Ajitha Chandramohan Nair Vs ITO (ITAT Ahmedabad)
Summary: The Income Tax Appellate Tribunal, Ahmedabad SMC Bench, comprising Dr. B.R.R. Kumar, Vice President, and Shri Rahul Chaudhary, Judicial Member, partly allowed two appeals filed by Ajitha Chandramohan Nair for Assessment Years 2020-21 and 2021-22. The dispute concerned the taxability of compensation received under the BSNL Voluntary Retirement Scheme, 2019, the rejection of delayed appeals by the Commissioner of Income Tax (Appeals), and an additional claim for leave encashment exemption under Section 10(10AA) of the Income Tax Act, 1961.
For AY 2020-21, the assessee received VRS compensation of ₹6,83,000, claimed exemption of ₹5,00,000 and inadvertently offered the remaining ₹1,83,603 to tax. The employer had deducted tax at source, and the return was processed under Section 143(1). Subsequently, relying on Harish Kumar Vs ITO, the assessee sought exemption under Section 10(10B). The CIT(A) rejected the appeal as time-barred. The Tribunal followed its coordinate Bench decisions in Jayeshkumar Tulsidas Sutaria, Kirtida Rajeshkumar Shah and Chhaganlal Bhimabhai, observing that bona fide ignorance should not defeat a legitimate tax exemption claim. It also relied on the Supreme Court’s decision in Collector, Land Acquisition Vs Katiji and CBDT Circular No. 14 of 1955.
The Tribunal held that the disputed ₹1,83,603 for AY 2020-21 and ₹15,00,404 received under BSNL VRS-2019 for AY 2021-22 were exempt under Section 10(10B), and directed the Assessing Officer to recompute taxable income and grant consequential refunds, if due. Regarding leave encashment, it applied the Kerala High Court’s ruling in Sanchar Nigam Pensioners’ Welfare Association Vs Union of India and directed verification of whether the assessee was a Department of Telecommunications employee absorbed into BSNL, eligible for treatment at par with Central Government employees under Section 10(10AA)(i). The alternative argument based on CBDT Notification No. 31/2023 was not examined. Both appeals were partly allowed.
Cases Discussed
- Harish Kumar Vs ITO — ITA No. 42/CHD/2025, dated 30.05.2025 (ITAT Chandigarh) — Relied upon for exemption of compensation received under BSNL VRS-2019.
- Jayeshkumar Tulsidas Sutaria Vs ITO — ITA Nos. 2387 & 2388/AHD/2025 (ITAT Ahmedabad) — Followed for condonation of delay and allowance of exemption under Section 10(10B).
- Kirtida Rajeshkumar Shah Vs ITO — ITA No. 151/AHD/2026 (ITAT Ahmedabad) — Followed as a coordinate Bench precedent on the same exemption issue.
- Chhaganlal Bhimabhai Vs ITO — ITA Nos. 2547 & 2548/AHD/2025 (ITAT Ahmedabad) — Followed regarding exemption of BSNL VRS compensation.
- Collector, Land Acquisition Vs Katiji and Ors. — (1987) 167 ITR 471 (Supreme Court) — Relied upon for the principles governing condonation of delay and substantial justice.
- N. Balakrishnan Vs M. Krishnamurthy — Supreme Court — Cited in the assessee’s grounds concerning condonation of delay.
- Goetze (India) Ltd Vs CIT — (2006) 284 ITR 323 (Supreme Court) — Distinguished regarding the power of appellate authorities to entertain fresh claims.
- Chandra Prakash Vashistha Vs ITO — ITA No. 1139/JPR/2025 (ITAT Jaipur) — Cited in the additional ground concerning leave encashment exemption.
- Sanchar Nigam Pensioners’ Welfare Association Vs Union of India — WP(C) No. 16360 of 2023 (Kerala High Court) — Applied concerning Section 10(10AA)(i) eligibility of qualifying DoT employees absorbed into BSNL.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. These are two appeals filed by the same Assessee against two separate Orders passed by the Learned Commissioner of Income Tax – Appeals ADDL/JCIT(A)-1, Visakhapatnam [hereinafter referred to as ‘the CIT(A)’] for the Assessment Years 2020-2021 and 2021-2022. Since the issues involved in both the appeals are common and arise from the same factual matrix, both the appeal were heard together and are therefore, being disposed by way of a common order.
ITA No.749/AHD/2026
2. We would first take up ITA No.749/AHD/2026 pertaining to Assessment Year 2020-2021 preferred by the Assessee against the Order, dated 02/03/2026, passed by the Learned CIT(A) dismissing the appeal against the Intimation Order, dated 28/08/2021, passed under Section 143(1) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] as being barred by limitation.
3. The grounds raised by the Assessee read as under:
“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(108) 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(108).
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.
5. Additional Ground
That on the facts and in the circumstances of the case, the Ld 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 as exempt of Rs 3,00,000 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 Honble ITAT Jaipur Bench in Chandra Prakash Vashistha vs 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.”
4. We have heard both the sides and have perused the material on record.
Ground No. 1 to 4
5. 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.
6. 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).
7. 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.
8. 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 computed 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.
9. 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)
10. 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 as the Assessee continues to be governed by the CCS (Pension Rules), 1972. 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 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 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 and revised computation of income claiming exemption under Section 10(10AA) of the Act of the Act for the same.
11. 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.
12. In view of the above, the Ground No. 5 raised by the Assessee is allowed for statistical purposes.
13. In result, the present appeal preferred by the Assessee is partly allowed.
ITA No.750/AHD/2026
14. We would next take up ITA No.750/AHD/2026 pertaining to Assessment Year 2021-2022 preferred by the Assessee against the Order, dated 02/03/2026, passed by the CIT(A) dismissing the appeal against the Intimation Order, dated 18/01/2022, passed under Section 143(1) of the Act being barred by limitation.
15. During the course of hearing both the sides had agreed that our finding/adjudication in ITA No.750/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 adjudicating appeal for the Assessment Year 2020-2021 hereinabove, we hold that the compensation of INR.15,00,404/- 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 computed 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. 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.
16. In result the present appeal preferred by the Assessee is partly allowed.
17. In conclusion both the appeal preferred by the Assessee are partly allowed.
Order pronounced on 13.08.2026
