INCOME TAX OFFICER, JAIPUR vs. MANMOHAN JAISWAL, JAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “SMC” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No. 134/JPR/2026 (Assessment Year:2024-25) ITO Vs. Manmohan Jaiswal C-95, Baba Siddhnath 3/310, Chitrakoot Scheme, Bhawan Lal Kohti, Jaipur Vaishali Nagar, Jaipur �थायीलेखासं./जीआइआरसं./PAN/GIR No:AFZPJ 4952 J Appellant .. Respondent Appellant by : Mrs. Aarti Rawat, JCIT Respondent by : Sh. D.K. Jain, CA Date of Hearing 16.07.2026 Date of Pronouncement 29.07.2026 O R D E R The present appeal has been filed by the Revenue against the order passed by the Office of the Commissioner of Income Tax, Appeal, Addl./JCIT(A), Mumbai 12(hereinafter referred to as “Ld. CIT(A)”), dated 20/11/2025under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

P a g e | 2 ITA No.134/JPR/2026 Manmohan Jaiswal obtaining approvals from the competent authorities and movement of records through different official levels. It was contended that the delay was neither deliberate nor intentional but was occasioned by bona fide official procedures and that sufficient cause has been shown for not presenting the appeal within the prescribed period. 3. I have carefully considered the application for condonation of delay, the explanation offered by the Revenue and the material placed on record. 4. The law governing condonation of delay is now well settledthat the expression "sufficient cause" occurring in the Limitation Act should receive a liberal construction so as to advance substantial justice; that a liberal and justice-oriented approach should be adopted, the explanation must be bona fide, reasonable and free from negligence or lack of due diligence. Reference decision of the Hon’ble apex court in the case of Collector, Land Acquisition, Anantnag &Anr. v. Mst. Katiji& Ors.(1987) 167 ITR 471 (SC), N. Balakrishnan v. M. Krishnamurthy(1998) 7 SCC 123, 5. Applying the aforesaid principles to the facts of the present case, I find that the delay involved is only 54 days. The explanation furnished by the Revenue indicates that the delay occurred during the course of administrative processing and obtaining the requisite approvals. Nothing has been brought on record to suggest that the delay was deliberate, mala fide or attributable to gross negligence. Refusing to condone such a short delay would result in the matter being rejected at the threshold without adjudication on merits.

P a g e | 3 ITA No.134/JPR/2026 Manmohan Jaiswal 6. In State of Nagaland v. Lipok AO & Ors.(2005) 3 SCC 752, the Hon'ble Supreme Court recognised that governmental decision- making necessarily involves procedural formalities and movement of files through different departments. It was held that while the Government is not entitled to any special privilege, a pragmatic approach keeping in view the realities of governmental functioning is permissible while considering whether sufficient cause has been made out. 7. Having regard to the totality of the facts and respectfully following the ratio laid down by the Hon'ble Supreme Court in Collector, Land Acquisition, Anantnag v. Mst. Katiji (167 ITR 471), N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123, State of Nagaland v. Lipok AO (2005) 3 SCC 752, I am satisfied that the Revenue has established sufficient cause for the delay in filing the appeal. 8. Accordingly, the delay of 54 days in filing the present appeal is condoned. The appeal is admitted for adjudication on merits. Ordered accordingly. 9. The Revenuehas raised the following grounds of appeal:- 1. Whether on the facts and circumstances of the case and in law, the Addl/JCIT(A0-2, Mumbai is justified in allowing the rebate u/s 87A of the Act, on STCG, when rebate u/s 87A of the Act is not available in respect of income tax payable on income chargeable to tax on special rates, which includes Short Term Capital Gain u/s 111A of the Act. 2. Whether on the facts and circumstances of the case and in law, the order of the Addl/JCIT (A)- 2, Mumbai is justified in view of the CBDT Circular No. 13/2025, which has made it - expressly clear that it was never the statutory intent to allow rebate in cases WHARE income is chargeable to tax u/s 115BAC(1) of the Act and any such cases WHARE rebate is erroneously claimed are to be rectified, thereby having no doubt that such claim was statutorily never permissible.

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P a g e | 5 ITA No.134/JPR/2026 Manmohan Jaiswal 6. Further section 112A(6), which reads as under, restricts the allowance of any rebate on any income from LTCG. "112A (6) Where the total income of an assessee includes any long-term capital gains referred to in sub-section (1), the rebate under section 87A shall be allowed from the income tax on the total income as reduced by tax payable on such capital gains." 7. It may also be mentioned that no such restriction is there in section 111A which provides for tax on STCG. Further, Section 111A(2) reads as under "111A (2) where the gross total income of an assessee includes any short-term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the gross total income as reduced by such capital gains" 8. Thus, the restriction on income from short term capital gains is that the deductions under Chapter VIA will not be allowed on such income. Since section 87A is incorporated in Chapter VIII the above provision is not applicable in this case. 9. Thus, a composite reading of section 87A r.w.s.111A r.w.s. 112A does not barthe appellant from claiming rebate in respect of short term capital gain u/s 87A of the Act. In view of the above discussion, it is held that the AO, CPC had erred in restricting the rebate u/s 87A in respect of the income from STCG of Rs. 1,21,015/The AO is directed to allow the deduction of Rs. 15,062/- in respect of STCG u/s 87A of the Act. Accordingly, Ground No. 1 raised by the appellant stands ALLOWED 11. Before me at the outset itself ld. counsel for the assessee pointed out that this issue has been dealt in various decisions of the ITAT ruling consistently in favour of the assessee as under:- i) Pranay M Kothari Vs. DCIT in ITA No.3469/Chny/2025 ii) Manojbhai C. Kamdar Vs. ITO in ITA No.572/RJT/2025 iii) Jayshreeben Jayantibhai Palsana Vs. ITO in ITA No.1014/Ahd/2025 Basty Keshava Shenoy Vs. ITO in ITA No.3134/Bang/2025 iv) 12. Before me, ld. DR was unable to distinguish the decisions, referred to by ld. Counsel for the assessee as above, nor she was able to draw my attention to any contrary decision of either the Jurisdictional High Court or the Hon’ble Apex Court in this regard.

P a g e | 6 ITA No.134/JPR/2026 Manmohan Jaiswal 13. I have gone through the orders of the ITAT, referred to by the ld. Counsel for the assessee, and have noted that it has been consistently held that the provisions of Section 87A of the Act provide rebate on the entire tax liability computed on the “total income” without drawing any distinction between income taxable at normal rates, and income taxable at special rates, i.e. short term capital gain taxable at rates specified u/s 111A of the Act. The findings of the ITAT in the case of Pranay M Kothari Vs. DCIT in ITA No.3469/Chny/2025 dated 23.03.2026 at para 7 to 9 of the order as under:- ………. 7. We note that an identical issue came up for consideration before this Tribunal in the case of Venkatachalam Venkatraman v. ITO [ITA No.1431/Chny/2025, order dated 20.08.2025]. The Tribunal therein held that the provisions of section 87A of the Act provide rebate on the entire tax liability computed on the "total income" without drawing any distinction between income taxable at normal rates and income taxable at special rates. It was accordingly concluded that rebate u/s.87A of the Act is available even in respect of such incomes taxed under special provisions. The relevant findings are extracted below for ease of reference:- "5.0 been concluded that to claim the rebate total income is to be computed after excluding any special rate income so as to determine the final tax liability. We have noted that the view taken by the Ld.CIT(A) of assessee filing return u/s 115BAC and consequently ineligible for rebate is not in order. The only controversy in this case is whether rebate u/s 87A is available on all the incomes or there is any exclusion. We have noted that the provisions of section 87A do not provide for such an exclusion. The first proviso to section 87A includes an exemption qua total income falling u/s 115BAC (1A) however the impugned amendment has been brought by Finance Act 2024 w.e.f 01.04.2025. The present AY-2024 25 would not be hit by the same. We have noted that Hon'ble Bombay High Court in the case of Rajiv G Shah supra has held that "...there is no indication in the plain language of Section 87A that any category of income or tax should be excluded from the computation. If the total income is within the threshold prescribed, rebate cannot be denied....". It istrite law that when provisions of the statute granting any benefit to the tax payer are unambiguously clear, no different interpretation thereof can be adopted. Accordingly, we are of the view that the assessee is entitled for claim of rebate u/s 87A. The orders of lower authorities are therefore set aside and the Ld.AO is directed to allow the assessee its claim of rebate u/s 87A. All the grounds of appeal raised by the assessee are therefore allowed."

P a g e | 7 ITA No.134/JPR/2026 Manmohan Jaiswal 8. Further, we find support from the decision of the Coordinate Bench in JayshreebenJayantibhai Palsana Shingala Sheri ITO [ITA No.1014/Ahd/2025, order dated 12.08.2025), where it was held as under:-

“5.8 The amended first proviso to Section 87A [inserted by the Finance Act, 2023 w.e.f. A.Y. 2024-25] provides: "Where the total income of the assessee is chargeable to tax under sub section (1A) of section 115BAC and the total income (a) does not exceed seven hundred thousand rupees, the assessee shall be entitled to a deduction...'

5.9 This provision applies to any resident individual whose total income does not exceed Rs.7,00,000 and who is assessed under section 115BAC(1A). The statute does not draw any distinction between normal income and income chargeable at special rates, nor does it contain any express exclusion for tax arising under section 111A.

5.10 By contrast, the legislature has inserted an express bar on availability of section 87A rebate in section 112A(6), which states:

(6) Where the total income of an assessee includes any long-term capital gains referred to in sub- section (1), the rebate under section 87A shall be allowed from the income-tax on the total income as reduced by tax payable on such capital gains.

5.11 The absence of a corresponding clause in section 111A is legally significant and supports the principle that when the legislature intended to deny rebate in respect of special income (as in section 112A), it has done so expressly. In contrast, the absence of any exclusion in section 111A or in section 87A must be construed in favour of the assessee.

5.12 At this point we discuss the interplay of Section 115BAC(1A) with Chapter XII where the scope is Confined to Computation of Tax Rates. Section 115BAC(1A) opens with the phrase:

"Notwithstanding anything contained in this Act but subject to the provisions of this Chapter..."

5.13 The purpose of this clause is to enable the computation of income tax under the concessional rate regime, subject to existing special rate provisions under Chapter XII, such as sections 111A, 112, 112A, etc. This clause governs the computation of tax and doesnot ipso facto affect eligibility to rebates or deductions unless specifically restricted. Section 87A is not part of Chapter XII; it is an independent rebate provision under Chapter VIII of the Act. Therefore, the overriding clause in section 115BAC(1A) does not derogate or modify section 87A, unless section 87A itself provides for exclusion, which, in the present case, it does not. Thus, section 87A operates on the total tax computed, whether it includes tax at slab rates or special rates, and applies so long as the total income threshold is met.

P a g e | 8 ITA No.134/JPR/2026 Manmohan Jaiswal 5.14 The CIT(A) placed strong reliance on the Explanatory Memorandum to the Finance Bill 2025, which clarified that rebate under section 87A is not available on tax arising from special rate incomes, including those under section 111A. However, we find this reliance to be misplaced for two reasons:

-Firstly, the Finance Bill 2025 itself proposes to insert new restrictions on rebate under section 87A w.e.f. A.Y. 2026-27, which implies that the existing law (i.e., as applicable to A.Y. 2024-25) does not contain such a restriction.

-Secondly, the Explanatory Memorandum cannot override the plain language of the statute. It is a tool of interpretation, not a source of substantive law.

Therefore, the prospective amendment in the Finance Act 2025 supports the view that under the unamended provision applicable for A.Y. 2024-25, rebate under section 87A cannot be denied merely because tax arises under section 111A.

5.15 In the recent judgment dated 24.01.2025 in the case of The Chamber of Tax Consultants vs. Director General of Income Tax (Systems) [TS 5026-HC-2025(Bombay)-O], the Hon'ble Bombay High Court considered the issue of system-based denial of 87A rebate on STCG under section 111A for assessees who had opted for 115BAC(1A). While the Hon'ble Court refrained from interpreting the substantive provisions, it held that the assessee must be allowed to claim rebate under section 87A, and it is for the quasi-judicial authority to decide on merits.

Thus, the Hon'ble High Court clearly held that the CPC utility or system configuration cannot override statutory rights, and that each case must be adjudicated on its own merits. We at the Tribunal, being such a quasi-judicial authority, are therefore duty-bound to examine the claim in light of the statutory framework and not be influenced by automated denial or procedural logic adopted by the CPC.

5.16 The assessee has also relied on an appellate order dated 27.05.2025 passed by CIT(A)-1, Nagpur in the case of Avni Milanbhai Maniya, wherein on identical facts the CIT(A) allowed the claim of rebate under section 87A in respect of STCG taxable under section 111A. We also note that such decision was taken by the JCIT/AddI.CIT(A) relying on the decision of Beena ManishbhaiFofaria for the A.Y. 2024-25. While not binding, the said appellate order affirms that divergent views exist and such benefit has been allowed in similar factual circumstances.

5.17 In view of the above discussion, we find that the assessee is a resident individual and the total income declared for the assessment year 2024-25 does not exceed Rs. 7,00,000. It is also an admitted position that the assessee has exercised the option to be assessed under the new tax regime in accordance with the provisions of section 115BAC(1A) of the Act. On a plain reading of the statutory provisions, there exists no express bar either in section 87A or section 111A for denial of rebate in respect of tax payable on short-term capital gains arising from transfer of listed equity shares taxable at special rates under section 111A. The legislative intent is further clarified by the subsequent amendment proposed in the Finance Bill, 2025, which is prospective

P a g e | 9 ITA No.134/JPR/2026 Manmohan Jaiswal in nature and thereby reinforces that no such restriction was in force during the relevant assessment year. The denial of rebate under section 87A by the CPC, Bengaluru, appears to be based solely on system-driven logic and not on any statutory mandate. Moreover, the interpretation adopted by the CIT(A) in upholding such denial is, in our considered view, not in consonance with the plain and unambiguous language of the law as applicable for A. Y. 2024- 25." 9. Respectfully following the ratio laid down in the above cases, we hold that the assessee in the instant case is entitled to rebate u/s.87A of the Act for the impugned assessment year, notwithstanding that the total income includes taxable long term capital gains chargeable at special rates. The AO is accordingly directed to allow the rebate of Rs.25,000/- claimed by the assessee u/s.87A of the Act and recompute the tax liability. Thus, the grounds of appeal raised by the assessee are allowed. 14. The ITAT in the other decisions has also reiterated the proposition of law as above. The decision rendered by the ITAT in the cases above, squarely applies to the facts of the present case, following which, I hold that there is no infirmity in the order of the Ld.CIT(A) holding the assessee entitled to rebate u/s 87A of the Act on the taxes paid on short term capital gain. 15. In effect, the appeal of the Revenue is dismissed. Order pronounced in the Open Court on 29.07.2026

Sd/- (Annapurna Gupta) ACCOUNTANT MEMBER Dated 29.07.2026 Mittali, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

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By Order,

Asst. Registrar ITAT, Jaipur