SATISHKUMAR MANSINH BHURIA,BHARUCH vs. ITO, WARD-1, AGARTALA, AGARTALA

ITA 190/GTY/2026Status: DisposedITAT Guwahati30 September 2026AY 2022-2319 pages
AI SummaryAllowed

What were the facts?

The assessee, Santoshkumar Mansinh Bhuria, an employee, received leave encashment of Rs.19,08,776/- upon retirement. He claimed this entire amount as exempt under Section 10(10AA)(ii) of the Income Tax Act, 1961, in his return filed on July 29, 2022. The Assessing Officer (AO), processing the return under Section 143(1), allowed an exemption of only Rs.3,00,000/-, making an addition of Rs.16,08,776/- and raising a demand of Rs.1,47,500/-. The assessee appealed to the CIT(A), who upheld the AO's decision, citing a CBDT notification dated May 24, 2023, which was applicable from April 1, 2023, and thus not allowing the increased limit for the assessment year 2022-23. The assessee then filed an appeal before the Income Tax Appellate Tribunal (ITAT).

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to the benefit of the enhanced exemption limit of up to Rs.25,00,000/- under Section 10(10AA)(ii) of the Act in respect of leave encashment received on retirement. The Tribunal noted that the issue of deduction under Section 10(10AA)(ii) is no longer res integra, citing decisions of co-ordinate benches. Specifically, the Tribunal referred to a decision that allowed the enhanced limit based on Notification No. 31/2023, considering it applicable even if issued belatedly, and that the assessee's claim was within the revised limit. The Tribunal also referenced a decision that found adjustments made by the CPC under Section 143(1)(a) invalid without prior intimation, adhering to the principles of natural justice. The Tribunal concluded that the restricting of the deduction by the lower authorities was not sustainable and liable to be deleted. The action of the CPC in restricting the exemption to Rs.3,00,000/- and the confirmation by the CIT(A) were set aside. The AO was directed to allow the exemption as claimed by the assessee. The Tribunal did not expressly leave any issue undecided.

What were the issues?

1. Whether the adjustment made by the CPC under Section 143(1)(a) of the Income Tax Act, 1961, disallowing the full exemption claimed for leave encashment under Section 10(10AA)(ii), was valid without issuing prior intimation to the assessee? 2. Whether the assessee is entitled to the enhanced exemption limit of Rs.25,00,000/- for leave encashment under Section 10(10AA)(ii) of the Act for the assessment year 2022-23, considering the CBDT notification issued on May 24, 2023. Assessee's contentions: The assessee argued that the AO/CPC wrongly disallowed the exemption. The CBDT Notification No. 31/2023 dated May 24, 2023, is a beneficial and retrospective amendment. Various benches of the Tribunal have allowed the enhanced limit. Furthermore, the AO/CPC cannot make additions under Section 143(1)(a) without prior intimation and has limited powers for disallowances under this section. Revenue's contentions: The revenue supported the orders of the AO and CIT(A), arguing that exemption provisions should be read strictly. The notification was issued on May 24, 2023, effective from April 1, 2023, and should only be applicable from its publication date. The CPC has the power to disallow wrong claims.

Which sections of the Income-tax Act were involved?

Section 10(10AA)(ii),Section 250,Section 143(1),Section 143(1)(a)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, GUWAHATI BENCH, GUWAHATI

For Appellant: Shri Bhupendra Mehta, Advocate
For Respondent: Shri Santosh Kumar Karnani, Sr. DR
Hearing: 10.09.2026Pronounced: 30.09.2026

PER LAXMI PRASAD SAHU, AM: This appeal is filed by the assessee against the order passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by the learned Addl./Jt. Commissioner of Income-tax (Appeals)- 2, Noida [hereinafter referred to as ‘the ld. CIT(A)’], dated 16.02.2026 vide DIN No. ITBA/APL/S/250/2025-26/1086073434(1) arising out of assessment order passed by the Assessing Officer (In short, ‘the AO’) for disallowing leave encashment of Rs.16,08,776/- u/s 10(10AA)(ii) of the Act.

2 ITA No.190/Gty/2026/AY 2022-23

2.

Briefly stated the facts of the case are that the assessee is an employee and got sup

The order continues below.

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