PRAVINCHANDRA MANEKLAL MITHAIWALA,BHARUCH vs. ITO WARD - 2(1) BHARUCH, BHARUCH

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ITA 60/SRT/2026Status: DisposedITAT Surat23 July 2026AY 2020-217 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a subsequent notification enhanced the exemption limit for leave encashment to Rs. 25,00,000 retrospectively. Therefore, the assessee was eligible for the higher exemption.

What were the facts?

The assessee claimed exemption for leave encashment on retirement exceeding the then limit of Rs. 3,00,000. The CPC made an adjustment of Rs. 7,71,000, disallowing the excess claim. The CIT(A) confirmed this disallowance.

What were the issues?

Whether the enhanced exemption limit for leave encashment, notified retrospectively, is applicable for the assessment year in question. Whether the disallowance made by the CPC was justified in light of the retrospective notification.

Which sections of the Income-tax Act were involved?

Section 10(10AA)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH (SMC

Before: Shri T.R. Sentil Kumar & Shri Ratnesh Nandan Sahay

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH (SMC), SURAT (PHYSICAL HEARING) Before: Shri T.R. Sentil Kumar, Judicial Member And Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 60/SRT/2026 Assessment Year: 2020-21

Pravinchandra Maneklal The ITO, Mithaiwala Ward-2(1), 159 Keshav Park Vs Bharuch. Ankleshwar, Ankleshwar, Gujarat-393001. PAN: ADVPM2947A (Respondent) (Appellant) Assessee Represented: Shri Bhupendra Mehta, A.R. Revenue Represented: Ms. Neerja Sharma, Sr. D.R. Date of hearing : 05-05-2026 Date of pronouncement : 23-07-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Assessee as against the appellate order dated 04.11.2025 passed by the Additional/Joint Commissioner of Income Tax (Appeals)-3, Delhi (in short referred to as “CIT(A)”), arising out of the intimation passed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2020-21.

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2.

Brief facts of the cases, the assessee is an individual retired from ONGC filed his return of income for the assessment year 2020-21 on 26.12.2020 declaring total income of Rs. 30,90,340/- and refund due to Rs. 2,38,240/-. The return was processed under section 143(1) of the Act by CPC, Bengaluru by making adjustment to the declared income to the extent of Rs. 7,71,000/- being excess claim made under section 10(10AA)(ii) of the Act on leave encashment salary on retirement wherein the exemption is allowed upto Rs. 3,00,000/- only. 3. Aggrieved against the intimation, assessee filed appeal before Ld. CIT(A), who has confirmed the disallowance and dismissed the assessee’s appeal. 4. Aggrieved against the appellate order, assessee is in appeal before us arising the following Grounds of Appeal:- “1. Ld Addl JCIT A grossly erred on facts and in law in dismissing the appeal without adjudicating the preliminary issues raised regarding the violation of statutory provision of Sec 143 1 a of the Income Tax Act, 1961 the Act in the form of non issue and service of the notice by the Ld AO us 143 1 a of the Act before making the adjustment of RS 771000. 2. The Ld Addl JCIT A grossly erred on facts and in law in not considering and not adjudicating the raised ground in the appeal that the addition made by the Ld AO is without jurisdiction and authority of law. Ground 3. The Ld Addl JCIT A has grossly erred in law in not adjudicating the ground that the Ld DDIT CPC has grossly erred and is not justified in not allowing the claim of leave Encashment on superannuation exceeding RS 3 Lakhs and making the adjustment of RS 771000. 4. On merit also, the exemption claim by the appellant exceeding RS 3 lakhs is allowable. 5. Your appellant craves leave to add amend alter withdraw any ground of appeal.”

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4.1 Learned counsel appearing for the assessee submitted that the Central Government vide notification no. 31/2023 dated 24.05.2023 enhanced limit to tax exemption of leave encashment of Rs. 25,00,000/- effective from 01.04.2023, this enhanced limit is applicable retrospectively. Learned counsel further submitted the following Coordinate Bench decisions on this issue:- 1. ITA No. 289/Ahd/2025 dated 28.07.2025 in the case of Goverdhan D Bhambhani vs. ITO. 2. ITA Nos. 81/Del/ 2025 dated 21.04.2025 in the case of Neelam Gupta vs. Addl./JCIT. 3. ITA No. 1280/JPR/2025 dated 01.01.2026 in the case of Ram Dev Daiya vs. ITO.

5.

Per contra, Learned Senior DR appearing for the Revenue supported the orders passed by the lower authorities and requested to upheld the same. 6. Heard rival submissions and perused materials available on record including the paper book and case laws filed by the assessee, this issue of leave encashment salary on retirement is no more res integra by the various decisions rendered by the Coordinate Benches of this Tribunal. In the case of Goverdhan D Bhambhani (supra) for the very same assessment year 2020-21 vide order dated 28.07.2025 Ahmedabad Tribunal, held as follows:- “3. The CBDT's Notification dated 24.05.2023 (No. 31/2023/F.No. 200/3/2023-ITA-1) (copy enclosed Page no. 1) clearly states that "S.O. 2276(E).-In exercise of the powers conferred by sub-clause (ii) of clause (1044) 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

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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. [Notification No. 31/2023/F. No. 200/3/2023-ITA-I] S OURABH JAIN, Under Secy. Explanatory Memorandum: It is hereby certified that no person is being adversely affected by giving retrospective effect to this notification." Thus in view of such notification section 10(10AA) sub section (i) & (ii) both are at par & since it is clear that as per explanatory memorandum that no person is being adversely affected by giving retrospective effect to this notification.

Thus sec 10(10AA) (i) & (ii) both are at par (with RETROSPECTIVE effect & even the private employee on retirement are entitled for such higher limit of Rs. 25,00,000/-or actual amount received whichever is less; to claim u/sec 10 (10AA) of Act. It is requested to kindly consider & grant relief. Under similar circumstances number of decisions already granted by Jaipur Bench; details as below:- (1) Govind Chatwani, Appeal No. ITA No. 385/JP/2023 dated 31.10.2023 copy as enclosed (Page 2108) (2) Devendra kumar Gupta M.A. No. 49/JP/2023 dated 18.02.2025 copy as enclosed.”

6.

Ld. Sr. D.R. appearing for the Revenue supported the order passed by the lower authorities and requested to confirm the disallowance. 7. We have given our thoughtful consideration and perused the materials available on record. This issue of deduction u/s. 10(10AA)(ii) is no more resintegra based on the decisions passed by Co-ordinate Bench of this Tribunal in the case of Govind Chhatwani Vs. CIT(Appeals) in ITA No. 385/JP/2023 dated 31-10-2023 wherein it is held as follows: “7. We have heard the rival contentions and perused the material placed on record. The bench noted that the apple of discord in this case that the assessee has received a sum of Rs. 17,68,479/- as leave encashment

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which was claimed in the return of income filed as exempt u/s 10(10AA) of the Act. The CPC and ld. CIT(A) contended that in the light of this specific notification being not issued the leave encashment allowable up to Rs. 3,00,000/- only whereas we note from the submission of the assessee that the assessee has relied upon the notification No. 31/2023/F.No. 200/3/2023-ITA-1 dated 24th May, 2023 and submitted that the revised limit of Rs. 25,00,000/- increased on account of leave salary is applicable and to be considered in the light of fact that government has issued this notification belatedly. The assessee has already claimed the leave salary as exemption the benefit should be given to the assessee. The similar issue has been decided by the bench in the case of Ram Charan Gupta in ITA No. 408/JP/2022 wherein the bench has already held 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

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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.” On being consistent to the said finding, we held that the assessee is entitled to get the deduction as claimed in the return of income u/s 10(10AA) of the Act as the limit has been increased from 3 lac to 25 lacs. 8. Further this decision is followed in the case of Devendra Kumar Gupta Vs. CIT(Appeals) in M.A. No. 49/JP/2023 dated 18-02-2025. Thus respectfully following the above decisions, the restricting the deduction u/s. 10(10AA) of Rs. 4,65,404/- made by the lower authorities are not sustainable in law. Therefore the same is liable to be deleted.”

6.1 There is no change in the facts of the present case, therefore, we have no hesitation in following the above decision of the Coordinate Bench of the Ahmedabad Tribunal and allow the appeal and direct to delete the addition made by CPC. 7. In the result, the appeal filed by the assessee is allowed.

Order is pronounced under the provisions of Rule 34(4) of IT(AT) Rules, 1963 on 23/07/2026.

Sd/- Sd/- (RATNESH NANDAN SAHAY) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat : Dated 23/07/2026 *Santosh आदेश क� �ितिलिप अ�ेिषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Surat

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6.

Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत

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