SHYAM LAL PANWAR,JODHPUR vs. ITO, W-3(1), JODHPUR

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ITA 205/JODH/2026Status: DisposedITAT Jodhpur26 October 2026AY 2021-228 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the enhanced exemption limit of Rs. 25,00,000/-, as prescribed by CBDT Notification No. 31/2023 dated 24.05.2023, is applicable to the leave encashment received by the assessee on retirement during the year relevant to Assessment Year 2021-22. The Tribunal noted that coordinate Benches of the Tribunal have consistently allowed the benefit of the enhanced limit in similar cases, citing decisions like Renu Moongia, Ram Charan Gupta, and Govind Chhatwani. The Tribunal agreed with the principle that CBDT circulars, if beneficial to the assessee, can mitigate the rigors of the law. Since the assessee's leave encashment amount of Rs. 5,25,698/- is below the enhanced limit, the assessee is eligible for exemption of the entire amount. The order of the Addl. CIT(A) was set aside, and the Assessing Officer was directed to allow the assessee's claim for exemption of Rs. 5,25,698/- under Section 10(10AA) of the Act.

What were the facts?

The assessee, Shyam Lal Panwar, a retired employee of Life Insurance Corporation of India, filed his return for AY 2021-22 on 20.09.2021, declaring a total income of Rs. 10,71,780/-. He claimed the entire leave encashment of Rs. 5,25,698/- as exempt under Section 10(10AA) of the Income Tax Act, 1961. The CPC, processing the return under Section 143(1), restricted the exemption to Rs. 3,00,000/-, making an addition of Rs. 2,25,698/-. The assessee's appeal to the Addl. CIT(A) was dismissed, upholding the CPC's action based on the then-prevailing limit of Rs. 3,00,000/-. The assessee filed an appeal before the ITAT with a delay of 560 days, which was condoned.

What were the issues?

1. Whether the assessee is entitled to claim the entire leave encashment of Rs. 5,25,698/- as exempt under Section 10(10AA) of the Income Tax Act, 1961, considering the subsequent enhancement of the exemption limit. Assessee's Contention: The assessee argued that the monetary limit for exemption under Section 10(10AA)(ii) was subsequently enhanced to Rs. 25,00,000/- by CBDT Notification No. 31/2023 dated 24.05.2023, and this enhanced limit should apply to his claim for AY 2021-22. He relied on decisions of coordinate Benches of the Tribunal, including Ram Charan Gupta Vs. ITO, Govardhan Deepchand Bhambhani Vs. ITO, and Renu Moongia Vs. The ITO. Revenue's Contention: The Revenue supported the orders passed by the lower authorities and requested to uphold them.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “DB”, BENCH, JODHPUR

Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar

IN THE INCOME TAX APPELLATE TRIBUNAL “DB”, BENCH, JODHPUR (VIRTUAL HEARING) Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member ITA No: 205/JODH/2026 Assessment Year: 2021-22 Shyam Lal Panwar ITO Ward 3(1) 115 Mahaveer Aayakar Bhawan, Lal Mahamandir, Jodhpur Vs maidan, PAOTO C Road, Rajasthan-342006 Jodhpur

PAN: AAPPP3356H (Appellant) (Respondent) Assessee Represented: Shri Shyam Lal Panwar (Self) Revenue Represented: Ms. Nidhi Nair, Addl. CIT Sr. DR (thru V.C.) Date of hearing : 18-08-2026 Date of pronouncement : 26-10-2026 O R D E R Per T.R. Senthil Kumar, Judicial Member: This appeal is filed by the assessee as against the order dated 20.05.2024 passed by the Addl./Joint Commissioner of Income Tax (Appeals)-2, Nagpur (hereinafter referred to as “Ld. Addl. CIT(A)”), arising out of the intimation passed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) relating to the Assessment Year 2021-22 2. The Registry has noted that there is a delay of 560 days in filing the above appeal. The assessee by way of Notarized Affidavit dated

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31.01.2026 stated that, he is not well versed with Income Tax Act and rules and he always seek the advice from the Tax Consultant who assured that he will file proper reply. The assessee being a salaried employee not faced any tax litigation, was full confident on his Tax Consultant, but assessee got communicated a high tax demand pending as well as not getting any proper communication from Tax Consultant. Then the assessee advised from another Chartered Account and he came to know that assessee is required to file appeal against the appellate order thereby the delay in filing the appeal and requested to condone the delay.

2.1. Considering the above submission of the assessee, where reasonable cause has been made out, thereby the delay of 560 days in filing the above appeal is hereby condoned.

3.

Brief facts of the case are that the assessee is a retired employee of public sector undertaking/Life Insurance Corporation of India. The assessee filed his return of income for the AY 2021-22 on 20.09.2021 declaring total income of Rs. 10,71,780/-, wherein claimed entire leave encashment amount of Rs. 5,25,698/- received at the time of retirement as exempt from tax u/s 10(AA) of the Act. The Central Processing Centre (CPC), while processing the return under section 143(1) of the Act, restricted the exemption claimed under section 10(10AA) in respect of leave encashment received on retirement to Rs. 3,00,000/-, thereby made addition of Rs. 2,25,698/-.

4.

Aggrieved against the same, the assessee challenged before the Ld. Addl. CIT(A) claiming exemption in respect of the entire amount of Rs.5,25,698/-. The Ld. Addl. CIT(A) observed that section 10(10AA)(i) of

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the Act provides for exemption in respect of leave encashment received by employees of the Central or State Government, whereas section 10(10AA)(ii) governs such receipts in the case of other employees, subject to the monetary limit notified by the Central Government. Since the limit prescribed by the notification then relied upon was Rs.3,00,000/-, the Ld. Addl. CIT(A) upheld the adjustment made by the CPC and dismissed the assessee’s appeal.

5.

Aggrieved against the appellate order, the assessee is in appeal before us raising the following Grounds of Appeal:-

It is clear from the above that I claim full exemption as per CBDT rule but you have allowed exemption for 3 lacs only which is not correct. Please allow me full exemption. 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. 5,25,698/- 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 5,25,698/- Based on these observations the Id. 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 Order bad in law CASE LAWS 1. Vijay Kumar Jain VS Income-tax Officer, Ward 2(3)(1), Jhansi. 2. Govind Chhatwani VS CIT (Appeal)

6.

The solitary issue in the present appeal pertains to the restriction of claim of exemption of leave encashment received by the assessee to the extent of Rs.3 lakhs. The assessee having received leave encashment to the tune of Rs.5,25,698/-, and his claim is that, he was entitle to the entire leave encashment being treated as exempt in terms of provisions of Section 10(10AA) of the Act.

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7.

At the outset, the assessee submitted before us that the monetary limit for exemption under section 10(10AA)(ii) had subsequently been enhanced to Rs.25,00,000/- by CBDT Notification No.31/2023 dated 24.05.2023. It was contended that the enhanced limit should also apply to the assessee’s claim for Assessment Year 2021-22. In support, the assessee relied upon decisions of the coordinate Benches of the Tribunal, including Ram Charan Gupta Vs. ITO, Ward-4(2) Jaipur in ITA No. 408/JPR/2022, Govardhan Deepchand Bhambhani Vs. ITO, Ward -7 in ITA No. 289/JPR/2025 and Renu Moongia Vs. The ITO Ward-4(2), Jaipur in ITA No. 1196/JPR/2026.

8.

Per contra, Ld. CIT-DR appearing for the Revenue supported the orders passed by the lower authorities and requested to uphold the same.

9.

We have heard the rival submissions and perused the materials available on record. The issue for consideration is whether the enhanced exemption limit of Rs.25,00,000/- prescribed by CBDT Notification No.31/2023 dated 24.05.2023 is applicable to the leave encashment received by the assessee on retirement during the year relevant to Assessment Year 2021-22.

10.

We find that the coordinate Benches of the Tribunal have considered identical issue and have allowed the benefit of the enhanced limit in respect of leave encashment received in earlier years as well. In particular, in Renu Moongia (supra), the Tribunal, after considering the earlier decisions in Ram Charan Gupta (supra), Govind Chhatwani v. CIT(A), ITA No.385/JP/2023, and Vijay Kumar Jain v. ITO, ITA No.175/Agra/2022, held that the enhanced limit of Rs.25,00,000/- was

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available for the purpose of exemption under section 10(10AA) of the Act. The Tribunal accordingly directed that the assessee be allowed exemption within the enhanced limit. The relevant findings of the coordinate bench in the case of Renu Moongia (supra) is reproduced hereunder:-

“12. In the backdrop of the aforesaid facts and circumstances of this case the sole question arises for determination is "as to whether the assessee, who has retired after putting in more than 30 years of service is entitled for exemption of the entire amount of Rs. 9,04,669/- received by him on account of leave encashment?" 13. Ld. AR for the assessee contended that Hon'ble Delhi High Court in case of Kamal Kumar Kalia & Ors. Vs. Undion of India & Ors. in WP(C) 11846/2019 dated 08.11.2019, wherein claim of the assessee for exemption/deduction of Rs. 6,97,100/- on account of leave encashment on superannuation was allowed. The assessee also relied upon CBDT notification No. 31/2023 dated 24.05.2023. 14. Now this issue is no more res-Integra as the Coordinate Bench of the Tribunal has also decided an identical issue in case of Vijay Kumr Jain vs. ITO in ITA No. 175/Agr/2022 dated 18.06.2025. For ready perusal, operative part thereof is extracted 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

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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." 11. Another coordinate Bench of Jaipur Tribunal vide order dated 31.10.2023 passed in ITA No. 385/JP/2023 for A.Y. 2020-21 in the case of Govind Chhatwani vs. CIT(Appeals), has followed Ram Charan Gupta (supra) and held that the assessee was eligible for the claim of deduction in respect of the exemption of his leave encashment exceeding Rs. 3,00,000/-, as the CBDT Notification No. 31/2023 dated 24.05.2023 has raised the limits to Rs.25,00,000/-. 12. It is established principle of law that a circular of CBDT, no doubt, has the force of law, can even supplant the law in case where it is beneficial to the assessee and can mitigate or relax the rigors of law. The powers of CBDT in issuing circular for general guidance are subject to two important conditions. One is that it does not entitle the Income-tax authority including the Board to issue instructions or circulars contrary to the substantive provisions of law or curtailing the relief, to which the assessee is otherwise entitled under law. The circular cannot, therefore, curtail the benefit conferred on the assessee or be contradictory to the Act. Hon'ble Apex Court in Union of India vs. Wood Paper Limited AIR 1991 SC 2049 has held that the condition regulating the computation of benefit should be interpreted liberally. 13. In view of this legal position, we are in respectful agreement of what has been held by the afore cited coordinate Jaipur Benches of this Tribunal as noted hereinabove. We accordingly answer the aforesaid question in favour of the assessee and against the Revenue and hold that the appellant/assessee is eligible to claim deduction of Rs.7,51,755/- in view of limits raised to Rs.25,00,000/- vide Notification No. 31/2023 dated 24.05.2023. The appeals is thus liable to be allowed."

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15.

So in view of what has been discussed above, we are of the considered view that the assessee, who has received an amount of Rs. 9,04,669/- on account of leave encashment as retiral benefits after putting in more than 30 years in Life Insurance Corporation of India is exempted u/s 10(10AA) of the Act. Ld. CIT(A) has erred in confirming the disallowance made by the AO/CPC, hence the AO is directed to allow the claim of the assessee.” 11. In the present case, the amount of leave encashment received by the assessee, namely Rs.5,25,698/-, is below the enhanced limit of Rs.25,00,000/-. The Revenue has not brought to our notice any decision reversing the aforesaid view of the coordinate Benches. Respectfully following the decisions cited above, we hold that the assessee is entitled to exemption in respect of the entire amount of Rs.5,25,698/- received as leave encashment, subject to the provisions of section 10(10AA) of the Act.

12.

We accordingly set aside the order of the Ld. Addl. CIT(A) on this issue and direct the Jurisdictional Assessing Officer to allow the assessee’s claim for exemption of Rs.5,25,698/-under section 10(10AA) of the Act. The grounds of the appeal of the assessee are accordingly allowed.

In the result, the appeal filed by the assessee is hereby allowed. 13. Order is pronounced in the open Court on 26-10-2026

Sd/- Sd/- (Annapurna Gupta) (T. R. Senthil Kumar) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 26.10.2026 Dhananjay K., Sr. PS True Copy

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