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Devi Dutt Agarwal Vs Assessment Unit (ITAT Jaipur)
Income Tax Appellate Tribunal (ITAT), Jaipur Bench, decided the appeal of an individual assessee against the order of the NFAC, Delhi, regarding the exemption claim for leave encashment under Section 10(10AA) of the Income-tax Act, 1961. The assessee filed the original return declaring total income of ₹20,94,750 and subsequently filed a revised return of ₹11,81,550, claiming full leave encashment exemption of ₹12,13,200 under Section 10(10AA). In the original return, the assessee had claimed only ₹3,00,000 as exempt. The Assessing Officer (AO) disallowed the excess claim of ₹9,13,200 and added it back to the income, treating the assessee as a non-Central/State Government employee. The Commissioner of Income Tax (Appeals) confirmed the AO’s order.
The assessee appealed before the ITAT, contending that the CBDT Notification No. 31/2023 enhanced the leave encashment exemption limit from ₹3,00,000 to ₹25,00,000 under Section 10(10AA)(ii), making him eligible for full exemption. The assessee also cited judicial pronouncements, including the Delhi High Court’s decision in Kamal Kumar Kalia & Ors. vs. Union of India and ITAT Jaipur Bench decisions in Ram Charan Gupta vs. ITO and Govind Chhatwani vs. CIT, supporting the application of the revised exemption limit.
The ITAT observed that the appeal was filed beyond the prescribed time limit by 326 days. The assessee, aged 66, submitted a request for condonation of delay, citing severe eye trauma and surgeries in 2024 that prevented him from accessing e-mails and departmental notices. The Tribunal found the explanation reasonable and condoned the delay.
The principal issue before the Tribunal was whether the assessee was entitled to claim the full leave encashment amount of ₹12,13,200 or the restricted ₹3,00,000 allowed by the AO. The ITAT reviewed the provisions of Section 10(10AA), noting that the exemption limit for non-government employees is determined by the Central Government notification, and recognized that Notification No. 31/2023 specified a limit of ₹25,00,000, effective from 1 April 2023.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This appeal by assessee is directed against the order of NFAC, Delhi dated 01.11.2023 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal: –
1. Ld. CIT appeal did not consider notification no. 31/2023 for enhancement of leave encashment limit from 3 Lakhs to 25 Lakhs u/s. 10(10AA) of the Act and relevant decision of Honourable Delhi High Court and wrongly sustain Ld. AO order of allowing deduction u/s 10(10AA) for leave encashment of Rs. 3,00,000/- instead of Rs. 12,13,200/-. Hence, full claim of Rs. 12,13,200/- must be allowed as within the limits prescribed.
2. The Assessee craves the right to add, delete, amend or abandon any of the grounds of this appeal at the time or before the actual hearing of the case.
2. The brief facts of the case are that the assessee individual filed his return of income at Rs. 20,94,750/- on 17.12.2020 and thereafter a revised return also on 05.05.2021 declaring total income at Rs. 11,81,550/-. The case of the assessee was selected for complete scrutiny under CASS for the following reasons:
1. Salary income shown under TDS schedule of ITR is higher than the salary income shown under Part-B;
2. Reduction of income in revised return and claim of refund and
3. Salary income shown as per the ITR is less than the salary income as per Form No. 26AS.
In the original return, the assessee claimed Leave Encashment of Rs. 3 Lacs u/s. 10(10AA) of the Act. But in the revised return of income, he claimed the full amount received as leave encashment amounting to Rs. 12,13,200/- u/s. 10(10AA) of the Act. The AO disallowed the claim of the assessee and Rs. 9,13,200/- (Rs. 12,13,200/- minus 3,00,000/-) being difference in the original claim and revised claim added back to the income of the assessee. The assessee being aggrieved with this order preferred an appeal before the Ld. CIT (A), who in turn confirmed the order of the AO and dismissed the appeal of the assessee.
3. The assessee being further aggrieved with the same preferred the present appeal before us. It is observed that the appeal filed before us is time barred by 326 Days. In response to the same the assessee filed an application for condonation of delay along with an affidavit. The assessee is a 66 years old person and has severe eye vision trauma since last year. Due to this eye problem, the assessee was not able to view TV, computer and even mobile. Hence, can’t check his e-mails. The assessee has under gone two eye operation in March 2024 and May 2024. The assessee came to know about the Ld. CIT(A)’s order only on 7th November 2024, when he received a notice from the department under the DTVSV. Thereafter, the assessee checked his portal and downloaded the Ld. CIT(A)’s order and filed the present appeal before us. We found the explanation filed by the assessee as reasonable, hence delay in filing of this return is condoned.
4. The only issue for our consideration is whether the assessee is entitled to claim the deduction at Rs. 12,13,200/- or at a figure of Rs. 3 Lacs as allowed by the AO, for better understanding, we are reproducing herein below the relevant provisions of the section 10(10AA) of the Act as under:
| 10AA) | (i) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise; |
| (i) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirementwhether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during theperiod of ten months immediately preceding his retirement whether on superannuation or otherwise, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government: | |
| Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause shall not exceed the limit so specified: | |
| Provided further that where any such payment or payments was or were received in any one or more earlier previous years also and the whole or any part of the amount of such payment or payments was or were not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this sub-clause shall not exceed the limit so specified], as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years. | |
| Explanation. —For the purposes of sub-clause (ii), — | |
| the entitlement to earned leave of an employee shall not exceed thirty days for every year of actual service rendered by him as an employee of the employer from whose service he has retired; | |
5. In the light of the provisions of sub-clause (ii) and the latest notification on this subject as reproduced herein below as under:
NOTIFICATION S.O. 2276(E) [NO. 31/2023/F. NO. 200/3/2023-ITA…
SECTION 10(10AA) OF THE INCOME-TAX ACT, 1961 – EXEMPTIONS – ENHANCEMENT OF EXEMPTION LIMIT OF LEAVE ENCASHMENT
In exercise of the powers conferred by sub-clause (ii) of clause (10AA) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government, having regard to the maximum amount receivable by its employees as cash equivalent of leave salary in respect of the period of earned leave at their credit at the time of their retirement, whether superannuation or otherwise, hereby specifies the amount of Rs. 25,00,000 (twenty-five lakhs’ rupees only) as the limit in relation to employees mentioned in that sub-clause who retire, whether on superannuation or otherwise.
2. This notification shall be deemed to have come into force with effect from the 1st day of April, 2023.
In addition to the above we have considered the judicial pronouncement by the Hon’ble Delhi High Court in the case of Kamal Kumar Kalia & Ors. Vs. Union of India and coordinate bench in the case of Ram Charan Gupta vs. ITO, Ward 4(2), Jaipur, ITA No. 408/JPR/2022, Dated: 27.06.2023 and Govind Chhatwani, Jaipur vs. CIT, ITA No. 385/JPR/2023 on 31.10.2023.
6. In view of the above, there is a firm view has already been taken by the coordinate bench respectfully considering the decision of Kamal Kumar Kalia & Ors. Vs. Union of India, for sake of consistency and view of the Hon’ble Delhi High Court (supra), The grounds raised by the assessee are allowed and the AO is directed to accept the claim of the assessee as claimed in his revised return amounting to Rs. 12,13,200/- u/s. 10(10AA) of the Act.
7. In the result the appeal of the assessee is allowed.
Order is pronounced in the open court on the 13th Day of March 2025.
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