ITAT Rajkot Condones Delays Exceeding Four Years in BSNL VRS Cases

Khimjibhai Nanjibhai Babaria Vs ITO (ITAT Rajkot)

BSNL VRS Exemption Requires Examination of the Scheme: ITAT Condones Delays of Over Four Years and Orders Fresh Adjudication

The Controversy

In a consolidated order involving seven appeals of former BSNL employees, the Rajkot ITAT considered claims for exemption of compensation received under the BSNL Voluntary Retirement Scheme, 2019.

The controversy involved both substantive eligibility for exemption under section 10(10B) and substantial delays in approaching the first appellate authority. In five appeals, the delays ranged from 1,540 to 1,589 days. Two other appeals had been dismissed on merits.

The Tribunal condoned the delays and restored all seven appeals to the CIT(A), directing fresh consideration of the BSNL scheme, supporting evidence and relevant judicial decisions.

Compensation under BSNL’s Revival Package

The employees had separated from BSNL under VRS-2019, introduced as part of its revival and restructuring plan approved by the Union Cabinet on 23 October 2019. The scheme was implemented through the Department of Telecommunications’ Office Memorandum dated 29 October 2019 and funded through Central Government budgetary support.

The case presented before the Tribunal emphasised BSNL’s severe financial difficulties and persistent operational losses. The scheme sought manpower rationalisation, reduction of costs and long-term sustainability through a substantial reduction in workforce.

Although described as voluntary retirement, the employees contended that the separation represented a Government-directed downsizing exercise having the character of retrenchment.

In the lead case concerning Lakhman Shir, the ex-gratia compensation amounted to ₹44,22,776, received in instalments across the relevant financial years.

Exemption Omitted While Filing Returns

The lead assessee explained that, acting on incorrect professional advice, he had treated the ex-gratia compensation as taxable while filing his return.

On subsequently examining the scheme, Government notifications and Cabinet approval, he considered the compensation eligible for full exemption under section 10(10B). The employees also referred to favourable decisions concerning similar BSNL VRS claims.

They maintained that the earlier omission was bona fide and inadvertent. Their appeals arose from processing orders under section 143(1).

However, the CIT(A) declined to condone the delay in several cases. In the two appeals concerning Lakhman Shir, the claims were dismissed on merits. The employees consequently approached the Tribunal.

Explanation for the Prolonged Delays

The delays before the CIT(A) were 1,580, 1,568, 1,540, 1,559 and 1,589 days in the five affected appeals.

The employees explained that they had been obtaining legal advice on the disputed exemption and pursuing an alternative remedy under a bona fide belief. Their counsel submitted that the delays were neither deliberate nor motivated by any mala fide intention.

The Revenue opposed condonation and sought dismissal on limitation grounds.

After considering the explanations, affidavits and condonation applications, the Tribunal found the reasons convincing and sufficient to constitute reasonable and sufficient cause. It accordingly condoned the delays in filing the respective appeals before the CIT(A).

Thus, the length of the delay did not prevent consideration of the claims where the Tribunal accepted the explanation for it.

Failure to Examine the Governing Scheme

On the substantive issue, the Tribunal observed that the compensation arose under the BSNL retirement package approved by the Central Government.

The order contains favourable observations concerning section 10(10B) and its second proviso, describing the package as a special protection arrangement for BSNL employees.

Nevertheless, the Tribunal’s operative decision was to restore the matters for examination. It found that the CIT(A) had not properly considered the BSNL scheme approved by the Central Government before rejecting the claims.

The employees also complained that favourable authorities cited by them had not been considered. The Tribunal regarded adjudication without examining the governing scheme as a violation of the principles of natural justice and held that another opportunity should be granted.

All Seven Appeals Restored

The Tribunal set aside the CIT(A)’s orders and remanded the issues for fresh consideration.

The employees were given liberty to substantiate their claims by producing sufficient evidence and material to the satisfaction of the CIT(A). The Revenue had no objection to remitting the substantive issues for examination of the scheme, although it opposed condonation of delay.

All seven appeals were allowed for statistical purposes. The operative relief therefore comprised condonation and fresh adjudication, rather than a final direction granting exemption of the entire compensation.

Author’s Comments

The decision underlines the need to examine the actual terms and character of a severance scheme before deciding an exemption claim. Its title alone cannot replace scrutiny of the Government documents, compensation provisions and statutory requirements relied upon by the employees.

Equally, the favourable observations in the order should be read alongside its remand directions. Presenting this decision as an unconditional final exemption for every BSNL VRS recipient would overstate the relief granted.

The condonation ruling is also fact-specific. Employees relying on it should preserve evidence of legal consultations, alternative proceedings and the circumstances explaining their delay.

On remand, a clear presentation of the scheme, payment records and the precise exemption claimed will be essential. The reference to section 10(10AA) in the narration of counsel’s submissions should not obscure the principal controversy concerning section 10(10B).

Cases Discussed

• Lakshminarayana Peravali Vs ITO (ITAT Nagpur) — A related decision addressing whether BSNL VRS-2019 compensation constitutes retrenchment compensation exempt under section 10(10B).
• Raju Goral Vs ITO (ITAT Pune) — A related decision distinguishing section 10(10B) retrenchment compensation from section 10(10C) voluntary retirement exemption.
• Prathibha Jgadish Unawane Vs ITO (ITAT Pune) — A related decision considering delayed claims for exemption of BSNL VRS compensation.
• Chhaganlal Bhimabhai Dangodara Vs ITO (ITAT Ahmedabad) — A related decision concerning compensation under the Central Government-approved BSNL restructuring scheme and section 10(10B).
• Ramesh Bhimshankar Budwatrao Vs ITO (ITAT Pune) — A related decision involving delayed appeals and claims under section 10(10B).

FULL TEXT OF THE ORIGINAL ORDER OF ITAT RAJKOT

Captioned Seven appeals filed by the different assessees, pertaining to assessment years (AY) 2020-21 & 2021-22, are directed against the separate orders passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), by the National Faceless Appeal Centre (NFAC), Delhi/ Commissioner of Income Tax (Appeals) [in short ‘Ld.CIT(A)’] which in turn arise out of separate orders passed by the Assessing Officer u/s 143(1) of the Act.

2. Since, the issues involved in all these appeals of different assessees are common and identical, therefore, these appeals have been heard together and are being disposed of by this consolidated order. The facts narrated in ITA No.497/Rjt/2026, for assessment year 2021–22, in the case of Lakhman Shir have been considered for deciding these appeals en masse.

3. The facts of the case as per lead case in ITA No.497/Rjt/2026, have been considered, which are as follows: The assessee was employed with Bharat Sanchar Nigam Limited (BSNL), a Public Sector Undertaking under the DoT. During the assessment year 2020-21 and 2021-22, the assessee separated from service under the BSNL Voluntary Retirement Scheme 2019 (VRS-2019), which formed an integral part of the Revival and Restructuring Plan for BSNL approved by the Union Cabinet on 23.10.2019. The Scheme was implemented through the DoT Office Memorandum dated 29.10.2019 and was fully funded through Central Government budgetary support. The Scheme was introduced in the context of severe financial stress and persistent operational losses in BSNL. Its stated objectives were manpower rationalization, cost reduction, and long-term sustainability, involving a significant reduction in workforce. Although termed voluntary, the separation was substantively a Government-directed downsizing exercise, possessing the essential character of retrenchment, not ordinary voluntary retirement. The assessee entitled to receive ex-gratia compensation of Rs.44,22,776 /- computed strictly as per the Scheme received in instalments as under:

At the time of filing the return, due to incorrect professional advice, the assessee incorrectly treated as taxable ex-gratia amount of Rs. 44,22,776 /- instead of the correct provision under section 10(10B) of the Act. Subsequently, upon reviewing the Scheme, DoT notifications, the Cabinet approval, and noting that similar BSNL-VRS cases had already been allowed by the Hon’ble ITAT Chandigarh and various CIT(A) benches including Mumbai, Ranchi, and Udaipur, the assessee understood that the ex-gratia amount is fully exempt under Section 10(10B) of the Act. The earlier omission was bona fide and inadvertent. The assessee, therefore respectfully submits that the entire ex-gratia amount is eligible for full exemption under Section 10(10B) and requests that appropriate relief be granted accordingly.

4. Being aggrieved by the said order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), but remained unsuccessful as the Ld. CIT(A) did not condone the delay in filing these appeals. In some case, Ld. CIT(A) adjudicated the issue on merit and dismissed the appeal of the assessee on merit. Therefore, these assessees are left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.

5. Learned Counsel for the assessee, argued that there were delay in filing these appeals before the Ld. CIT(A). The appeal wise delay is reproduced below:

(i) In ITA No.472/Rjt/2026, 1580 days delay before Ld. CIT(A).

(ii) In ITA No.613/Rjt/2026, 1568 days delay before Ld. CIT(A)

(iii) In ITA No.481/Rjt/2026, 1540 days delay before Ld. CIT(A)

(iv) In ITA No.559/Rjt/2026, 1559 days delay before Ld. CIT(A)

(v) In ITA No.558/Rjt/2026, 1589 days delay before Ld. CIT(A)

In case of ITA No. 497 & 498/RJT/2026, the Ld. CIT(A) had dismissed the appeals on merit. However, most of the above appeals were not adjudicated by the learned CIT(A) on merit, therefore, Learned Counsel for the assessee prayed the Bench, that the delay may be condoned in filing these appeals before the learned CIT(A). Learned Counsel further submitted that these assessees were taking the legal opinion on the disputed issue/ and were exercising alternative remedy, therefore, these respective delay in filing the appeal have resulted, which may be condoned in the interest of justice, and matter, may be restored back to the file of the Ld. CIT(A) with the direction to the learned CIT(A) to adjudicate, the issue as per the voluntary retirement scheme framed by the central government for BSNL employees.

6. On the other hand, the Ld. DR for the Revenue relied on the findings of Ld. CIT(A).

7. I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. The facts of the issue are that the amount was received by the respective employees of BSNL on account of Retrenchment Compensation Received From Central Government Under the Scheme Approved By Central Government which is fully exempted from Income Tax Under Section 10(10B) of Income Tax Act, 1961. The compensation amount receipts in the hands of assessee as an employee of the BSNL, pursuant to the severance package, titled as BSNL Voluntary Retirement Scheme-2019 announced by the Department of Telecommunications(DoT), Central Government of India under total budgetary allocation approved by the Government is a special privilege/protection package granted to the employees of the BSNL and therefore, the Second Proviso of the Section 10(10B) of the Income Tax Act, 1961 are attracted and accordingly, the same shall not fall within the definition of income, while computing the total income of an assessee and income tax not to be deducted from the severance package paid as an employee of DOT and BSNL Combined Service.

8. Learned Counsel for the assessee submitted that in these cases the compensation received by an assessee is towards loss of employment for the reason of employer so it would amount to Capital Receipt and hence, no income tax is payable. The amount received is fully exempted u/s.10(10AA) of the Income Tax Act, 1961. The Ld. CIT(A) did not examine the scheme framed by the Central Government for BSNL employees, therefore matter may be restored back to the file of the Ld. CIT(A), with the direction to examine the scheme of the central government, and then adjudicate the issue in accordance with law.

9. On the other hand, I note that Ld. DR for the revenue did not raise any objection if these matters are remitted back to the file of the Ld. CIT(A) for examination of the scheme of BSNL employees framed by the Central Government and then adjudicate the issue in accordance with law.

10. I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel further submitted before us that the respective assessees had been obtaining legal opinion in respect of the disputed issue and, under a bona fide belief, had also been pursuing an alternative legal remedy in relation thereto. It was, therefore, contended that the delay in filing the respective appeals had occurred for bona fide and reasonable reasons and was neither deliberate nor attributable to any mala fide intention on the part of the assessees. Considering the explanation furnished by the assessees, the nature of the disputed issue and the fact that the assessees had been pursuing an alternative remedy under a bona fide belief, it was pleaded that the delay may kindly be condoned in the interest of substantial justice and the matter may thereafter be restored to the file of the learned CIT(A) with a direction to adjudicate the issue on merits in accordance with law, particularly in the light of the Voluntary Retirement Scheme framed by the Central Government for the employees of BSNL. I note that the reasons given by Ld. Counsel for the assessee for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing these appeals. However, Ld. DR for the revenue, opposed the prayer of the assessee for condonation of delay and stated that these appeals should be dismissed on account of delay. Having heard both the parties and after having gone through the affidavit as well the delay condonation, application, I am of the considered opinion that in the interest of justice, the delay deserves to be condoned. I, accordingly, condone the delay in above, respective appeals, in filing the appeal before the Ld. CIT(A).

11. On merit, I note that these appeals relate to Retrenchment Compensation/retirement scheme of BSNL employees and Ld. CIT(A) did not consider the BSNL Scheme of retirement and without considering the scheme of BSNL employees’ the Ld. CIT(A), dismissed these appeals of different assessees. The BSNL Scheme was approved by the Central Government and therefore Ld. CIT(A) should have considered the scheme approved by the Central Government for BSNL employees, however, the Ld. CIT(A) did not consider, at all, the BSNL Scheme for employees, as approved by the Central Government, therefore the decision rendered by the Ld. CIT(A) is factually incorrect and hence another opportunity to plead these cases before the Ld. CIT(A) should be granted to these all assessees. The Ld. Counsel for the assessee also submitted that the Ld. CIT(A) has also not considered the case law cited by the assessees which are in favour of employees/assessees. I note that Ld. CIT(A) did not go through the scheme of the BSNL-employees framed by the Central Government and adjudicated the issue without going through the scheme of BSNL, hence, it is violation of principle of natural justice. Therefore, these assessees pray before the Bench that the matter may be restored back to the file of the Ld. CIT(A) to consider the scheme of the BSNL employees and to consider the case law in favour of these employees. Therefore, considering these facts, I am of the view that one more opportunity should be granted to these assessees to plead their cases before the Ld. CIT(A).

12. Hence, I accept the prayer of these assessees and set aside the order of Ld. CIT(A) and remand the various issues raised by the assessees in the grounds of appeal before Ld. CIT(A) for fresh consideration by the Ld. CIT(A), with a liberty to these assessees to prove their cases by producing sufficient evidences/material to the satisfaction of the Ld. CIT(A). For statistical purposes these all different assessees’ appeals are allowed.

13. In the result, all these appeals (ITA No.472/Rjt/2026, ITA No.481/Rjt/2026, ITA No.497/Rjt/2026, ITA No.498/Rjt/2026, ITA No.613/Rjt/2026, ITA No.558/Rjt/2026, ITA No.559/Rjt/2026), filed by the different assessees, are allowed for statistical purposes.

Order is pronounced in the open court on 08/10/2026.