Suman Kumar Jha Vs DCIT (ITAT Ahmedabad)
The appeal before the Income Tax Appellate Tribunal (ITAT), Ahmedabad, arose from an order of the Additional Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, relating to Assessment Year 2020-21. The assessee, a retired salaried individual, had filed a return declaring total income of ₹44,05,230 and claimed exemption of ₹15,93,539 under Section 10(10AA) of the Income Tax Act towards earned leave encashment received on retirement. While processing the return under Section 143(1), the Central Processing Centre (CPC) restricted the exemption to ₹3,00,000 and added the balance amount of ₹12,93,540 to the assessee’s income, resulting in a tax demand that was subsequently paid by the assessee.
The assessee challenged the adjustment and relied upon Notification No. 31/2023 dated 24 May 2023, through which the Central Government enhanced the leave encashment exemption limit from ₹3 lakh to ₹25 lakh. The assessee contended that the CBDT had failed to issue revised notifications for a long period despite substantial increases in government salaries and argued that the exemption limit should be aligned with the leave encashment entitlement applicable to government employees. The assessee also raised grounds relating to non-consideration of an adjournment application, alleged violation of Section 143(1)(a), the validity of the adjustment, the nature of the notification issued in 2002, and eligibility for relief under Section 89(1).
