ANIL KUMAR SHUKLA,INDORE vs. COMMISSIONER OF INCOME-TAX (APPEALS), INDORE

आदेश/O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by the order of first appeal dated 18.05.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“Ld. CIT(A)”], which in turn arises out of rectification-order dated 02.06.2022 passed by learned CPC, Bengaluru [“Ld. AO”] u/s 154 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2020-21, the assessee has filed this appeal.

(i) The assessee-individual is a retired employee of State Bank of India.

During previous year 2019-20 relevant to AY 2020-21, he retired and

received a sum of Rs. 9,60,130/- on account of ‘leave encashment’.

For AY 2020-21, the assessee filed his original return of income on

17.12.2020 declaring a total income of Rs. 14,34,540/-. In the original

return so filed, the assessee claimed exemption of Rs. 3,00,000/- u/s

10(10AA) out of leave encashment of Rs. 9,60,130/- and offered

excess amount of Rs. 6,60,130/- as taxable income.

(ii) Subsequently, the assessee filed a revised return of income declaring a

total income of Rs. 7,74,410/- on 30.03.2021. In the revised return so

filed, the assessee claimed full exemption of Rs. 9,60,130/- u/s

10(10AA) in respect of leave encashment. Thus, the assessee reduced

the total income and claimed a refund in revised return.

(iii) The Ld. AO processed assessee’s revised return vide intimation dated

26.11.2021 u/s 143(1) but allowed exemption to the extent of Rs.

3,00,000/- only. This resulted in an addition of Rs. 6,60,130/- and

computation of total income at Rs. 14,34,540/- by the Ld. AO.

(iv) The assessee filed rectification-application u/s 154 to the Ld. AO

whereupon the Ld. AO passed rectification-order dated 02.06.2022

keeping total income at Rs. 14,34,540/- as assessed in the intimation

u/s 143(1).

(v) Finding no success at Ld. AO level, the assessee carried matter in

first-appeal before Ld. CIT(A) and made submissions. The Ld. CIT(A),

however, observed that the assessee was not an employee of Central

Govt. or State Govt. He further observed that the ceiling limit of Rs.

3,00,000/- applicable to “Non-Govt. employee” for leave encashment

remained static and had not been enhanced since 1998. Accordingly,

Ld. CIT(A) did not grant any relief to assessee. The concluding para of

order passed by Ld. CIT(A) is re-produced below for an immediate

reference:

“5.3. To conclude the issue, I have deliberated upon the relevant provisions of law contained in that behalf and have noticed that the Assessing Officer has correctly applied the provisions of sec. 10(10AA) in the present case while passing the order u/s 154 of the I.T. Act 1961. It is clear and with no ambiguity that the maximum amount exempt from tax for an employee who is not a Government Employee on account of leave encashment cannot exceed Rs. 3,00,000/-. The government has issued a notification [No. S.O. 588(E) dated 31.05.2002] in terms of Clause (ii) of sub-section 10AA of Section 10 whereby the limit to which such income is exempted, is prescribed as Rs. 3,00,000/- which reads as follows: "S.0.588 (E). 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 regards 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 rupees 3,00,000 (Rupees three lakhs only) as the limit in relation to employees mentioned in that sub-clause who retire, whether on superannuation or otherwise after the 1st day of April, 1998.” In the present case, the retired employee is not a Central Government or State Government employees. Agreed that the limit for exemption has remained static and has not been enhanced since 1998, even though, multiple Pay Commissions have come into force and have been implemented/adopted. So far as the challenge to provisions of Section 10 (10AA) of the Act on the ground of discrimination is concerned, I am of the view that there is no merit therein. As such the Ground of appeal is dismissed.”

(vi) Still aggrieved, the assessee has come in next appeal before us.

amount of exemption in respect of leave encashment.

submissions. He made a straightforward submission that the lower-

authorities have treated him as a “non-govt. employee” and accordingly

restricted exemption to the ceiling limit of Rs. 3,00,000/-. However, the

ceiling limit had already been revised/increased to Rs. 25,00,000/- by CBDT

through Notification No. 31/2023/F.No. 200/3/2023-ITA-I dated

24.05.2023. He submitted that revised/increased limit would apply to the

previous year 2019-20/AY 2020-21 (under consideration). He submitted

that this proposition is already accepted in several decisions of ITAT

Benches including a very recent order dated 27.02.2026 of this very bench

in Narendra Kumar Mishra Vs. ITO, ITA No. 233/Ind/2025; copy of order

is filed from which the relevant portion is re-produced below:

“12. We have considered rival submissions of both sides and considered the issue, facts and the judicial rulings cited before us. At first, we re-produce the relevant parts of certain decisions cited by Ld. AR: Govardhan Deepchand at S.No. 1: “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 res- integra 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 which was claimed in the return of income filed as exempt u/s 10(10AA) of theAct. 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 Suo motu 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 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.”

Ram Dev Daiya at S.No. 5:

“22. As noted above, the issue related to denial of exemption under Section 10(10AA) amounting to Rs.13,12,806/-. The assessee is a salaried individual who had returned leave encashment salary received on retirement amounting to Rs.13,12,806/- and claimed exemption of the same u/s 10(10AA) of the Act. The same was however restricted to Rs.3 lacs while processing the return of income of the assessee by the CPC in terms of the provisions of Section 10(10AA) of the Act.

Name of the Appellant Sr Name of the Assessment Date of ITAT Bench No and ITA No Employer Year Order Mr. Ram Charan 1) Bank Employee 2020-21 Jaipur 27/06/2023 Gupta ITA No 408/JPR/2022 Mr. Satish Kumar Electricity 2) 2018-19 Chandigarh 12/09/2023 Thakur ITA Board No211/CHD/2023 Himachal Pradesh Mr. Mangala Ram 3) BSNL 2018-19 Jaipur 04/10/2023 Nimbark ITA No 542/JPR/2023 Mr. Govind Electricity 4) 2020-21 Jaipur 31/10/2023 Board Chatwani ITA Rajasthan No 385/JPR/2023 Mr. Devendra Kumar Ajmer Vidyut 2020-21 Jaipur 5) 18/02/2025 Gupta MA No Vitaran Nigam 49/JPR/2023 (Arising Ltd Rajasthan out of ITA No 17/JPR/2023) Mr. Dashrath 6) BSNL 2020-21 Jaipur 05/03/2025 Kumar Sen ITA No 1258/JPR/2024 Mr. Devi Dutt 7) State Bank of 2020-21 Jaipur 13/03/2025 Agrawal ITA No India 1375/JPR/2024 Mr. Suman Kumar Oil and 8) 2020-21 Ahmedaba 18/03/2025 Jha ITA No Natural Gas d 1179/AHD/2024 Commission Ltd Medical Mr. Dinesh Kumar 9) 2021-22 Jaipur 07/04/2025 Mittal ITA No Department 1570/JPR/2024 Rajasthan Mr.Sham Sunder 10) Canara Bank 2021-22 Delhi 21/04/2025 Sahani ITA No 129/DEL/2025 Mrs. Neelam Gupta 11) Bank of Baroda 2020-21 Delhi 21/04/2025 ITANo081/DEL/2025 Mr. Sharad 12) 2020-21 Agra 22/04/2025 Shukla ITA No 108/AGR/2024 State Bank of Mr. Vijay Kumar 13) 2019-20 Agra 18/06/2025 India Jain ITA No 175/AGR/2022 State Bank of Mr. Anil Kumar 14) 2020-21 Agra 18/06/2025 India Khatri ITA No 187/AGR/2022 15) Punjab National 2020-21 Ahmedaba 28/07/2025 Mr. Goverdhan Bank d Bhambhani ITA No 289/AHD/2025 State Bank of Mrs. Sujata 16) 2022-23 Jaipur 31/07/2025 Bikaner & Gupta ITA No Jaipur 915/JPR/2025 17) Life Insurance 2022-23 Jaipur 06/08/2025 Mr. Om Prakash Corporation of Khandelwal ITA No India 887/JPR/2025 18) Punjab & Sind 2021-22 Delhi 28/08/2025 Mr. Ashok Arora Bank ITA No 2942/DEL/2025 19) Mr. Chandra State Bank of 2021-22 Jaipur 07/10/2025 Prakash India Vashishtha ITA No 1139/JPR/2025 Canara Bank Mr. Rajiv Kumar 20) 2020-21 Delhi 29/10/2025 Wadhwa ITA No 5897/DEL/2025 21) Canara Bank 2021-22 Delhi 29/10/2025 Mr. Vijay Pal Gupta ITA No 5915/DEL/2025

22) State Bank of 2020-21 Pune 31/10/2025 Mr. Sudhakar G. India Paldewar ITA No 1781/PUN/2025

The appeal of the assessee is accordingly allowed.” 13. Thus, in these decisions, the benches of Tribunal have applied the revised limit of Rs. 25,00,000/- to earlier AYs 2018-19, 2019-20, 2020-21 & 2021-22 after due analysis. There is no contrary decision referred by Ld. DR. In that view of matter, we accept the claim of assessee that he is entitled to the benefit of revised ceiling limit of Rs. 25,00,000/- as per Notification. Accordingly, we remand this issue to the file of Ld. AO for the limited purpose of re-computation of the quantum of exemption u/s 10(10AA) taking into account the revised limit of Rs. 25,00,000/- and give appropriate amount of exemption to assessee. Consequently, the Ground No. 3 is allowed for statistical purpose.” 5. Accordingly, he prayed that the benefit of above decision must also be

extended to present appeal.

respectfully follow the decision of this very bench in Narendra Kumar

Mishra (supra) as well as the decisions of other co-ordinate benches

referred therein. Accordingly, we too hold that the assessee is entitled to the

benefit of the revised/increased ceiling limit of Rs. 25,00,000/- as per CBDT

Notification No. 31/2023 dated 24.05.2023, for the purpose of computing

exemption u/s 10(10AA) for AY 2020-21. The matter is remanded to the file

of the Ld. AO for the limited purpose of re-computing the amount of

exemption u/s 10(10AA) by applying the revised/increased limit of Rs.

25,00,000/-. The addition of Rs. 6,60,130/- (or part thereof) made by Ld.

AO shall stand deleted upon re-computation by Ld. AO giving effect to

the revised/increased limit.

justice’. We appreciate that the assessee himself appeared in present appeal

and made submissions in a clear and concise manner supported by relevant

documents.

Order pronounced in open court on 24/04/2026

Sd/- Sd/- (PARESH M. JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore

िदनांक/Dated : 24/04/2026 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore

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