Geetha. S Vs ITO (ITAT Chennai)
Chennai ITAT Allows BSNL Employee’s Ex-Gratia Exemption Despite No Revised Return, Citing CBDT Circular Against Taking Advantage of Taxpayer’s Ignorance
The Chennai ITAT held that a BSNL employee was entitled to exemption under sections 10(10B) and 10(10C) in respect of ex-gratia received under the retrenchment scheme, even though the claim had not been made through a revised return. The Tribunal observed that the assessee had initially claimed incorrect exemptions due to ignorance of the applicable provisions, while the legal position had already been settled by the Madras High Court. Relying on CBDT Circular No. 14(XL-35) of 1955, which mandates that tax authorities should not take advantage of an assessee’s ignorance and should assist taxpayers in securing legitimate reliefs, the Tribunal held that both the CPC and the First Appellate Authority failed in their duty by rejecting the claim on the technical ground of absence of a revised return. The Tribunal further reiterated that the powers of the First Appellate Authority are co-terminus with those of the Assessing Officer and that it was fully competent to admit and allow a legitimate claim. Accordingly, it directed the Assessing Officer to grant exemption under section 10(10B) for both assessment years and under section 10(10C) for AY 2020-21, ignoring the absence of a revised return and subject to the prescribed monetary limits.
Cases Discussed
- Kannammal v. Income-tax Officer-Ward-1(1), Tirupur (Madras HC), [2019] 103 taxmann.com 364 (Mad.)
- Hindustan Photo Film Workers’ Welfare Centre (CITU) Government of India, New Delhi (Madras HC), [2017] 79 taxmann.com 298 (Mad.)
- Parekh Brothers v. CIT (Kerala HC), [1983] 15 Taxman 539 (Ker.)
- CIT v. Mahendra Mills (SC), [2000] 109 Taxman 225 (SC)
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. These two appeals are preferred by the assessee against the order of Ld. Addl. / JCIT (A), Kochi (hereinafter referred as the ‘Ld. Ld. Addl. / JCIT (A)) dated 31.03.2026 for the Assessment Year (hereinafter referred as the ‘AY’) 2020-21 & 2021-22 respectively.
GROUDS OF APPEAL
ITA No.3176/Chny/2026
1. The Learned Assessing Officer (CPC) has erred in law and on facts in not allowing the exemption of Ex-gratia amount received of INR 38,08,897 under section 10(10B) of the Income-tax Act, 1961, though the appellant is legally entitled to claim such deduction and as such no exemption has been given. Thus the benefit of exemption of Rs.38, 08,897/- is deprived of resulting in more tax liability.
2. The Honourable Commissioner of Income Tax (Appeals) is empowered to admit fresh claims of deduction, as held in various judgements passed by the Commissioners of Income Tax in various places recently on the appeal of my peer employees. It is held in all those appeals that the employee is entitled to the exemptions and have allowed the appeals and directing for revision of the assessment orders.
3. Based on the facts, circumstances and legal position of the case, the Appellant files this appeal for a direction to admit the entitled claim of exemption under section 10(10B) of the Act amounting to INR 38, 08,897/-.
4. The claim is supported by all necessary facts and evidences are available and can be produced to the satisfaction of the adjudicating authority during the time of hearing.
5. The Appellant reserves the right to initiate any other point that may arise during the proceedings under this appeal that results in a benefit to the employee and pray for entertaining such additional points.
ITA No.3181/Chny/2026
1. The Learned Assessing Officer (CPC) has erred in law and on facts in not allowing the exemption of Ex-gratia amount received of INR 38,08,897 under section 10(10B) of the Income-tax Act, 1961, though the appellant is legally entitled to claim such deduction and as such no exemption has been given. Thus the benefit of exemption of Rs.38, 08,897/- is deprived of resulting in more tax liability.
2. The Honourable Commissioner of Income Tax (Appeals) is empowered to admit fresh claims of deduction, as held in various judgements passed by the Commissioners of Income Tax in various places recently on the appeal of my peer employees. It is held in all those appeals that the employee is entitled to the exemptions and have allowed the appeals and directing for revision of the assessment orders.
3. Based on the facts, circumstances and legal position of the case, the Appellant files this appeal for a direction to admit the entitled claim of exemption under section 10(10B) of the Act amounting to INR 38, 08,897/-.
4. The claim is supported by all necessary facts and evidences are available and can be produced to the satisfaction of the adjudicating authority during the time of hearing.
5. The Appellant reserves the right to initiate any other point that may arise during the proceedings under this appeal that results in a benefit to the employee and pray for entertaining such additional points.
2. The brief facts of the case are that the assessee is a retrenched employee of Bharat Sanchar Nigam Limited (BSNL), a Public Sector Undertaking under the Government of India. BSNL, with the approval of the Central Government, under a scheme, as part of its financial restructuring and employee cost-reduction Under the said scheme, employees opting for the scheme entitled to receive ex-gratia compensation on account of retrenchment. The appellant opted for the scheme and, pursuant thereto, received a total ex-gratia compensation of Rs. 69, 56,826/-. Out of the total ex-gratia amount, a sum of Rs. 31, 47,929/- was received during the year. While filing the return of income for A.Y. 2020-21, the appellant, due to lack of clarity regarding the applicable provisions of the Income Tax Act 1961, claimed exemption under sections 10(10AA) amounting to Rs. 9,12,580/- and 10(10C) of the Act to the extent of Rs. 5, 00, 000/- and paid tax on the balance amount.
3. In view of the above facts, the assessee filed his return of income on 30-10-2020.The return was processed by the Central Processing Centre (CPC), Bengaluru u/s. 143(1) of the Act vide order dated: 31.08.2021, which allowed exemption as claimed by the assessee in the return filed. Later on, the assessee came across various decisions of Coordinate Benches starting from Harish Kumar Vs ITO (ITA No.42/Chd./2025) and even the order of the Hon’ble Jurisdictional High Court in the case of Hindustan Photo Film Workers’ Welfare Centre (CITU) Government of India, New Delhi [2017] 79 taxmann.com 298 (Mad.) vide order dated 17.03.2017.
4. Considering above, the assessee filed an appeal u/s. 250 of the Act and claimed an additional amount of Rs. 12, 35,349/- u/s. 10(10B) of the Act and Rs. 5, 00,000/- u/s. 10(10C) of the Act, but the same was rejected by the Ld. Addl./JCIT(A), Kochi vide order dated: 31.03.2026, as there is no revised return filed by the assessee to claim the same. The assessee being aggrieved preferred the present appeal before us. We have gone through the intimation issued by CPC, Bengaluru u/s. 143(1) of the Act, order of the Ld. Addl. /JCIT (A), Kochi and submissions of the assessee along with grounds taken before us. It is observed that out of ignorance the assessee himself has not rightly claimed the benefit of section 10(10B) and 10(10C) of the Act and based on this return, intimation u/s. 143(1) of the Act was also issued. But, it is pertinent to mention that the issue was no more res integra in view of the decision of the Hon’ble Jurisdictional High Court in the case of Hindustan Photo Film Workers’ Welfare Centre (CITU) Government of India, New Delhi [2017] 79 taxmann.com 298 (Mad.) vide order dated 17.03.2017.
5. Here we relied upon Circular No. 14(XL-35) of 1955, dated: 11.04.1955, i.e. “Department not to take benefit of assessee’s ignorance”
Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should—
(a) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;
(b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.
6. The assessee is entitled for relief u/s. 10(10B) and 10(10C) of the Act was not under challenge and the only issue involved in this matter is that relief not claimed by the assessee himself and later on denied by the Ld. Addl. /JCIT (A), Kochi on the ground of non-filing of revised return. Whereas, it is observed that the legal position was already in favour of the assessee by virtue of the decision of the Hon’ble Jurisdictional High Court in the case of Hindustan Photo Film Workers’ Welfare Centre (CITU) (supra).Hence, in the light of the decision and Circular No. 14(XL-35) of 1955, dated: 11.04.1955, it is opined that in this case the assessee was not at fault. Rather, the CPC, Bengaluru has to assess the return keeping in view the decision of Hon’ble Jurisdictional High Court in the case of Hindustan Photo Film Workers’ Welfare Centre (CITU) (supra) and should also apply Circular No. 14(XL-35) of 1955, dated: 11.04.1955.
7. As discussed above, the CPC, Bengaluru was at fault while ignoring the decision of the Hon’ble Jurisdictional High Court and non-application of Circular No. 14(XL-35) of 1955, dated: 11.04.1955, the same could have been made right by the Ld. Addl. /JCIT (A), Kochi, but he dismissed the appeal of the assessee on the ground of non-filing of revised return. Here, we rely on the settled position of law, which confers powers with the First Appellate Authority (FAA) i.e. the powers of the First Appellate Authority are co-terminus with that of AO, what an AO can do, the FAA can also do the same.
8. The powers of the FAA and applicability of Circular No. 14(XL-35) of 1955, dated: 11.04.1955 has been discussed by the Hon’ble Apex Court and various High Courts including Jurisdictional High Court as under:
- [2000] 109 Taxman 225 (SC) CIT Mahendra Mills/Arun Textile ‘C’/Humphreys/ Glasgow Consultants
- [2019] 103 taxmann.com 364 (Mad.) Mrs. Kannammal Income-tax Officer-Ward-1(1), Tirupur, “The disposal of the request for stay by the assessee leaves much to be desired. The Assessing Officer ought to have taken note of the conditions precedent for the grant of stay as well as theCirculars issued by the CBDT and passed a speaking order. Of course the application seeking stay filed by the assessee is itself cryptic. However, as noted by the Supreme Court in the case of CIT v. Mahindra Mills [2000] 243 ITR 56/109 Taxman 225 in the context of grant of depreciation, the Circular of the Central Board of Revenue (No. 14 (SL – 35) of 1955, dated 11-4-1955) required the officers of the Department ‘to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs. …. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should -(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other……’. Thus, notwithstanding that the assessee may not have specifically invoked the three parameters for the grant of stay, it is incumbent upon the Assessing Officer to examine the existence of a prima facie case as well as call upon the assessee to demonstrate financial stringency, if any and arrive at the balance of convenience in the matter. [Para 14]”
- [1983] 15 Taxman 539 (Ker.) Parekh Brothers CIT, “Whether an assessee is entitled to a deduction or not will depend on the relevant provision of law relating thereto and not on the view which the assessee might take of his rights, or the method and manner in which accounts are kept or an entry made in the books or the way in which the claim for deduction is pleaded or made. Nodoubt for the exercise of powers under section 263, the order should be erroneous as well as prejudicial to the interests of the revenue, but there is no such requirement for exercising power under section 264. There is no indication in the Act to show that the Commissioner can revise only an erroneous order in exercise of the powers under section 264.
The revisional jurisdiction may be a part of or a specie of appellate jurisdiction and not part of original jurisdiction, but on that basis, it would not follow that all powers so exercisable by the appellate authority, with all limitations inherent therein, would be equally applicable in construing the scope and content of the revisional power under section 264. The scope of the appellate power specified in section 251 and the scope of the revisional power vested in the Commissioner under section 264 are entirely different.
Again, Circular No. 14 (XL-35), dated 11-4-1955, issued by the Central Board of Direct Taxes, which was binding on the department, enjoined upon the ‘Officers of the department’ which would certainly include the Commissioner, to bear in mind the spirit of the circular in affording relief to the assessee, as indicated therein. At least when the matter was brought to their notice, without raising technical objections, the matter should receive attention.
In the instant case, even though a mistake was committed by the assessee and it was detected by him after the order of assessment was made, and the order of assessment was not erroneous, nonetheless, in view of the legal position stated above, it was open to the assessee to file a revision before the Commissioner under section 264 and claim appropriate relief. But it should not be forgotten that the power to be exercised under section 264 is a revisionary one. The limitations implicit in the exercise of such power are well known. The jurisdiction is discretionary. Whether in a particular case, on the basis of facts disclosed, the Commissioner will exercise his jurisdiction and interfere in the matter is a matter of discretion. It is certainly a judicial discretion vested in the Commissioner to be exercised in accordance with law. The impugned order of the Commissioner was, therefore, quashed and he was directed to entertain and dispose of the petition in accordance with law.
9. So, in view of the above facts and settled legal position, we are of the opinion that the Ld. Addl. /JCIT (A), Kochi has committed a mistake by dismissing the appeal of the assessee. Whereas, the assessee was entitled for the benefit as envisaged in the provisions of section 10(10B) and 10(10C) of the In view of this, relevant grounds raised by the assessee are allowed.
10. In the result, both the appeals of the assessee are allowed in view of above discussions and observations u/s. 10(10B) of the Act for both the years and u/s. 10(10C) for the A.Y. 2020-21. The AO is directed to allow the claim of the assessee ignoring the presence of revised return and considering the monetary limit under respective sections for both the years.
Order pronounced on the 27th day of July, 2026 in Chennai.
