ITO Vs Rakesh Kumar Malani (ITAT Jaipur)
Case Background
The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the grant of rebate under Section 87A against tax computed on short-term capital gains taxable under Section 111A, where the assessee had opted for the new tax regime under Section 115BAC for Assessment Year 2025-26.
Dismissing the Revenue’s appeal in ITO vs. Rakesh Kumar Malani, the Tribunal followed earlier coordinate bench decisions allowing the rebate in similar circumstances. It noted that the Revenue could neither distinguish the decisions relied upon nor produce any contrary ruling of the jurisdictional High Court or the Supreme Court.
Case Details
Case Name: ITO vs. Rakesh Kumar Malani; Court: Income Tax Appellate Tribunal, Jaipur; Appeal Number: ITA No. 1425/JPR/2026; Assessment Year: 2025-26; Date of Order: 21 October 2026.
Background: CPC Disallowed Rebate of ₹20,035
The assessee filed his return of income for the relevant assessment year under the new tax regime prescribed by Section 115BAC of the Income-tax Act, 1961.
In the return, he claimed a Section 87A rebate of ₹20,035 against the tax calculated on short-term capital gains chargeable under Section 111A.
The Centralised Processing Centre (CPC), while processing the return, disallowed the rebate through an intimation dated 29 January 2026 under Section 143(1).
The assessee subsequently sought rectification under Section 154, but his request was rejected. The rectification order was dated 25 February 2026.
Aggrieved by the denial, the assessee approached the first appellate authority. The Additional/Joint Commissioner of Income Tax (Appeals) allowed his appeal and directed the Assessing Officer to grant the rebate under Section 87A.
The Revenue challenged this relief before the Tribunal.
Revenue’s Arguments Against the Rebate
The Revenue contended that Section 87A rebate was unavailable against income tax payable on income chargeable at special rates, including short-term capital gains covered by Section 111A.
According to the grounds of appeal, the first appellate authority had therefore erred in allowing the assessee’s claim.
The Revenue also relied on CBDT Circular No. 13/2025. It argued that the circular clarified that allowing such rebate was never the statutory intent and that cases involving erroneous rebate claims were liable to rectification.
These submissions formed the basis of the Revenue’s challenge to the appellate relief. The Tribunal’s decision, however, rested on the earlier judicial decisions covering the issue and the Revenue’s inability to establish a basis for departing from them.
Issue Before the Tribunal
The Tribunal identified the question as whether rebate under Section 87A could be allowed against tax computed on short-term capital gains under Section 111A, when the assessee had chosen taxation under Section 115BAC for AY 2025-26.
The dispute thus concerned the availability of the rebate against the tax on the capital gains. It did not concern the classification of those gains under Section 111A.
No one appeared on behalf of the assessee during the hearing. The Tribunal considered the issue after hearing the Revenue’s representative and examining the decisions relevant to the dispute.
Earlier Decisions Supported the Assessee
The Tribunal referred to the Ahmedabad Bench’s decision in Jayshreeben Jayantibhai Palsana vs. ITO, ITA No. 1014/Ahd/2025.
In that case, an identical issue had been decided in favour of the assessee for AY 2024-25, allowing rebate under Section 87A.
The Jaipur Bench further noted that it had itself considered identical facts in ITA No. 1412/JPR/2025, decided on 25 June 2026, also concerning AY 2024-25. In that decision, the Bench had held that Section 87A rebate was allowable in such a situation.
The Tribunal therefore found support for the assessee’s claim in both the Ahmedabad Bench’s ruling and its own earlier decision.
Revenue Failed to Distinguish the Precedents
A significant consideration was the Revenue’s inability to rebut the decisions supporting the claim.
The Departmental Representative could not bring to the Tribunal’s notice any contrary decision of the jurisdictional High Court or the Supreme Court.
The representative was also unable to distinguish the Ahmedabad Bench’s ruling.
In these circumstances, the Tribunal held that the issue was covered in favour of the assessee. Following the earlier decisions, it concluded that the first appellate authority’s grant of rebate was in accordance with law and required no interference.
ITAT Dismisses Revenue’s Appeal
The Tribunal accordingly dismissed the Revenue’s appeal, leaving intact the direction to grant the assessee the Section 87A rebate of ₹20,035.
The ruling concerns AY 2025-26, although the earlier decisions followed by the Bench related to AY 2024-25. Its reasoning centres on adherence to coordinate bench decisions where the Revenue produced no contrary higher-court ruling and failed to distinguish the precedent.
The order grants relief on the specific dispute involving Section 111A short-term capital gains under the Section 115BAC regime. Its conclusion should therefore be read in the context of that assessment year and the issue actually decided.
Cases Discussed
- Jayshreeben Jayantibhai Palsana Vs ITO (ITAT Ahmedabad) — ITA No. 1014/Ahd/2025; followed.
- Jaipur ITAT coordinate-bench ruling — ITA No. 1412/JPR/2025; 25.06.2026; followed (party names not specified in source order).
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT JAIPUR
1. This appeal by the Revenue is directed against the order of the learned Additional/Joint Commissioner of Income Tax (Appeals)-5, Chennai, [hereinafter referred to as “Addl./JCIT(A)”] dated 30.03.2026 for the Assessment Year 2025-26 arising out of the rectification order dated
25.02.2026 passed by the Assessing Officer at the Centralized Processing Centre (hereinafter referred to as “the AO at the CPC”) under section 154 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”),
2. The grounds of appeal raised by the Revenue before us in the memorandum of appeal in Form No. 36 read as under:
1. Whether on the facts and circumstances of the case and in law, the Addl./JCIT (A)-1, Guwahati is justified in allowing the rebate w/s 87A of the Act, on STCG, when rebate w/s 87A of the Act is not available in respect of Income Tax payable on income chargeable to tax on special rates, which includes Short Term Capital Gain w/s 111A of the Act?
2. Whether on the facts and circumstances of the case and in law, the order of the Addl./JCIT (A)-1, Guwahati is justified in view of the CBDT Circular No. 13/2025, which has made it expressly clear that it was never the statutory intent to allow rebate in cases WHARE rebate is erroneously claimed are to be rectified, thereby having no doubt that such claim was statutorily never permissible?
3. The appellant craves leave OR reserves right to amend, modify, alter, add OR forego any ground(s) of appeal at any time before OR during the hearing of this appeal.
3. Briefly stated, the facts of the case are that the assessee filed the return of income for the year under consideration opting for the tax regime provided under section 115BAC of the Act. In the said return, the assessee claimed a rebate under section 87A of the Act amounting to Rs. 20,035 against the tax computed on short term capital gain chargeable to tax under section 111A of the Act. The AO at the CPC, by the intimation dated 29.01.2026 passed under section 143(1) of the Act, disallowed the said rebate. Assessee request for rectification under section 154 of the Act was also rejected. Aggrieved, the assessee filed an appeal before the learned Addl./JCIT(A), who allowed the appeal and directed the AO to grant the rebate under section 87A of the Act.
4. Aggrieved by the said order of the learned Addl./JCIT(A), the Revenue is in appeal before us.
5. The only issue that arises for our consideration is whether a rebate under section 87A of the Act is allowable on the tax computed on short term capital gain offered to tax under section 111A of the Act, where the assessee has opted for the tax regime under section 115BAC of the Act for the Assessment Year 2025-26.
6. None appeared on behalf of the assessee. We note that the Hon’ble Ahmedabad Bench of the Tribunal in the case of Jayshreeben Jayantibhai Palsana vs. ITO (ITA No. 1014/Ahd/2025) has decided an identical issue in favour of the assessee by allowing the rebate under section 87A of the Act for the Assessment Year 2024-25.
7. The learned Departmental Representative (hereinafter referred to as the “DR”) was unable to bring to our notice any contrary decision of the Hon’ble jurisdictional High Court or of the Hon’ble Supreme Court. The learned DR was also unable to distinguish the above decision.
8. We further note that this Bench, in ITA No. 1412/JPR/2025 dated 25.06.2026 for the Assessment Year 2024-25, has considered identical facts and has held that a rebate under section 87A of the Act is allowable in such a situation.
9. The issue is thus covered in favour of the assessee by the decision of the coordinate Bench as well as by the decision of the Hon’ble Ahmedabad Bench of the Tribunal, and the Revenue has not been able to place before us any contrary decision of the Hon’ble jurisdictional High Court or of the Hon’ble Supreme Court. Respectfully following the settled view, we hold that the rebate allowed to the assessee under section 87A of the Act by the learned Addl./JCIT(A) is in accordance with law and calls for no interference.
10. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 21.10.2026
