Makarand Prabhakar Abhyankar Vs ADIT (ITAT Pune)
Tax Paid by Mistake? ITAT Allows ₹40.55 Lakh BSNL VRS Exemption
Retirement Compensation Offered to Tax Inadvertently
The Pune Tribunal allowed a retired BSNL employee’s claim for exemption of ₹40,55,328 received under the BSNL Voluntary Retirement Scheme, 2019, even though the amount had originally been included in his taxable income.
The assessee was a former employee of the Department of Telecommunications who had subsequently been absorbed into Bharat Sanchar Nigam Limited. In his return for assessment year 2021-22, he inadvertently included the VRS amount as taxable income.
The Centralised Processing Centre processed the return under section 143(1) on 20 May 2022, accepting the returned income without any adjustment. Thus, the dispute arose from the assessee’s own treatment of the receipt in the return, rather than an addition made by the Department.
A Union Meeting Brings the Exemption Claim to Light
At a meeting organised by the employees’ union on 1 July 2025, the assessee learnt that several retired employees had allegedly received incorrect professional advice and had paid tax on their BSNL VRS receipts.
He was informed that the amount was eligible for exemption under the second proviso to section 10(10B). An alternative contention was also suggested: the payment represented compensation for termination of employment and loss of the job and was, therefore, a capital receipt not chargeable to tax.
Following this information, the assessee appealed against the processing of his return and claimed exemption of ₹40.55 lakh under section 10(10B).
The alternative capital-receipt argument formed part of the background recorded in the order. The Tribunal ultimately granted relief under the specific exemption provision, without separately deciding that alternative contention.
First Appellate Authority Rejects the Claim
The first appellate authority dismissed the appeal by an order dated 13 February 2026.
The Tribunal recorded that the appeal had been filed belatedly and that the exemption had not been claimed in the original return. The CPC had merely processed the income declared by the assessee.
Before the Tribunal, the assessee challenged the rejection of his claim on these procedural grounds. He argued that appellate authorities possess wide powers to grant lawful relief, even where a claim was omitted from the return.
He also relied on CBDT Circular No. 14 of 1955 and judicial precedents supporting the consideration of legitimate claims. His grounds referred to Harish Kumar v. ITO and Jayeshkumar Tulsidas Sutaria v. ITO as decisions supporting exemption of receipts under the BSNL VRS-2019 scheme.
Assessee’s Earlier-Year Decision Provides the Foundation
The decisive circumstance was that the assessee had already obtained relief on a similar claim for assessment year 2020-21.
His earlier appeal, ITA No. 1496/PUN/2026, had been allowed through a common order dated 20 May 2026, covering him and other similarly situated employees.
That common order had followed the Pune Tribunal’s decision in Prathibha Jagdish Unawane v. ITO, ITA No. 1117/PUN/2026 and connected appeals, dated 29 April 2026.
The earlier decision treated the relevant BSNL VRS receipts as retrenchment compensation and reversed the rejection of the employees’ exemption claims.
The Tribunal found that the assessee’s similar claim had already been accepted for the preceding assessment year and followed that decision in the present appeal.
Section 10(10B) Exemption Expressly Allowed
The Tribunal set aside the first appellate authority’s order and expressly held that the sum received under the BSNL Voluntary Retirement Scheme, 2019 was in the nature of retrenchment compensation and exempt under section 10(10B).
There is a drafting inconsistency worth recognising. The passage reproduced from the earlier common order refers to section 10(10C). However, the operative finding in the present order expressly grants exemption under section 10(10B), and the consequential direction also refers to that provision.
Accordingly, the present decision should be reported on the basis of its clear operative finding under section 10(10B).
Revised Computation and Refund Directed
The Tribunal directed the assessee to submit a revised computation of income before the jurisdictional Assessing Officer, claiming exemption of the disputed receipt.
The Assessing Officer was directed to verify the revised computation, recompute the tax liability and grant the refund, if any, arising from that exercise.
The appeal was allowed. This was a substantive acceptance of the exemption claim, with verification of the revised computation left to the Assessing Officer.
Author’s Comments
The decision offers useful relief where an employee has paid tax on a receipt owing to incorrect advice and subsequently discovers an available exemption. Here, including the amount in the original return did not prevent the Tribunal from granting relief.
Nevertheless, the reasoning rests substantially on the assessee’s own earlier-year decision and the coordinate Bench rulings concerning BSNL VRS-2019. It should not be extended indiscriminately to every voluntary retirement payment.
The order also does not contain a detailed, separate discussion of delay condonation or the statutory conditions underlying the exemption. For practical purposes, the important outcome is clear: the exemption was accepted, and the employee was permitted to obtain consequential relief through a verified revised computation.
A mistaken tax payment need not become a permanent tax burden when the exemption claim is accepted in appeal.
Cases Discussed
- Harish Kumar v. ITO, ITA No. 42/Chd/2025, ITAT Chandigarh, order dated 30.05.2025 — relied upon in the grounds as supporting exemption of compensation received under BSNL VRS-2019 under section 10(10B).
- Jayeshkumar Tulsidas Sutaria v. ITO, [2026] 183 taxmann.com 587 (ITAT Ahmedabad), order dated 17.02.2026 — cited in the grounds in support of exemption of BSNL VRS-2019 compensation under section 10(10B).
- Makarand Prabhakar Abhyankar and other similarly situated assessees, ITA No. 1496/PUN/2026 and connected matters, ITAT Pune, common order dated 20.05.2026 — followed; the assessee’s similar exemption claim for assessment year 2020-21 had already been allowed.
- Prathibha Jagdish Unawane v. ITO, ITA No. 1117/PUN/2026 and connected appeals, ITAT Pune, order dated 29.04.2026 — followed in the earlier common order concerning similarly situated BSNL employees.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 13.02.2026 passed by Ld. Addl./JCIT(A)-5, Chennai [‘Ld. CIT(A)’] for the assessment year 2021-22.
2. The appellant has raised the following grounds of appeal :-
“1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in holding that the Appellant was making a new claim which was not made in the return of income, without appreciating that the appellate authorities possess wide and plenary powers to grant lawful reliefs even if such claims were not made in the return of income. The Ld. CIT(A) failed to follow the binding principles laid down in CBDT Circular No. 14 (XL-35) of 1955 and the judicial precedents of the Hon’ble Supreme Court and various High Courts which mandate that legitimate relief should not be denied merely on technical grounds.
2. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in dismissing the appeal at the threshold without adjudicating the issue on merits, despite the fact that the Appellant’s case is squarely covered by the decision of the Hon’ble ITAT in the case of Harish Kumar v. ITO in ITA No. 42/Chd/2025 and Jayeshkumar Tulsidas Sutaria vs. Income-tax Officer [2026] 183 taxmann.com 587 (Ahmedabad – Trib.)[17-02-2026] wherein compensation received under the BSNL VRS-2019 scheme was held to be fully exempt under Section 10(10B) of the Act. The Ld. CIT(A) failed to consider that the Appellant had a legitimate and legally sustainable claim which required adjudication on merits.
3. On the facts and in the circumstances of the case and in law, the Learned CIT(A) failed to appreciate that the Appellant had received compensation under the duly approved “BSNL VRS2019” scheme which satisfies the conditions prescribed and is therefore eligible for exemption under Section 10(10B) of the Act. The Ld. CIT(A) ignored relevant judicial precedents including the recent decision of the Hon’ble ITAT Chandigarh in Harish Kumar v. ITO (ITA No. 42/Chd/2025 dated 30.05.2025) wherein identical benefits received under the BSNL VRS-2019 scheme were held to be eligible for exemption. The impugned order passed by the Ld. CIT(A) is therefore contrary to law and liable to be set aside.
4. On the facts and in law, the Appellant is entitled to a refund of excess tax paid pursuant to erroneous payment made on account of incorrect professional advice.”
3. Facts of the case, in brief, are that the assessee is an individual retired employee from DoT (Department of Telecommunication) which was subsequently absorbed in Bharat Sanchar Nigam Limited (hereinafter referred to as ‘BSNL’). The return of income was furnished by the assessee which inadvertently includes an amount of Rs.40,55,328/- received under the VRS announced by BSNL during A.Y. 2021-22 & the same was processed u/s 143(1) of the IT Act by CPC on 20.05.2022 wherein returned income was accepted as it is. During a meeting organized by the SNPWAMH (“the Union”) on 01.07.2025, it was informed to the assessee that several retired employees, including appellant, had been given incorrect advice due to which they inadvertently paid tax on the amount received from BSNL under the VRS as per the applicable tax rate during the A.Y. 2021-22, since the amount of Rs.40,55,328/- received from BSNL under the VRS during A.Y. 2021-22 was exempt as per 2nd proviso to section 10(10B) of the IT Act. Without prejudice, it was also informed to the assessee that the amount of Rs.40,55,328/- received from BSNL under the VRS, represents compensation paid by employer while terminating the services of employee on account of loss of job and therefore, the same is capital receipt not chargeable to tax under the Act. After receiving this information, the assessee furnished first appeal before Ld. CIT(A) claiming exemption of Rs.40,55,328/- u/s 10(10B) of the IT Act. Since the appeal was furnished belatedly & on the other hand no such claim was made by the assessee in the return of income & the return was processed by CPC on the income declared by the assessee as it is, vide order dated 13.02.2026 the appeal was dismissed by Ld. CIT(A).
4. It is the above order against which the assessee is in appeal before this Tribunal.
5. We have heard Ld. counsels from both the sides and perused the material available on record. In this regard, we find that it is the claim of the assessee that similar claim for assessment year 2020-21 was also made by the assessee and a coordinate bench of this Tribunal in the case of various other similarly situated assessees, including the assessee, has already allowed the appeal filed by the assessee in ITA No.1496/PUN/2026 vide common order dated 20-05-2026, by relying on other coordinate bench decision passed in the case of Prathibha Jagdish Unawane Vs. ITO – ITA No.1117/PUN/2026 and others, order dated 29.04.2026 by observing as under :-
“6. We find that the decision of this Tribunal in case of is Prathibha Jagdish Unawane Vs. ITO (supra) is squarely applicable on the facts and issues raised in the instant bunch of appeals and respectfully following the same we hold that the alleged sum received by the respective employees from BSNL under the Voluntary Retirement Scheme, 2019 is in the nature of Retrenchment Compensation and is exempt u/s.10(10C) of the Act. Findings of ld.CIT(A) are reversed and Grounds of appeal raised by the respective assessee(s) are allowed.”
6. Respectfully following the above decision passed in the case of assessee and other similarly situated assessees in ITA No.1496/PUN/2026 vide common order dated 20-05-2026, we find force in the arguments of the assessee that similar claim made by the assessee before the Tribunal has already been allowed for Asstt Year 2020-21. Accordingly, we deem it appropriate to set-aside the order passed by Ld. CIT(A) & hold that the alleged sum received by the employees from BSNL under the Voluntary Retirement Scheme, 2019 is in the nature of Retrenchment Compensation and is exempt u/s 10(10B) of the IT Act. Accordingly, assessee is directed to place revised computation of income before the Jurisdictional Assessing Officer claiming the exemption u/s 10(10B) of the IT Act of the alleged sum and thereafter, the Jurisdictional Assessing Officer shall re-compute the tax liability and grant the refund, if any, arising to the assessee after due verification of such revised computation of income. Thus, the grounds of appeal raised by the assessee are allowed.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 05th day of October, 2026.
