NARASIMHA BHAT NANDAVARA,MANGALORE,KARNATAKA vs. ITO, WARD-1, MANGALORE

The facts involved in all the appeals are similar to each other and in some appeals, one more issue was raised. For the sake of convenience, the

The brief facts of the case are that the assessees are individuals and employees of the BSNL who were opted to retire under the BSNL Voluntary Retirement Scheme, 2019. The Scheme was formulated for restructuring as well as to reduce the cost faced in view of the losses suffered by BSNL. The assessees are aged about 50 years and not conversant with the new technological systems being adopted by BSNL and therefore the organization had formulated the VRS, 2019. Even though the Scheme was named as Voluntary Retirement Scheme, in sum and substance, it is a retrenchment scheme designed to compulsorily reduce the workforce.

Under the said scheme, the employees were entitled to received ex- gratia / compensation and the disbursement was made in four equal installments and the first installment starts during the fourth quarter of the F.Y. 2019-20 (A.Y. 2020-21) and the balance three installments during the F.Y. 2020-21 (A.Y. 2021-22). While paying the retrenchment compensation, the BSNL also deducted the tax at source and therefore the assessees were under the impression that the said compensation is liable for tax under the provisions of the Income Tax Act. On that basis, the assessees had also claimed exemption u/s. 10(10C) of the Act and offered the balance compensation as income in the return of income filed. Later on, the assessees came to know about the decision of the Hon’ble Chandigarh Bench of this Tribunal in the case of Harish Kumar vs. ITO reported in (2025) 175 taxmann.com 379 in which the retrenchment compensation received by the BSNL employees were eligible for exemption u/s. 10(10B) of the Act.

Similarly, in some of the assessees’ case, the leave encashment received was claimed as exemption u/s. 10(10AA) of the Act as per the statutory limits prevailing at that time. During the disputed assessment years, the exemption available u/s. 10(10AA) is restricted to Rs. 3,00,000/-

The assessees had filed their return of income showing the part of the retrenchment compensation as taxable income and also claimed the leave encashment of Rs. 3,00,000/-. The said returns were processed by the CPC and the returns were accepted and intimations u/s. 143(1) were made. Thereafter the order of the Hon’ble Chandigarh Bench of this Tribunal in the case of Harish Kumar vs. ITO reported in (2025) 175 taxmann.com 379 was known to the assessees and based on that, the assessees filed appeals before the Ld.CIT(A) with a delay and also enclosed applications to condone the said delays. The Ld.CIT(A) considered the appeals filed by the assessees with the delay and not satisfied with the reasons stated by the assessees and dismissed the appeals on the ground of limitation thereby confirmed the denial of exemption u/s. 10(10B) as well as the exemption u/s. 10(10AA) of the Act. In the appeals in ITA Nos. 1526 & 1527/Bang/2026, the Ld.CIT(A) had rejected the appeals on the ground that the assessees are not entitled to claim the benefit when there is no claim made in the return of income. The Ld.CIT(A) also observed in ITA No. 1535/Bang/2026 that the exemption has to be claimed before the AO by filing the revised return or application of section 154 of the Act and on that basis, the appeal was dismissed. The Ld.CIT(A) in the appeal in ITA No. 1611/Bang/2026 had observed that new plea cannot be raised before him by relying on the judgement of the Hon’ble Supreme Court reported in 284 ITR 323 in the case of Goetze (India) Ltd. vs. CIT and dismissed the appeal. Similarly, in the appeal in ITA No. 1612/Bang/2026, the Ld.CIT(A) had dismissed the appeal on the ground that no claim was made in the return of income. In ITA No. 1614/Bang/2026, the Ld.CIT(A) again relied on the judgment of the Hon’ble Supreme Court reported in 284 ITR 323 in the case of Goetze (India) Ltd. vs. CIT and dismissed on the ground of maintainability as well as on the ground of limitation.

The respective Ld.ARs appearing for the assessees submitted that the deduction to be claimed u/s. 10(10B) of the Act was considered by the various Tribunals and all the Tribunals took a view that the retrenchment compensation received by the employees of the BSNL are eligible for deduction u/s. 10(10B) of the Act. The respective Ld.ARs further submitted that the delay in filing the appeals before the Ld.CIT(A) were also condoned by the various Tribunals by considering the peculiar facts and circumstances of the case and therefore submitted that the order of the Ld.CIT(A)s rejecting the appeals as barred by limitation is not in order. The respective Ld.ARs further submitted that the entire leave encashment received by the employees were also eligible for deduction u/s. 10(10AA) of the Act in view of the judgment of the Hon’ble Kerala High Court in the case of Sanchar Nigam Pensioners Welfare Association vs. Union of India dated 06/02/2026 in W.P. No. 16360 of 2023. The respective Ld.ARs also relied on the several orders of the Hon’ble Ahmedabad, Pune, Chandigarh, Jaipur & Indore Benches and Coordinate Bench order of this Tribunal and prayed to take a lenient view so that the assessees will get their benefits in accordance with the provisions of the Act. The respective Ld.ARs further submitted that if the appeals are not allowed on technicalities, it would amount to unjust enrichment to the revenue since the levies are made against the provisions of the Act and therefore prayed to allow the appeals. The respective Ld.ARs also submitted that some of the Ld.CIT(A)s had condoned the delay in filing the appeals even though there were delays and prayed to take a uniform view since the assessees are all belonged to the same category of employees employed by the BSNL. The respective Ld.ARs also submitted that the judgment of the Hon’ble Supreme Court would not apply to the appellate authorities and in fact, the same is applicable to the AOs. The respective Ld.ARs further submitted that on the ground of equity, the assessees are also entitled for the benefits similar to the several assessees got from the Ld.CIT(A)s / ITATs. The respective Ld.ARs further

The Ld.DR submitted that the assessees are not entitled to reagitate the issue and also submitted that the assessees had voluntarily filed their return of income declaring the incomes as taxable and therefore they cannot now dispute the same before the appellate authorities for the first time. Similarly, the Ld.DR submitted that there are no valid reasons stated by the assessees to condone the delay and therefore the appeals dismissed on the ground of limitation are in order. The Ld.DR also relied on the judgment of the Hon’ble Supreme Court reported in (2014) 11 SCC 351 and unreported judgment of the Hon’ble Supreme Court in Civil Appeal No. 7696 of 2021 dated 16/12/2021 wherein the Hon’ble Supreme Court had not condoned the huge delays of more than 10 years and 1011 days in preferring the appeals and therefore submitted that by applying the said principles, the delays are not condonable and therefore the orders of the Ld.CIT(A)s are in order and prayed to dismiss all the appeals.

We have heard the arguments of both sides and perused the materials available on record.

We have considered the facts and also the order of the Chandigarh Bench of this Tribunal in which the Tribunal had granted the deduction u/s. 10(10B) of the Act on the retrenchment compensation received by the BSNL employees pursuant to the Voluntary Retirement Scheme, 2019. Similarly, the assessees had restricted their claim of deduction on the leave encashment at Rs. 3,00,000/- as per the limit prescribed during such period. Before us, it was demonstrated that the issues has been decided by the several benches of this Tribunal and therefore the benefits could not be denied to the same set of employees by citing the delay in filing the appeals. We have also considered the various orders pronounced by the several Tribunals in which the Tribunals had condoned the similar delays in filing the appeals and also granted exemption u/s. 10(10B) of the Act on the compensation received on retrenchment. The Tribunals also accepted that the claim was made by the assessees mistakenly since the employer had deducted the TDS while making the said payments.

We have also considered the order of the Coordinate Bench of this Tribunal in ITA No. 992/Bang/2026 dated 29/05/2026 wherein the Tribunal had given the findings as follows: “15. However, with respect to condonation of delay, the ld. AR submitted that the ld. CIT(A) should have condoned the delay as in the case of 72 cases before the Coordinate Benches across the country in the case of BSNL employees on identical facts and circumstances, delay has been condoned by the ld. CIT(A) itself ranging from 900 to 2000 days. The assessee has produced the list of 72 cases where the delay is condoned by the ld. CIT(A). Further in

We have also considered the reasoning given by the Ld.CIT(A)s in some of the appeals that the assessees had not claimed such deductions in their return of income and also not filed any revised return or application u/s. 154 before the AO and therefore the appeals are not maintainable. It is not the case of the revenue that the assessees are not entitled for such deduction but on technical grounds, the revenue had denied the deductions. Further, the Ld.CIT(A) had also relied on the judgment of the Hon’ble Supreme Court reported in 284 ITR 323 in the case of Goetze (India) Ltd. vs. CIT and rejected the appeals on the ground of maintainability. We have also gone through the above cited judgment and we do not find that the Hon’ble Supreme Court had restricted the powers of the appellate authorities. In fact, the judgment had restricted the power of the AO and therefore the above said judgment would not be applicable to the facts of the present case. Further, the assessees had mistakenly claimed the deduction in the original return of income and therefore there is no question of saying that the assessees cannot raise the issue for the first time before the Ld.CIT(A). Therefore the orders of the Ld.CIT(A)s are liable to be interfered.

Similarly, the other issue of exemption claimed on the leave encashment was also addressed by the Hon’ble Kerala High Court in the above referred judgment by holding that the retired employees from BSNL under the Voluntary Retirement Scheme, 2019 are entitled for the leave encashment tax exemption as they are deemed to be Central Government employees. We have also considered the decisions of the Hon’ble Jaipur and Indore Benches in ITA No. 1139/JPR/2025 dated 07/10/2025 and ITA No. 233/IND/2025 dated 27/02/2026 wherein it was held that the enhanced limit of exemption of Rs. 25,00,000/- introduced by the Gazette Notification No.31/2023 dated 24.05.2023 w.e.f. 01/04/2023 u/s. 10(10AA) is a

Therefore both the issues are covered by the earlier orders of the Coordinated Benches of this Tribunal and against which no further proceedings were taken up by the revenue and therefore the said orders have become final and in that circumstances, we are also taking the same view. Insofar as the delay in filing the appeals before the Ld.CIT(A), we have taken note of the fact that the Ld.CIT(A)s had condoned the delay in filing the appeals of 72 assessees on identical facts in which the delays are ranging from 900 to 2000 days. We have also taken note of another fact that the Coordinated Benches had condoned the similar delays in the 144 appeals filed by the employees on similar facts and circumstances. In view of the above said facts, we are of the view that the Ld.CIT(A) ought to have condoned the delay and entertained the appeals and decided the appeals on merits instead of dismissing the appeals. Similarly, the orders of the Ld.CIT(A)s dismissing the appeals on the ground of maintainability is also not correct. Therefore, in the interest of justice, instead of condoning the delays and remitting this issue back to the Ld.CIT(A), we are passing these orders on merits after condoning the said delays and allow the appeals filed by the assessees and granted the relief of exemption u/s. 10(10B) and also granted the entire leave encashment received as eligible for exemption u/s. 10(10AA) of the Act. Considering the several orders of the Coordinated Benches of this Tribunal as well as the orders of the Ld.CIT(A), we are allowing the appeals filed by the assessees insofar as the claims made u/s. 10(10B) and 10(10AA) of the Act.

In the combined result, all the appeals filed by the assessees are allowed.