Jayshree Kamlesh Mehta Vs ITO (ITAT Ahmedabad)
A Lawful Exemption Cannot Be Lost to a Late Awakening — Four-Year Delay Condoned BSNL VRS Compensation Held Fully Exempt
The Ahmedabad Bench of the ITAT has condoned a delay of nearly four years in appeals filed against intimations u/s 143(1) and held that compensation received under the BSNL Voluntary Retirement Scheme, 2019 was fully exempt u/s 10(10B). The Tribunal observed that the delay arose from the assessee’s bona fide ignorance of the correct legal position and did not involve negligence, mala fides or dilatory tactics.
The assessee, Jayshree Kamlesh Mehta, received compensation under the BSNL VRS-2019 during AYs 2020-21 and 2021-22. Under the mistaken belief that the compensation was taxable, she did not claim exemption u/s 10(10B) in her original returns.
For AY 2020-21, compensation of ₹5,90,725 was received. The return was processed by CPC, Bengaluru u/s 143(1) on 28.08.2021. Subsequently, the Chandigarh Bench of the Tribunal, in Harish Kumar v. ITO, ITA No. 42/Chd/2025, dated 30.05.2025, held that compensation received under BSNL VRS-2019 was eligible for exemption u/s 10(10B).
After becoming aware of this legal position, the assessee filed an appeal before the CIT(A), seeking condonation of delay and claiming the exemption. She explained that the omission arose from a bona fide misunderstanding and lack of proper professional guidance. There was no deliberate intention to delay the proceedings or obtain any unfair advantage.
The CIT(A), however, refused to condone the delay of approximately 1,578 days and dismissed the appeal as time-barred. According to the CIT(A), a subsequent judicial decision could not, by itself, constitute sufficient cause for filing a belated appeal. The claim was therefore rejected without adjudication on merits.
Before the Tribunal, the assessee contended that “sufficient cause” u/s 249(3) must receive a liberal and justice-oriented interpretation. Reliance was placed upon Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC), wherein the Supreme Court held that substantial justice should ordinarily prevail over technical considerations.
The assessee also relied upon several decisions concerning identically placed BSNL employees, including Jayeshkumar Tulsidas Sutaria v. ITO, Kirtida Rajeshkumar Shah v. ITO, Chhaganlal Bhimabhai v. ITO and Manojkumar Parmar v. ITO. In these cases, similar delays were condoned and compensation received under the same BSNL VRS-2019 was held exempt u/s 10(10B).
The Tribunal found that there was no change in the legal position or factual matrix and that the Revenue could not distinguish the earlier decisions either on facts or in law.
The Tribunal also referred to CBDT Circular No. 14 of 1955, which directs departmental officers not to take advantage of an assessee’s ignorance of his or her rights and to assist taxpayers in securing the reliefs and refunds legitimately due to them.
The Revenue relied upon the judgments of the Supreme Court in Esha Bhattacharjee v. Managing Committee of Raghunathpur Nafar Academy and N. Balakrishnan v. M. Krishnamurthy to oppose condonation. The Tribunal observed that the present case concerned the protection of a substantive right and did not prima facie involve any dilatory tactics. The delay was, therefore, condoned.
On merits, the Tribunal held that the compensation of ₹5,90,725 received during AY 2020-21 under BSNL VRS-2019 was exempt u/s 10(10B). The AO was directed to recompute the taxable income and grant the consequential refund, if any.
However, the assessee had apparently already obtained exemption of ₹5 lakh u/s 10(10C) in respect of the same compensation. The Tribunal clarified that a double exemption could not be granted for the same amount. Therefore, once the entire compensation was treated as exempt u/s 10(10B), the exemption earlier allowed u/s 10(10C) was directed to be withdrawn.
The assessee was directed to furnish before the AO the complete details of compensation received under BSNL VRS-2019 and a revised computation claiming exemption u/s 10(10B).
For AY 2021-22, the assessee had received further compensation of ₹12,96,575 under the same scheme. Both parties agreed that the findings recorded for AY 2020-21 would apply equally to the subsequent year. The Tribunal accordingly held that ₹12,96,575 was also exempt u/s 10(10B) and directed the AO to grant the resulting refund.
Both appeals of the assessee were allowed.
Author’s Comments
The decision carries an important message: tax legitimately not payable does not become payable merely because the assessee initially misunderstood the law. An intimation u/s 143(1) is based primarily upon the return filed. It does not constitute a conclusive adjudication that every amount voluntarily offered by the assessee is legally taxable.
The power of the CIT(A) is wide enough to entertain a legitimate legal claim even where the exemption was not claimed in the original or revised return. The restriction associated with making a fresh claim before the AO cannot be mechanically extended to appellate authorities, whose duty is to determine the correct taxable income.
The case also illustrates the correct approach towards condonation of substantial delay. The length of delay is relevant, but the acceptability of the explanation is more important than the number of days. A delay of 1,578 days cannot be condoned casually; equally, it should not be rejected mechanically where identically placed employees have already been held entitled to the exemption and the delay resulted from a bona fide misunderstanding.
The Tribunal’s reliance on CBDT Circular No. 14 of 1955 is particularly appropriate. The Department’s role is to collect the correct tax, not to retain tax merely because a retired employee failed to select the correct exemption provision while filing the return.
At the same time, the ruling rightly prevents duplication. The same compensation cannot enjoy exemption simultaneously u/s 10(10B) and u/s 10(10C). Full exemption under the correct provision is permissible; double exemption is not.
The broader principle is simple: procedural limitation serves certainty, but it should not become a licence to tax an amount which, according to settled judicial decisions, is not taxable at all.
Cases Discussed
- Harish Kumar v. ITO — ITA No. 42/CHD/2025, dated 30.05.2025 — ITAT Chandigarh.
- Jayeshkumar Tulsidas Sutaria v. ITO — ITA Nos. 2387 & 2388/Ahd/2025.
- Kirtida Rajeshkumar Shah v. ITO — ITA No. 151/Ahd/2026.
- Chhaganlal Bhimabhai v. ITO — ITA Nos. 2547 & 2548/Ahd/2025, order dated 17.03.2026.
- Suman Nandlal Raval v. ITO — ITA Nos. 2389 & 2390/Ahd/2025, order dated 18.02.2026.
- Meghmala Sudhir Pathak & Others v. ITO — ITA Nos. 290 to 308/PUN/2026 and batch, order dated 24.03.2026.
- Manojkumar Parmar v. ITO — ITA Nos. 480-481/Ahd/2026, order dated 23.04.2026.
- Collector, Land Acquisition, Anantnag and Ors. v. Mst. Katiji and Ors. — [1987] 167 ITR 471 (SC).
- Esha Bhattacharjee v. Managing Committee of Raghunathpur Nafar Academy and Ors. — Civil Appeal Nos. 8183 & 8184 of 2013, order dated 13.09.2013.
- N. Balakrishnan v. M. Krishnamurthy — order dated 03.09.1998.
- Majji Sannemma v. Reddy Sridevi & Others — Civil Appeal No. 7696 of 2021.
- Pundlik Jalam Patil v. Executive Engineer, Jalgaon Medium Project — (2008) 17 SCC 448.
- Basawaraj v. Special Land Acquisition Officer — (2013) 14 SCC 81.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AHMEDABAD
The captioned two appeals have been filed by the Assessee against the different orders passed by the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “Ld. CIT(A)”), ADDL/JCIT(A)-2, Hyderabad relates to A.Ys. 2020-21 & 2021-22. Since, the facts and issues involved in two appeals are identical, hence, the captioned appeals were heard together and are being disposed of by this common order.
ITA No. 1481/Ahd/2026
2. We would first take up ITA No. 1481/Ahd/2026 pertaining to A.Y. 2020-21 preferred by the assessee against the order, dated 31.03.2026, passed by the Ld. 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 assessee has raised the following grounds of appeal:
“1. The appellant respectfully submits that the order passed by the learned Commissioner of Income Tax (Appeals) u/s 250 of the Income-tax Act, 1961 dated 09.04.2026 is bad in law, contrary to the facts of the case and liable to be set aside. The learned CIT(A) has grossly erred in dismissing the appeal of the appellant primarily on the ground of delay of approximately 1578 days in filing the appeal, without properly appreciating that the delay had occurred due to bona fide reasons, namely lack of knowledge of the correct legal position and absence of proper professional guidance at the relevant time. The appellant had filed the return of income under a mistaken belief that the ex-gratia compensation received from Bharat Sanchar Nigam Limited (BSNL) was taxable, and only upon subsequent awareness of the correct legal position, supported by judicial precedents, preferred the appeal. The explanation offered clearly constituted “sufficient cause” within the meaning of section 249(3) of the Act and warranted liberal consideration in the interest of substantial justice; however, the learned CIT(A) failed to adopt such settled judicial approach.
“It is respectfully submitted that the expression “sufficient cause” used in section 249(3) of the Income-tax Act, 1961 is not defined under the Act and is therefore to be interpreted in a liberal and justice-oriented manner. The provision confers discretionary power upon the learned CIT(A) to admit an appeal if he is satisfied that the appellant was prevented by reasonable and bona fide circumstances from filing the appeal within the prescribed time. It is well settled that “sufficient cause” should receive a liberal construction so as to advance substantial justice rather than defeat it on technical grounds”.
2. The learned CIT(A) failed to apply the well-settled principles laid down by the Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji and N. Balakrishnan v. M. Krishnamurthy, wherein it has been consistently held that substantial justice should prevail over technical considerations, that a liberal approach must be adopted while considering condonation of delay, and that the length of delay is not decisive so long as the explanation offered is bona fide and reasonable.
3. It is respectfully submitted that the reliance placed by the learned CIT(A) on the observations of the Hon’ble Supreme Court in the cases of Esha Bhattacharjee and N Balakrishnan to deny condonation of delay is misplaced and contrary to the ratio laid down in the said judgments themselves. While it is correct that the law of limitation is founded on public policy and is intended to prevent dilatory tactics, the Hon’ble Supreme Court has categorically held that such provisions are not meant to destroy substantive rights and that length of delay is not decisive but the acceptability of the explanation is the determining factor. The learned CIT(A) has selectively relied upon general observations regarding limitation while ignoring the settled principle that where the delay is bona fide and not attributable to negligence or mala fide conduct, the same deserves to be condoned in the interest of substantial justice.
In the present case, the delay has arisen due to bona fide lack of awareness of the correct legal position and subsequent judicial developments in respect of BSNL VRS matters, and there is no element of deliberate delay, negligence or abuse of process. Therefore, the case of the appellant squarely falls within the category of cases where the Hon’ble Supreme Court itself has advocated a liberal and justice-oriented approach, and accordingly, the rejection of condonation by the learned CIT(A) by relying on the said judgments is erroneous and unsustainable in law.
4. The learned CIT(A) has erred in dismissing the appeal at the threshold without properly appreciating that the appellant’s case is on identical facts to the decision of the Hon’ble ITAT, Chandigarh Bench in Harish Kumar v. ITO (ITA No. 42/CHD/2025), wherein compensation received under the very same BSNL VRS-2019 scheme was held to be fully exempt under section 10(10B). The learned CIT(A) summarily brushed aside the reliance placed on the said decision by observing that it was distinguishable and that the present issue pertained to maintainability and limitation. However, once the appellant had demonstrated that the delay was bona fide and that the claim was legally sustainable, the learned CIT(A) ought to have examined the matter on merits rather than rejecting it on technical grounds. The existence of a directly applicable and reasoned Tribunal decision on the same scheme warranted judicial consideration. The failure to do so has resulted in denial of adjudication of a legitimate claim, contrary to the settled principle that substantive justice should not be defeated by procedural technicalities.
5. It is respectfully submitted that the reasoning adopted by the learned CIT(A) is legally unsustainable. Merely because the appellant did not claim exemption under section 10(10B) in the original or revised return does not preclude appellate authorities from granting lawful relief. The processing under section 143(1) is a summary procedure based solely on the returned income and does not determine the correct tax liability on merits. The absence of an “error” in the intimation from the CPC’s perspective cannot override the statutory entitlement of the appellant to exemption under section 10(10B), if otherwise eligible in law. It is a settled principle that tax authorities are duty-bound to assess the correct income in accordance with law. If, due to a bona fide mistake or misunderstanding of the legal position, an assessee fails to claim a legitimate exemption in the return, such omission cannot deprive him of substantive relief at the appellate stage. The powers of the appellate authority are wide and co-terminus with those of the Assessing Officer, and the appellate proceedings are a continuation of the assessment proceedings. Therefore, once all primary facts relating to receipt of compensation were fully disclosed in the return, the legal claim for exemption can and ought to be examined in appeal. The denial of relief merely on the ground that the CPC processed the return as filed defeats the object of appellate jurisdiction and results in taxation contrary to the provisions of the Act.
6. It is respectfully submitted that the reliance placed by the learned CIT(A) on the judgment of the Hon’ble Supreme Court in the case of Majji Sannemma as well as the observations in Pundlik Jalam Patil and Basawaraj is misplaced and contrary to the factual position of the present case. The said judgments do not lay down an absolute bar against condonation of delay but merely emphasize that delay should not be condoned in cases involving negligence inaction or lack of bona fides. In fact, the Hon’ble Supreme Court has consistently held that the expression sufficient cause is to be applied based on the facts of each case and that discretion must be exercised judiciously.
In the present case, there is neither negligence nor inaction nor lack of bona fides on the part of the appellant. The delay has occurred due to bona fide lack of awareness of the correct legal position and subsequent judicial developments in BSNL VRS matters and the appellant has acted promptly upon gaining knowledge. Therefore, the present case does not fall within the category of cases where condonation is to be refused as per the aforesaid judgments but rather falls within the category where a liberal and justice-oriented approach is warranted. The learned CIT(A) has thus misapplied the said decisions by ignoring the crucial distinction between deliberate delay and bona fide delay and has erred in rejecting the condonation request.
7. The learned CIT(A) has failed to appreciate that in an identical matter concerning compensation received under the same BSNL VRS-2019 scheme, the Hon’ble ITAT, Ahmedabad Bench in Suman Nandlal Raval v. ITO (ITA Nos. 2389 & 2390/Ahd/2025, order dated 18.02.2026) has condoned similar delay and allowed full exemption under section 10(10B), holding that bona fide ignorance of the legal position constitutes sufficient cause and that the assessee is entitled to lawful relief notwithstanding non-claim in the return. Further, in the case of Chhaganlal Bhimabhai v. ITO (ITA Nos. 2547 & 2548/Ahd/2025, order dated 17.03.2026), the Hon’ble ITAT, Ahmedabad Bench, on identical facts relating to BSNL VRS-2019, condoned delay, admitted the claim raised for the first time before appellate authorities, and held that such compensation is exempt under section 10(10B), directing grant of refund of taxes deducted.
Similarly, the Hon’ble ITAT, Pune Bench in a consolidated order in Meghmala Sudhir Pathak & Others v. ITO (ITA Nos. 290 to 308/PUN/2026 and batch, order dated 24.03.2026) has categorically held that compensation received under BSNL VRS-2019 is in the nature of retrenchment compensation, being a capital receipt fully exempt under section 10(10B), and further held that such claim can be entertained even if not made in the original return, and delay in filing appeal deserves to be condoned in such bona fide circumstances.
The appellant further relies upon the decision of the Hon’ble Income Tax Appellate Tribunal, Ahmedabad Bench in the case of Manojkumar Parmar v. ITO (ITA Nos. 480-481/Ahd/2026, order dated 23.04.2026), wherein on identical facts relating to compensation received under BSNL Voluntary Retirement Scheme, 2019, the Hon’ble Tribunal held that delay in filing the appeal deserves to be condoned when the same is attributable to bona fide ignorance of the correct legal position and subsequent judicial developments. The Hon’ble Tribunal further held that a legitimate claim of exemption under section 10(10B) can be entertained at the appellate stage even if not made in the original return of income, and that denial of such claim on technical grounds is unsustainable in law. The Tribunal, after condoning the delay, proceeded to adjudicate the issue on merits and allowed the exemption, holding that the compensation received under BSNL VRS is eligible for relief in accordance with settled judicial precedents.
It is respectfully submitted that the finding of the learned CIT(A) that a subsequent decision of the Hon’ble ITAT cannot constitute sufficient cause for condonation of delay is legally erroneous and contrary to settled principles governing section 249 (3) of the Act. The learned CIT(A) has failed to appreciate that the delay in the present case is not merely on account of existence of a subsequent judicial decision but arises due to bona fide lack of awareness of the correct legal position which came to light only upon such judicial pronouncements. The subsequent ITAT decisions in identical BSNL VRS matters have only clarified the correct legal position and triggered the appellant to pursue the remedy. Thus, the cause of delay is not the decision per se but the bona fide ignorance of law coupled with subsequent crystallization of legal position. It is well settled that ignorance of law when bona fide and supported by subsequent authoritative pronouncements can constitute sufficient cause particularly where the claim is otherwise legally sustainable and all material facts were already on record. Further the Hon’ble ITAT in several identical cases has condoned similar delays on the same reasoning and granted relief on merits. Therefore, the learned CIT(A) has erred in treating the subsequent judicial decision in isolation without appreciating the surrounding circumstances and has wrongly concluded that sufficient cause was not made out. The rejection of condonation on this ground is thus arbitrary and unsustainable in law.
8. The impugned order is further vitiated by violation of principles of natural justice, as the learned CIT(A) has not properly appreciated the submissions made by the appellant and has disposed of the appeal without meaningful consideration of the issues involved. The order is thus arbitrary, unjust and liable to be quashed.
In view of the above facts and circumstances, the appellant humbly prays that the delay in filing the appeal be condoned, the order passed by the learned CIT(A) be set aside, and the exemption under section 10(10B) of the Act in respect of ex-gratia compensation of ₹5,90,725/- be allowed in full, and such other relief as deemed fit in the interest of justice be granted.”
4. We have heard both the sides and have perused the material available on record.
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’]. Under the mistaken belief that the compensation received under the BSNL VRS-2019 was taxable, at the time of filing the return of income the Assessee did not claim exemption under Section 10(10B) of the Act, in respect of the compensation of Rs.5,90,725/- in the income tax return for the Assessment Year 2020-2021. The return was processed by CPC, Bengaluru under Section 143(1) of the Act on 28.08.2021. 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) seeking condonation of delay in the interest of natural justice and 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 delay was unintentional, and caused by bonafide reasons beyond applicant’s control, and due to ambiguity/loack of clarity. The appellant stated that the compensation was not taxable under Section 10(10B) of the Income Tax Act and therefore, the Assessee was eligible for the benefits of tax exemption on such compensation. However, the Learned CIT(A) dismissed the appeal by declining to condone the delay in filing the appeal after a period of four years. 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 in ITA Nos. 2387 & 2388/AHD/2025 (Assessment Years: 2020-21 & 2021-22) wherein in the case of identically placed employee of BSNL, the Co-Ordinate Bench of 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 BSNL VRS -2019 was exempt under Section 10(10B) of the Act. The aforesaid decision of the Tribunal was followed, inter alia, in the case of Kirtida Rajeshkumar Shah Vs. ITO, in ITA Nos. 151/AHD/2026 for A.Y. 2020-21, Chhaganlal Bhimabhai Vs. ITO in ITA Nos. 2547 & 2548/AHD/2025 for Assessment Years: 2020-21 & 2021-22 and in the case of Manojkumar Parmar vs. ITO in ITA Nos. 480&481/Ahd/2026 for A.Ys. 2020-21 & 2021-22 vide order dated 23.04.2026.
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 from 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 Revenue referred to the judgment of the Hon’ble Supreme Court in the case of Esha Bhattarcharjee vs. Managing Committee of Raghunathpur Nafar Academy and oths. in Civil Appeal No. 8183&8184 of 2013 order dated 13.09.2013 and further the judgment of the Hon’ble Supreme Court in the case of N. Balakrishnan vs. M. Krishnamurthy vide order dated 03.09.1998 relied by the Ld. CIT(A) in his order to defend the order of Ld. CIT(A). However, in the instant appeal, the core issue relates to protection of substantive rights and as per the facts of the case and based on submission of the appellant, it does not prima facie involve any dilatory tactics.
8. In view of the above, accepting the claim of the Assessee we hold that compensation of Rs. 5,90,725/-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 compute the taxable income of the Assessee accordingly and grant refund due, if any, as per law. Since we have accepted assessee’s claim for exemption under Section 10(10B) of the Act for the compensation of Rs.5,90,725/- received by Assessee, the exemption of Rs.5,00,000/- granted to the Assessee under Section 10(10C) of the Act stands withdrawn as double exemption cannot be granted for the same compensation of Rs.5,00,000/- under Section 10(10B) and 10(10C) of the Act. 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. Thus, in terms of the aforesaid, Ground raised by the Assessee is allowed.
9. In result, in view of the above terms, the present appeal preferred by the Assessee is allowed.
ITA No.1482/Ahd/2026
10. We would next take up ITA No.1482/Ahd/2026 pertaining to Assessment Year 2021-2022 preferred by the Assessee against the Order, dated 31/03/2026, passed by the CIT(A) dismissing the appeal against the Intimation Order, dated 29/10/2021, passed under Section 143(1) of the Act being barred by limitation.
11. During the course of hearing both the sides had agreed that our finding/adjudication in ITA No.1481/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 the appeal for the Assessment Year 2020-2021 hereinabove, the compensation of Rs.12,96,575/- 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 raised by the Assessee is allowed.
12. In result, in view of the above terms, the present appeal preferred by the Assessee is allowed.
13. In the combined result, both the appeal preferred by the Assessee are allowed.
This Order pronounced in Open Court on 10/09/2026
