Renu Moongia Vs ITO (ITAT Jaipur)
Retired in 2020, Relief Under the ₹25 Lakh Limit: ITAT Allows Full Leave Encashment Exemption
Full Exemption Despite Retirement Before the Enhancement
The Jaipur Tribunal allowed exemption for the entire ₹9,04,669 received as leave encashment by a retired LIC employee, relying on coordinate Bench decisions applying the enhanced ₹25 lakh ceiling under CBDT Notification No. 31/2023.
The assessee had retired on 30 June 2020, whereas the notification relied upon was issued on 24 May 2023. Nevertheless, following the favourable Tribunal precedents discussed in its order, the Bench directed the Assessing Officer to allow her claim. It also condoned an unusually long 1,277-day delay in filing the appeal.
CPC Restricted the Claim to ₹3 Lakh
After serving the Life Insurance Corporation of India for more than 30 years, the assessee superannuated and received leave encashment of ₹9,04,669, along with other retirement benefits.
She claimed exemption for the entire amount in her return. However, while processing the return under Section 143(1), CPC allowed only ₹3 lakh under Section 10(10AA)(ii) and disallowed the balance of ₹6,04,669.
The first appellate authority upheld this restriction and dismissed her appeal. Before the Tribunal, the assessee challenged that decision with reference to the subsequent notification enhancing the exemption ceiling. The Tribunal permitted her revised ground to be taken on record.
Consultant’s Failure Explained the 1,277-Day Delay
Before examining the exemption, the Tribunal considered the application for condonation of delay.
The assessee explained that she had entrusted the appellate proceedings to a tax consultant and relied on his advice. According to her application, the consultant neither communicated the adverse appellate order nor pursued a further appeal before the Tribunal. She became aware of the position upon receiving a substantial tax demand.
The Revenue opposed condonation, contending that no sufficient cause justified such an extensive delay.
The Tribunal accepted the explanation in the circumstances of this retired assessee, unfamiliar with income-tax procedures. It observed that the consultant had a professional responsibility to communicate the dismissal and take appropriate further action.
Applying Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC), the Bench adopted a liberal approach to advance substantial justice. It held that the consultant’s lapse should not cause the assessee to suffer and condoned the entire delay.
Earlier Decisions Supported the Enhanced Exemption
On merits, the Tribunal framed the question as whether the assessee was entitled to exemption for the entire leave encashment received after her long service with LIC.
It relied on Vijay Kumar Jain v. ITO, ITA No. 175/Agr/2022, dated 18 June 2025, which had decided an identical issue favourably. The extracted reasoning referred to the enhanced ceiling of ₹25 lakh and earlier Jaipur Tribunal decisions, including Govind Chhatwani v. CIT(A), ITA No. 385/JP/2023, dated 31 October 2023, concerning Assessment Year 2020-21.
Those decisions treated the revised ceiling as supporting exemption beyond the earlier ₹3 lakh restriction. The present Bench followed that approach and found the assessee’s claim covered by the coordinate Bench rulings.
Delhi High Court’s Observations Must Be Read Precisely
The order also discussed Kamal Kumar Kalia & Others v. Union of India, W.P.(C) No. 11846/2019, dated 8 November 2019.
The passage reproduced in the Tribunal’s order records the Delhi High Court’s prima facie concern that the exemption ceiling had remained unchanged despite salary revisions, economic growth and inflation. The Court issued notice on that limited aspect.
This distinction matters. The reproduced passage contains preliminary observations and issuance of notice; it does not itself record a final direction granting the enhanced exemption for earlier retirements. The operative relief in the present case rests on the Tribunal’s adoption of the favourable coordinate Bench decisions and their treatment of the subsequent notification.
₹6.04 Lakh Disallowance Removed
The Tribunal concluded that the entire ₹9,04,669 leave encashment received by the assessee was exempt under Section 10(10AA).
It held that the CIT(A) had erred in sustaining the restriction imposed by CPC and directed the AO to allow the claim. Consequently, the disputed ₹6,04,669 disallowance stood removed, and the appeal was allowed on merits.
Author’s Comments
The decision provides favourable appellate support for employees who retired before the enhancement and whose leave encashment exemption was restricted to ₹3 lakh. Its particular significance is the grant of relief for Assessment Year 2021-22, despite reliance on a notification issued in 2023.
However, the order does not undertake a detailed examination of the notification’s commencement language or independently resolve the broader question of retrospective operation. It follows the existing favourable Tribunal decisions. The result should therefore be described as a specific judicial ruling supporting earlier-year relief, rather than a general declaration that every earlier retirement automatically attracts the enhanced ceiling.
The delay ruling is equally useful: a substantial lapse may be condoned where the explanation establishes genuine reliance on professional assistance and the Tribunal finds sufficient cause on the facts.
Cases Discussed
- Collector, Land Acquisition, Anantnag v. Mst. Katiji & Ors., [1987] 167 ITR 471 (SC) — Relied upon for liberal interpretation of sufficient cause while condoning the 1,277-day delay.
- Vijay Kumar Jain Vs ITO, ITA No. 175/Agr/2022, ITAT Agra, order dated 18.06.2025 — Followed on the applicability of the enhanced ₹25 lakh ceiling to the leave-encashment exemption claim.
- Govind Chhatwani Vs CIT(Appeals), ITA No. 385/JP/2023, ITAT Jaipur, order dated 31.10.2023, AY 2020-21 — Referred to in the extracted coordinate-Bench reasoning for allowing leave-encashment exemption beyond ₹3 lakh in view of Notification No. 31/2023.
- Kamal Kumar Kalia & Ors. Vs Union of India & Ors., W.P.(C) 11846/2019, Delhi High Court, order dated 08.11.2019 — The extracted passage records prima facie observations regarding the unchanged Section 10(10AA)(ii) ceiling and issuance of notice on that aspect.
- Union of India Vs Wood Paper Limited, AIR 1991 SC 2049 — Cited in the extracted coordinate-Bench decision for liberal interpretation of conditions regulating computation of a benefit.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The Appellant, Renu Moongia (hereinafter referred to as the ‘assessee’) by filing the present appeal, sought to set aside the impugned order dated 02.08.2022 passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] qua assessment year 2021-22 on the grounds inter-alia that:-
“Impugned order passed by Ld. CIT(A) is bad in law and fact as well as against the CBDT notification number 31/2023, revising the limit u/s 10(10AA) to Rs. 25,00,000/-, as such liable to be set aside.”
2. The assessee was moving an application sought to file the revised ground in the interest of justice, revised ground is allowed to be taken on record.
3. Briefly stated, facts necessary for consideration and adjudication of the issues at hand are: Assessee has superannuated from Life Insurance Corporation of India on 30.06.2020 and along with other retiral benefits also received leave encashment to the tune of Rs. 9,04,669/-. The assessee filed return of income claiming deduction of Rs. 9,04,669/- on account of leave encashment. However assessee has been given deduction to the extent of Rs. 3,00,000/- only as against the leave encashment of Rs. 9,04,669/- on the ground that deduction of Rs. 3,00,000/- is only allowable u/s 10(10AA) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and thereby sent the intimation to the assessee u/s 143(1) of the Act.
4. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal, who has confirmed the disallowance by dismissing the appeal. Being aggrieved with the impugned order passed by the Ld. CIT(A), assessee has come up before the Tribunal by way of filing the present appeal.
5. At the very outset, It is brought to the notice of the Bench by the assessee by moving an application for condonation of delay that present appeal is filed with the delay of 1277 days and sought to condone the same on the grounds inter alia that the assessee had filed her appeal before Ld. CIT(A) through Shri Rajesh Gupta, who has not filed the appeal, nor intimated the assessee; that the assessee is not conversant with Income Tax Act, its rules and regulations and has always sought advice from the tax consultant; that assessee had full faith in the capacity and knowledge of her tax consultant and always acted under his legal advice; that assessee came to know about the impugned order on the receipt of high tax demand; that the delay has been caused due to non communication of the impugned order passed by Ld. CIT(A) by her tax consultant, nor he has challenged the same before the Tribunal.
6. On the other hand, Ld. DR for the Revenue opposed the application filed by the assessee to condone the inordinate delay on the ground that no “sufficient cause” has come on record.
7. When we examine the causes of delay put forth by the assessee in her application for condonation of delay, in the light of fact that she is a retired lady having no knowledge of Income Tax Act, its rules and regulations, “causes” put forth by her are sustainable because once she has engaged Shri Rajesh Gupta, tax consultant to pursue her appeal before Ld. CIT(A), it is his professional duty to intimate the dismissal order to the assessee and to take further action to file an appeal before the Tribunal.
8. It is settled principle of law that mistake or negligence on the part of a tax consultant engaged by the assessee cannot be attributed to the assessee and he/she should not be made to suffer. Furthermore, it is also settled principle of law, as has been held by the Hon’ble Supreme Court in case of Collector, Land Acquisition vs Mst Katiji and Others (167 ITR 471) (SC) that to achieve the ends of justice provisions for condonation of delay in limitation Act should be given liberal interpretation.
9. By applying the settled principle of law, we find it a “sufficient cause” to condone the delay of 1277 days in filing the present appeal by the assessee. Hence the delay is hereby condoned. The appeal is being heard on merits.
10. We have heard Ld. ARs for the assessee and Ld. DR for the Revenue and perused the record available on file.
11. Undisputedly, the assessee being a retired employee has received leave encashment to the tune of Rs. 9,04,669/- and claimed exemption thereof u/s 10(10AA) of the Act. The Assessing Officer as well as Ld. CIT(A) by applying section 10(10AA)(ii) proceeded to hold that maximum exemption under this section is Rs. 3,00,000/- , thus disallowed the remaining amount of Rs. 6,04,669/-.
12. In the backdrop of the aforesaid facts and circumstances of this case the sole question arises for determination is “as to whether the assessee, who has retired after putting in more than 30 years of service is entitled for exemption of the entire amount of Rs. 9,04,669/- received by him on account of leave encashment?”
13. Ld. AR for the assessee contended that Hon’ble Delhi High Court in case of Kamal Kumar Kalia & Ors. Vs. Undion of India & Ors. in WP(C) 11846/2019 dated 08.11.2019, wherein claim of the assessee for exemption/deduction of Rs. 6,97,100/- on account of leave encashment on superannuation was allowed. The assessee also relied upon CBDT notification No. 31/2023 dated 24.05.2023.
14. Now this issue is no more res-Integra as the Coordinate Bench of the Tribunal has also decided an identical issue in case of Vijay Kumr Jain vs. ITO in ITA No. 175/Agr/2022 dated 18.06.2025. For ready perusal, operative part thereof is extracted as under:-
“8. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee relying the decision of Hon’ble Delhi High Court has issued a notice to the Union of India in the case of Kamal Kumar Kalia & Ors. Vs. Union of India & Ors in WP(C) 11846/2019 dated 08.11.2019 wherein the court has given following directions :-
“8. We are however of the, prima facie, view that the grievances of the petitioner with regard to exemption limit under Clause (ii) of Section 10 (10AA) not being raised since 1998, appears to be justified. This is so because over the decades, the pay-scales admissible to government servants, and even employees of the Public Sector Undertaking and Nationalised Banks and all others have been upwardly revised, keeping in view, the financial growth in the country as well as on account of rising inflation. The last drawn salaries have increased manifold since time and notification issued under Clause (ii) of Section 10(10AA) was lastly issued, as taken note of hereinabove, on 31.05.2002. We therefore, issue notice to the respondents limited to this aspect. 9. Issue notice, learned counsel for the respondents accepts notice. Respondents should file counter affidavits be filed within six weeks. Rejoinder thereto, if any, be filed before the next date.”
8.1 Recently the Central Board of Direct Taxes Suomotu revised the limit for deduction u/s 10(10AA) of the Act and the revised limit now stood at Rs. 25,00,000 as specified vide notification no. 31/2023 issued by the ministry of finance. Since the leave encashment amount as claimed by the assessee is amount to Rs. 6,97,100/- which is below the revised limit of leave encashment exempt prescribed by the Board, the assessee is eligible to claim of deduction of said Rs. 6,97,100/-. Based on these observations the ld. AO is directed to allow the claim of the assessee u/s. 10(10AA) of the Act within the revised limit as prescribed. In terms of these observations the appeal of the assessee is allowed.”
11. Another coordinate Bench of Jaipur Tribunal vide order dated 31.10.2023 passed in ITA No. 385/JP/2023 for A.Y. 2020-21 in the case of Govind Chhatwani vs. CIT(Appeals), has followed Ram Charan Gupta (supra) and held that the assessee was eligible for the claim of deduction in respect of the exemption of his leave encashment exceeding Rs.3,00,000/-, as the CBDT Notification No. 31/2023 dated 24.05.2023 has raised the limits to Rs.25,00,000/-.
12. It is established principle of law that a circular of CBDT, no doubt, has the force of law, can even supplant the law in case where it is beneficial to the assessee and can mitigate or relax the rigors of law. The powers of CBDT in issuing circular for general guidance are subject to two important conditions. One is that it does not entitle the Income-tax authority including the Board to issue instructions or circulars contrary to the substantive provisions of law or curtailing the relief, to which the assessee is otherwise entitled under law. The circular cannot, therefore, curtail the benefit conferred on the assessee or be contradictory to the Act. Hon’ble Apex Court in Union of India vs. Wood Paper Limited AIR 1991 SC 2049 has held that the condition regulating the computation of benefit should be interpreted liberally.
13. In view of this legal position, we are in respectful agreement of what has been held by the afore cited coordinate Jaipur Benches of this Tribunal as noted hereinabove. We accordingly answer the aforesaid question in favour of the assessee and against the Revenue and hold that the appellant/assessee is eligible to claim deduction of Rs.7,51,755/- in view of limits raised to Rs.25,00,000/- vide Notification No. 31/2023 dated 24.05.2023. The appeals is thus liable to be allowed.”
15. So in view of what has been discussed above, we are of the considered view that the assessee, who has received an amount of Rs. 9,04,669/- on account of leave encashment as retiral benefits after putting in more than 30 years in Life Insurance Corporation of India is exempted u/s 10(10AA) of the Act. Ld. CIT(A) has erred in confirming the disallowance made by the AO/CPC, hence the AO is directed to allow the claim of the assessee.
16. Resultantly, the appeal filed by the assessee is hereby allowed.
Order pronounced in the open court on 28-09-2026.
