/Chd/2025, ITAT Chandigarh, order dated 30 May 2025.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned four appeals filed by the different assessees, pertaining to Assessment Years 2020-21 and 2021-22, are directed against the separate orders passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), which in turn arise out of separate orders passed by the Assessing Officer u/s 143(1) of the Income-tax Act.
2. Since, the issues involved in all these appeals of different assessees are common and identical, therefore, these appeals have been heard together and are being disposed off by this consolidated order. The facts narrated in ITA No.1190/Rjt/2026, in the case of Visheswar Shivdayal Yadav have been considered for deciding these appeals en masse.
3. The facts of the case as per lead case in ITA No.1191/Rjt/2026, have been considered, which are as follows:
The appeal has been instituted against the intimation issued by CPC, Bengaluru u/s 143(1) of the Income Tax Act, 1961 on 28.11.2020. The appellant is an individual and had filed his return of income for the relevant assessment year u/s 139(1) of the Act declaring total income of Rs. 6,17,510/-. The return was processed by CPC u/s 143(1) of the Act, wherein the income returned by the appellant was accepted and tax liability was computed accordingly. The intimation determined total income at Rs. 6,17,510/- and computed tax and interest thereon as per the provisions of the Act. During the relevant previous year, the appellant had received, inter alia, salary income and an amount described as ex-gratia compensation pursuant to a Voluntary Retirement Scheme (VRS) floated by his employer, Bharat Sanchar Nigam Limited (BSNL). The said ex-gratia amounting to Rs. 1,48,821/- was included by the appellant in the total income offered to tax in the return of income filed for the year under consideration. Subsequently, the appellant contended that the ex-gratia amount received under the BSNL VRS Scheme, 2019 partakes the character of retrenchment compensation and is eligible for exemption u/s 10(10B) of the Act. It has been submitted that the exemption u/s 10(10B) was not claimed in the original return of income and the amount was offered to tax at the time of filing the return. The core issue arising in the present appeal is whether the appellant is entitled to claim exemption u/s 10(10B) of the Act in respect of the ex-gratia amount of Rs.1,48,821/- received under the BSNL VRS Scheme, 2019, notwithstanding the fact that such exemption was not claimed in the original return of income and the amount was voluntarily offered to tax therein. The appellant has further raised the legal contention that the appellate authority is empowered to entertain and adjudicate a fresh claim, even if such claim was not made in the return of income, provided the relevant facts are already on record. Accordingly, the dispute in the present appeal centers around-
(i) the admissibility of the fresh claim for exemption u/s 10(10B), and
(ii) the taxability or otherwise of the ex-gratia compensation received by the appellant under the BSNL VRS Scheme, 2019. The assessee became aware of the legal position only after pronouncement of decision by ITAT Chandigarh Bench, in the case of Harish Kumar vide ITA No.42/Chd/2025, order dated 30.05.2025.
4. Being aggrieved by the said order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), but remained unsuccessful as the Ld. CIT(A) did not condone the delay in filing the appeal. Therefore, assessee is left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.
5. Learned Counsel for the assessee, argued that delay in filing the appeal before the Ld. CIT(A) may be condoned and matter may be restore back to the file of Ld. CIT(A) for fresh adjudication.
6. On the other hand, the Ld. DR for the Revenue relied on the findings of Ld. CIT(A).
7. I have heard, both the parties. I see no reason to take any other view of the matter then the view so taken by the Hon’ble ITAT, Rajkot Bench in the case of Bhimji Bhikhabhai Tukadiya in ITA No. 1072/RJT/2026 for AY 2020-21, vide order dated 01.10.2026. In this order, the Tribunal has inter alia observed as under:
“3. Common and similar facts, contain in these appeals, are as follows. The amount was received by the respective employees of BSNL on account of Retrenchment Compensation Received From Central Government Under the Scheme Approved By Central Government which is fully exempted from Income Tax Under Section 10(10B) of Income Tax Act, 1961. The compensation amount receipts in the hands of assessee as an employee of the BSNL, pursuant to the severance package, titled as BSNL Voluntary Retirement Scheme-2019 announced by the Department of Telecommunications(DoT), Central Government of India under total budgetary allocation approved by the Government is a special privilege/protection package granted to the employees of the BSNL and therefore, the Second Proviso of the Section 10(10B) of the Income Tax Act, 1961 are attracted and accordingly, the same shall not fall within the definition of income, while computing the total income of an assessee and income tax not to be deducted from the severance package paid as an employee of DOT and BSNL Combined Service. However, the assessing officer rejected the above contention of these assessees/ employees and made the addition in the hands of the respective employees.
4. Being aggrieved by the said order of the Assessing Officer, these assessees filed appeal before the Ld.CIT(A), but remained unsuccessful. Therefore, these assessees are left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.
5. Learned Counsel for the assessee submitted that in these cases the compensation received by an assessee is towards loss of employment for the reason of employer so it would amount to Capital Receipt and hence, no income tax is payable. The amount received is fully exempted u/s.10(10AA) of the Income Tax Act, 1961. In respect of leave encashment received by an Applicant. This is as per Revised Limit of Leave Encashment Rs.25,00,000/- as per CBDT, Notification No.31/2023/F.No.200/3/2023-ITA-1, Dated: 24/05/2023.The Ld. CIT(A) has misdirected himself in law, facts and circumstances of the case, that Ld. CIT(A) has dismissed the Appeal rejecting the claim of Assessee for exemption u/s 10(10B) of the Act. The Ld. CIT(A) did not examine the scheme framed by the Central Government for BSNL employees, therefore matter may be restored back to the file of the Ld. CIT(A), with the direction to examine the scheme of the central government, and then adjudicate the issue in accordance with law.
6. On the other hand, Ld. DR for the revenue did not raise any objection if these matters are remitted back to the file of the Ld. CIT(A) for examination of the scheme of BSNL employees framed by the Central Government and then adjudicate the issue in accordance with law.
7. I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I note that these appeals relate to Retrenchment Compensation/ retirement scheme of BSNL employees and Ld. CIT(A) did not consider the BSNL Scheme of retirement and without considering the scheme of BSNL employees’ the ld.CIT(A), dismissed these appeals of different assessees. The BSNL Scheme was approved by the Central Government and therefore Ld. CIT(A) should have considered the scheme approved by the Central Government for BSNL employees, however, the Ld. CIT(A) did not consider, at all, the BSNL Scheme for employees, as approved by the Central Government, therefore the decision rendered by the Ld. CIT(A) is factually incorrect and hence another opportunity to plead these cases before the Ld. CIT(A) should be granted to these all assessees. The Ld. Counsel for the assessee also submitted that the Ld. CIT(A) has also not considered the case law cited by the assessees which are in favour of employees/assessees. I note that Ld. CIT(A) did not go through the scheme of the BSNL for its employees framed by the Central Government and adjudicated the issue without going through the scheme of BSNL, in right perspective, hence, it is violation of principle of natural justice. Therefore, these assessees pray before the Bench that the matter may be restored back to the file of the Ld. CIT(A) to consider the scheme of the BSNL employees and to consider the case law in favour of these employees. Therefore, considering these facts, I am of the view that one more opportunity should be granted to these assessees to plead their cases before the learned CIT(A).
8. Hence, I accept the prayer of these assessees and set aside the order of Ld. CIT(A) and remand the various issues raised by the assessees in the grounds of appeal before CIT(A) for fresh consideration by the ld.CIT(A), with a liberty to these assessees to prove their cases by producing sufficient evidences/material to the satisfaction of the Ld. CIT(A). For statistical purposes these all different assessees’ appeals are allowed.
9. In the result, all these appeals (ITA No.1030/Rjt/2026, ITA No.1031/Rjt/2026, ITA No.1038/Rjt/2026, ITA No.1041/Rjt/2026, ITA No.1072/Rjt/2026, ITA No.1114/Rjt/2026, ITA No.1115/Rjt/2026, ITA No.1116/Rjt/2026, ITA No.1118/Rjt/2026, ITA No.1119/Rjt/2026), filed by the different assessees, are allowed for statistical purposes.”
8. As the issue is squarely covered by the decision of the Hon’ble ITAT, Rajkot Bench in the case of Bhimji Bhikhabhai Tukadiya in ITA No. 1072/RJT/2026 for AY 2020-21, vide order dated 01.10.2026, and there is no change in facts and law and the revenue is unable to produce any material to controvert the aforesaid findings of the Tribunal (supra). I find no reason to interfere in the said order of the ITAT Rajkot, Bench. I condone the delay of 1860 days in filing appeal before the Ld. CIT(A) in case of ITA No.1190/Rjt/2026. I condone the delay of 1553 days in filing the appeal before the Ld. CIT(A) in case of ITA No.1197/Rjt/2026. As these assessees were exercising alternative remedy and taking the opinion on the issue, therefore, delay deserve to be condoned and accordingly, I condone the delay in these appeals before the Ld. CIT(A). Therefore, respectfully following the binding precedent of the ITAT Rajkot, Bench (supra), I restore these appeals to the file of Ld. CIT(A) for fresh adjudication.
9. In the result, all these appeals (ITA No.958/Rjt/2026, ITA No.959/Rjt/2026, ITA No.1190/Rjt/2026, ITA No.1197/Rjt/2026), filed by the different assessees, are allowed for statistical purposes.
Order is pronounced in the open Court on 07/10/2026.
