ABHAY HIRALAL GANDHI,AHMEDABAD vs. THE ITO, WARD-6(1)(1), AHMEDABAD

ITA 1955/AHD/2024Status: DisposedITAT Ahmedabad07 October 2026AY 2019-206 pages
AI SummaryAllowed

What were the facts?

The assessee, Abhay Hiralal Gandhi, an individual formerly employed by the State Bank of India, retired and received leave encashment of ₹8,90,808/- for Assessment Year 2019-20. The assessee claimed the entire amount as exempt under Section 10(10AA) of the Income Tax Act, 1961, which was initially accepted during processing under Section 143(1). Subsequently, the Assessing Officer (AO) passed an order under Section 154 of the Act on 29.10.2021, restricting the exemption to ₹3,00,000/- and disallowing ₹5,90,808/-. The assessee appealed to the Commissioner of Income Tax (Appeals) (CIT(A))/NFAC, who confirmed the disallowance, holding that an employee of a public sector undertaking like SBI is not a Central Government employee for the purpose of Section 10(10AA). 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 exemption claimed under Section 10(10AA) of the Act, and the restriction of the exemption to ₹3,00,000/- by the lower authorities is not sustainable. The Tribunal relied on the decision of the Ahmedabad Bench in Govardhan Deepchand Bhambhani v. ITO, which followed the principle that the enhanced limit for exemption under Section 10(10AA) as per CBDT Notification No. 31/2023 dated 24.05.2023, increasing the limit to ₹25,00,000/-, is applicable. This decision was also followed in Devendra Kumar Gupta Vs. CIT(Appeals) and Mohdhussain Gulamhussain Qureshi vs. ITO. The Tribunal found that the assessee's claim was within this revised limit. The Tribunal also noted the assessee's alternative contention regarding the exercise of jurisdiction under Section 154 but deemed it unnecessary to adjudicate separately due to the decision on the substantive issue. The disallowance of ₹5,90,808/- was directed to be deleted, and the AO was instructed to allow the exemption subject to verification of actual receipt and statutory conditions.

What were the issues?

1. Whether the assessee is entitled to exemption in respect of leave encashment received on retirement under Section 10(10AA) of the Income Tax Act, 1961, and if the restriction of exemption to ₹3,00,000/- by the lower authorities is sustainable? (Question of law and fact, concerning Section 10(10AA)). Assessee's contentions: The assessee argued that the CIT(A) erred in confirming the disallowance of ₹5,90,808/- claimed as exemption under Section 10(10AA). The assessee also contended that the CIT(A) erred in confirming the disallowance made by the AO under Section 154 without providing an opportunity of being heard. Revenue's contentions: The revenue, through the CIT(A)'s order, contended that an employee of a public sector undertaking (SBI) is not considered a Central Government employee for the purposes of Section 10(10AA), thus limiting the exemption to ₹3,00,000/-.

Which sections of the Income-tax Act were involved?

Section 10(10AA),Section 250,Section 154,Section 143(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SHRI TAPAS RAM MISRA & SHRI GANGADHAR PANDA

For Appellant: Shri Hardik Vora, AR
For Respondent: Shri Amit Pratap Singh, Sr. DR
Hearing: 17.09.2026Pronounced: 07.10.2026

PER GANGADHAR PANDA - ACCOUNTANT MEMBER:

The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi dated 14.11.2024 under Section 250 of the Income Tax Act, 1961, arising out of the assessment order dated 29.10.2021 completed under section 154 of the Income-tax Act, 1961 (“the Act”) for A.Y. 2019- 20, whereby the claim of exemption under section 10(10AA) of the Act in respect of leave encashment received on retirement was restricted to ₹3,00,000/- and the balance amount of ₹5,90,808/- was

The order continues below.

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