Bharatkumar Jaishinh Soni Vs ITO (ITAT Mumbai)
ITAT Deletes Penalty for Leave Encashment Claim, Citing Bona Fide Interpretation
The Income Tax Appellate Tribunal (ITAT), Mumbai, addressed an appeal filed by the assessee, Bharatkumar Jaishinh Soni, a retired employee of Bank of Baroda, against a penalty imposed under Section 270A of the Income-tax Act, 1961, for Assessment Year 2020-21.
The core dispute involved a leave encashment sum of ₹ 11,91,369 received upon retirement. While the assessee’s original return claimed the statutory exemption of ₹ 3,00,000, a revised return subsequently claimed the entire amount as fully exempt under Section 10(10AA)(i). The Assessing Officer (AO) restricted the exemption to the ₹ 3,00,000 limit, adding the differential amount of ₹ 8,91,369 to the income.
The AO initiated penalty proceedings, alleging misreporting of income, and imposed a 200% penalty totaling ₹ 5,51,016. The AO and the first appellate authority (NFAC/CIT(A)) confirmed the penalty, arguing the assessee, as a public-sector undertaking (PSU) employee, knew he was ineligible for the full exemption available to government employees, and his reliance on a judicial observation was misplaced.
Before the ITAT, the assessee contended the claim was a bona fide interpretative claim and not an act of concealment or misreporting, noting that all primary facts were disclosed. The claim was based on the Delhi High Court’s observations in Kamal Kumar Kalia directing the Government to reconsider the monetary ceiling in Section 10(10AA)(ii). This reasoning was later recognized by the government when it enhanced the exemption limit to ₹ 25 lakhs through a notification in May 2023.
