ELANGOVAN THILLAI GOVINDARAJAN,CHENNAI vs. ITO, NCW-4(6), CHENNAI

The brief facts of the case, as borne out from the material available on record, are that the assessee is an individual and a retired employee of M/s.Chennai Petroleum Corporation Limited, having superannuated from service during the month of April, 2022. Upon his retirement, the assessee received a sum of Rs.22,22,472/- towards leave encashment during the previous year relevant to the assessment year under consideration. While filing the return of income, the assessee duly disclosed the aforesaid receipt under the head "Income from Salaries" and claimed exemption of Rs.3,00,000/- u/s.10(10AA) of the Act, being the amount reflected by the employer in Form No.16 issued for the relevant assessment year.

It is the case of the assessee that the employer had restricted the exemption to Rs.3,00,000/- solely because the said limit was the prevailing statutory ceiling as on the date of issuance of Form No.16. Consequently, while processing the return of income u/s.143(1) of the Act, the CPC, vide intimation dated 24.07.2023, accepted the returned income and allowed exemption u/s.10(10AA) of the Act only to the extent of Rs.3,00,000/-, as claimed in the return of income.

The Central Board of Direct Taxes (CBDT), in exercise of the powers conferred u/s.10(10AA) of the Act, issued Notification No.31/2023 dated 24.05.2023 enhancing the maximum exemption in respect of leave encashment received from Rs.3,00,000/- to Rs.25,00,000/-. The said notification was specifically made applicable with retrospective effect. The explanatory memorandum accompanying the notification further clarified that the retrospective operation was intended to confer a beneficial relief and that no taxpayer would be adversely affected on account of such retrospective enhancement.

It is an admitted position that the appeal before the Ld.CIT(A) came to be filed with a delay of 839 days. During the appellate proceedings, the assessee filed a petition seeking condonation of delay explaining that he is a retired employee, not well versed with the intricacies of income-tax appellate procedures, and that the delay had occurred on account of his bona fide lack of awareness regarding the legal remedy available to him consequent upon the retrospective amendment brought about by the CBDT notification along with judicial precedents decided in favour of the tax payers. It was thus pleaded that the delay was neither intentional nor attributable to any mala fide conduct and, therefore, deserved to be condoned in the interest of substantial justice.

The Ld.CIT(A), however, was not persuaded by the explanation furnished by the assessee. Holding that the reasons assigned did not constitute sufficient cause for condoning the substantial delay of 839 days, the Ld.CIT(A), vide the impugned appellate order dated 17.02.2026, declined to condone the delay and consequently dismissed the appeal in limine, without entering into or adjudicating the issue on merits.

Aggrieved by the action of the Ld.CIT(A) in refusing to condone the delay and dismissing the appeal at the threshold, the assessee has preferred the present appeal before this Tribunal.

The Ld.AR appearing on behalf of the assessee vehemently submitted that the Ld.CIT(A) was not justified in adopting a hyper-technical approach while considering the application for condonation of delay. It was contended that the delay was neither wilful, deliberate nor attributable to negligence but had occurred solely on account of the bona fide circumstances explained before the first appellate authority. The Ld. AR submitted that the assessee, being a retired employee with limited knowledge of the appellate procedure and the legal implications arising out of the retrospective enhancement of exemption, had approached the appellate authority immediately upon becoming aware of his entitlement. It was, therefore, pleaded that the delay deserved to be condoned in the interest of substantial justice so that the assessee's legitimate claim could be examined on merits.

Proceeding further on the merits of the issue, the Ld. AR submitted that the controversy involved in the present appeal is no longer res integra and stands squarely covered in favour of the assessee by the decision of this Tribunal rendered in ITA No.96/Chny/2026, wherein under identical facts and circumstances, the Tribunal had held that the enhanced exemption limit of Rs.25,00,000/- prescribed by CBDT Notification No.31/2023 is applicable retrospectively and consequently the entire amount of eligible leave encashment is entitled to exemption u/s.10(10AA) of the Act. Accordingly, it was prayed that the delay may first be condoned and thereafter the assessee be granted exemption in respect of the entire leave encashment amounting to Rs.22,22,472/-.

Per contra, the ld.DR strongly relied upon the findings recorded by the authorities below. It was submitted that the Ld.CIT(A) had rightly refused to condone the inordinate delay in filing the appeal as the assessee had failed to establish sufficient cause warranting such condonation. The Ld.DR further submitted that, in the absence of a satisfactory explanation for the delay, the

We have heard the rival submissions and perused the material available on record. The facts borne out from the record reveal that the only reason for which the appeal of the assessee came to be dismissed by the Ld.CIT(A) was on account of refusal to condone the delay of 839 days in filing the appeal and, consequently, the issue raised on merits was never examined. Therefore, the limited controversy that presently arises for our consideration is whether the Ld.CIT(A) was justified in declining to condone the delay and dismissing the appeal in limine without adjudicating the substantive claim of exemption u/s.10(10AA) of the Act.

It is an undisputed fact that the assessee is a retired employee who had superannuated from the services of M/s.Chennai Petroleum Corporation Limited during the relevant previous year and had received leave encashment amounting to Rs.22,22,472/-. It is equally undisputed that at the time of filing the return of income, the employer had reflected exemption u/s.10(10AA) of the Act only to the extent of Rs.3,00,000/- in Form No.16, as the statutory ceiling prevailing at that point of time was Rs.3,00,000/-. Subsequently, the CBDT, by Notification No.31/2023 dated 24.05.2023 issued in exercise of the powers conferred u/s.10(10AA) of the Act, enhanced the monetary ceiling for exemption from Rs.3,00,000/- to Rs.25,00,000/- and the said enhancement was specifically made applicable retrospectively so as to extend the benefit to eligible taxpayers. According to the assessee, since the leave encashment received by him was only Rs.22,22,472/-, the entire amount became eligible for exemption under the amended notification and, therefore, the intimation issued u/s.143(1) of the Act restricting the exemption to Rs.3,00,000/- resulted in denial of a statutory benefit conferred retrospectively.

The explanation furnished by the assessee for the delay discloses that he is a retired employee having no specialised knowledge of income-tax

In the present case, we find considerable force in the contention of the assessee that the delay was occasioned on account of his bona fide ignorance regarding the retrospective enhancement of exemption and the consequential remedy available under the Act. The assessee is a retired salaried employee and not a habitual litigant. More importantly, the issue sought to be agitated before the appellate authority concerns the availability of a beneficial exemption introduced through a retrospective notification issued by the CBDT itself. When the legislature or the delegated authority consciously extends a beneficial provision with retrospective effect for the benefit of taxpayers, the appellate authorities are expected to facilitate examination of such claims on merits rather

We further find that the issue on merits is no longer res integra. This Tribunal, in the case of Balasubramanian Venkatachalaperumal vs. DCIT in ITA No.96/Chny/2026 dated 04.05.2026, while considering an identical controversy arising out of the retrospective enhancement of exemption u/s.10(10AA) of the Act pursuant to CBDT Notification No.31/2023, has held that the enhanced exemption limit of Rs.25,00,000/- is applicable retrospectively and that eligible assessees are entitled to the benefit of the enhanced monetary ceiling. The said decision, being directly on the issue, has a substantial bearing on the controversy involved in the present appeal. Since the appeal before the Ld.CIT(A) came to be dismissed solely on the ground of limitation, the first appellate authority had no occasion to examine the factual eligibility of the assessee in the light of the aforesaid binding decision of the Tribunal. In our considered opinion, interests of justice would therefore require that the assessee should not be denied an adjudication on merits merely because the appeal was presented belatedly, especially when a prima facie sustainable claim founded upon a subsequent beneficial retrospective notification and a binding decision of the Tribunal is involved.

Having regard to the totality of the facts and circumstances of the case, the nature of the explanation furnished by the assessee, the absence of any mala fide or deliberate negligence, the beneficial character of the statutory provision involved and the settled legal position that substantial justice deserves precedence over technical considerations, we are of the considered view that the Ld. CIT(A) was not justified in refusing to condone the delay of 839 days. Accordingly, the delay in filing the appeal before the first appellate authority

In the result, the appeal of the assessee is allowed for statistical purposes.