SHREYANSH SURANA,BEAWAR vs. INCOME TAX OFFICER, INCOME TAX OFFICE

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “SMC” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI T. R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.303/JPR/2026 (Assessment Year: 2024-25)

Shreyansh Surana Vs. CPC, 174 Lokasha Nagar, Bengaluru Beawar H.O.Beawar C/o ITO Ward 1 Ajmer Beawar �थायीलेखासं./जीआइआरसं./PAN/GIR No: AVJPS 7600Q Appellant .. Respondent Appellant by : Sh. Mukesh Agarwal, CA (thru V.C.) Respondent by : Ms. Namita Patel, JCIT Date of Hearing 28.07.2026 Date of Pronouncement 27.10.2026 O R D E R Per Annapurna Gupta, AM:- The present appeal has been filed by the assessee against the order passed by the Office of the Commissioner of Income Tax, Appeal Addl./JCIT(A) Madurai (hereinafter referred to as “Ld. CIT(A)”), dated

P a g e | 2 ITA No.303/JPR/2026 Shreyansh Surana 18.12.2025 under Section 250of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. The grounds raised read as under:- REJECTION OF THE REQUEST FOR RECTIFICATION OF APPARENT MISTAKE That the ld. AO, CPC was not justified in law and on facts of the case in not rectifying the apparent mistake as the appellant requested to reprocess the return to allow rebate u/s.87A as only option available to him on the system. NOT DISCUSSION OF THE GROUND OF REJECTION OF THE REQUEST FOR RECTIFICATION OF APPARENT MISTAKE That the Id. CIT(A) was also not justified in law and on facts of the case in dismissing the appeal without discussing this ground properly DISALLOWANCE OF REBATE U/S 87A The ld. Lower authorities were not justified in law and on facts of the case in restricting the same to the tax on balance income taxable at slab rate and not allowing the full rebate as claimed u/s 87A on total income including Short Term Capial Gain chargeable at special rates u/s.112A. The appellant prays your honours indulgence to add, alter, amend and/or withdraw any grounds of appeal on or before hearing. 3. The solitary issue in the present appeal relates to denial of rebate of tax claimed by the assessee u/s 87A of the Act, on the taxes paid on income earned on short term capital gain. The denial of rebate was made by the CPC while processing the return of income filed by the assessee, in the intimation made u/s 143(1) of the Act. The assessee had e-filed his return of income declaring total income of Rs.4,93,420/- under the new regime. The return was processed by the AO, CPC u/s 143(1) of the Act, vide intimation/order dated 21.09.2024, computing the total income as returned. The total income consists of income from business of

P a g e | 3 ITA No.303/JPR/2026 Shreyansh Surana Rs.37,949/-, income from speculation business of Rs.132/ , income from speculation business of Rs.132/ , income from speculation business of Rs.132/-, income from short term capital gain of Rs.3,88,193/ short term capital gain of Rs.3,88,193/-, income from long term capital , income from long term capital loss of Rs.6,126/ .6,126/- and income from other sources of Rs.67,142/ and income from other sources of Rs.67,142/-. However, the rebate of Rs. However, the rebate of Rs.25,000/- claimed by the assessee u/s 87A of claimed by the assessee u/s 87A of the Act was denie d. 4. Aggrieved by the same the assessee pref Aggrieved by the same the assessee preferred appeal to the Ld. erred appeal to the Ld. CIT(A), who dismissed the appeal of the assessee CIT(A), who dismissed the appeal of the assessee. Relevant findings of . Relevant findings of the Ld.CIT(A) are at para the Ld.CIT(A) are at para 4 to 4.3 of his order asunder: of his order asunder:- 4. Observations: Observations: 4.1 The appellant's grounds of appeal, statement of facts and written submission are duly 4.1 The appellant's grounds of appeal, statement of facts and written submission are duly 4.1 The appellant's grounds of appeal, statement of facts and written submission are duly verified. The impugned rectification order u/s 154 dated 12 verified. The impugned rectification order u/s 154 dated 12-Nov Nov-2024 is perused. In the above order, the AO had accepted the appellant's total income of Rs. 4,93,420/ above order, the AO had accepted the appellant's total income of Rs. 4,93,420/ above order, the AO had accepted the appellant's total income of Rs. 4,93,420/-. However, the AO disallowed the appellant's claim of rebate of Rs.25,000/ the AO disallowed the appellant's claim of rebate of Rs.25,000/ the AO disallowed the appellant's claim of rebate of Rs.25,000/-. In this regard, the computation of rebate made by the CPC as follows: computation of rebate made by the CPC as follows:

4.2 In the impugned rectification order u/s 154 dated 12 n the impugned rectification order u/s 154 dated 12-Nov-2024, the income chargeable 2024, the income chargeable at special rate of Rs. 3,88,193/ at special rate of Rs. 3,88,193/-was excluded from the total income of Rs.4,93,420/ was excluded from the total income of Rs.4,93,420/- and the balance income taxable at slab rate of Rs. 1,05,227/ balance income taxable at slab rate of Rs. 1,05,227/- was treated as eligible i was treated as eligible income for calculation of rebate u/s 87A and the eligible rebate u/s 87A on the said income was arrived calculation of rebate u/s 87A and the eligible rebate u/s 87A on the said income was arrived calculation of rebate u/s 87A and the eligible rebate u/s 87A on the said income was arrived as Rs. Nil. Aggrieved by this rectification order, the appellant has preferred this present as Rs. Nil. Aggrieved by this rectification order, the appellant has preferred this present as Rs. Nil. Aggrieved by this rectification order, the appellant has preferred this present appeal. 4.3 The appellant in the grounds has contended against the disallowance of rebate u/s 87A 4.3 The appellant in the grounds has contended against the disallowance of rebate u/s 87A 4.3 The appellant in the grounds has contended against the disallowance of rebate u/s 87A of Rs.25,000/-. It is pertinent to be noted in the CBDT's Circular No. 13/2025 dated . It is pertinent to be noted in the CBDT's Circular No. 13/2025 dated . It is pertinent to be noted in the CBDT's Circular No. 13/2025 dated 19.09.2025 that it has been noticed by the Board that in certain cases "returns h 19.09.2025 that it has been noticed by the Board that in certain cases "returns h 19.09.2025 that it has been noticed by the Board that in certain cases "returns had already been processed and rebate was allowed under section 87A of the Act on incomes chargeable been processed and rebate was allowed under section 87A of the Act on incomes chargeable been processed and rebate was allowed under section 87A of the Act on incomes chargeable to tax at special rates," and in this regard, the CBDT has instructed that "rectifications have to tax at special rates," and in this regard, the CBDT has instructed that "rectifications have to tax at special rates," and in this regard, the CBDT has instructed that "rectifications have to be carried out to disallow such rebate, which has been in to be carried out to disallow such rebate, which has been in to be carried out to disallow such rebate, which has been incorrectly allowed." In the present case, the income chargeable at special rate of Rs. 3,88,193/ present case, the income chargeable at special rate of Rs. 3,88,193/ present case, the income chargeable at special rate of Rs. 3,88,193/- was excluded from the total income of Rs.4,93,420/ total income of Rs.4,93,420/- and the balance income taxable at slab rate of Rs. 1,05,227/ and the balance income taxable at slab rate of Rs. 1,05,227/- was treated as eligible income for calculatio was treated as eligible income for calculation of rebate u/s 87A and the eligible rebate u/s n of rebate u/s 87A and the eligible rebate u/s

P a g e | 4 ITA No.303/JPR/2026 Shreyansh Surana 87A on the said income was arrived as Rs. Nil, which is inline as per the Circular No. 13/2025. The disallowance of rebate is therefore confirmed. 5. We have heard both the parties. The issue of claim of rebate u/s 87A of the Act on the Short Term Capital Gains has been decided by the ITAT in number of decisions in favour of the assessee. In the recent decision, in the case of ITO Vs. Rajshree Kothari in ITA No.399/JPR/2026 order dated 20.08.2026, the ITAT has held the assessee eligible to claim rebate u/s 87A of the Act on the Short Term Capital Gains referring to several decisions of the ITAT holding as under:- ……. 6. Before us, at the outset itself ld. counsel for the assessee pointed out that this issue has been dealt in various decisions of the ITAT ruling consistently in favour of the assessee as under:- i) Pranay M Kothari Vs. DCIT in ITA No.3469/Chny/2025 ii) Manojbhai C. Kamdar Vs. ITO in ITA No.572/RJT/2025 iii) Jayshreeben Jayantibhai Palsana Vs. ITO in ITA No.1014/Ahd/2025 iv) Basty Keshava Shenoy Vs. ITO in ITA No.3134/Bang/2025 7. Before us, ld. DR was unable to distinguish the decisions, referred to by ld. Counsel for the assessee as above, nor she was able to draw my attention to any contrary decision of either the Jurisdictional High Court or the Hon’ble Apex Court in this regard. 8. We have gone through the orders of the ITAT, referred to by the ld. Counsel for the assessee, and have noted that it has been consistently held that the provisions of Section 87A of the Act provide rebate on the entire tax liability computed on the “total income” without drawing any distinction between income taxable at normal rates, and income taxable at special rates, i.e. short term capital gain taxable at rates specified u/s 111A of the Act. The findings of the ITAT in the case of Pranay M Kothari Vs. DCIT in ITA No.3469/Chny/2025 dated 23.03.2026 at para 7 to 9 of the order as under:- ………. 7. We note that an identical issue came up for consideration before this Tribunal in the case of Venkatachalam Venkatraman v. ITO [ITA No.1431/Chny/2025, order dated 20.08.2025]. The Tribunal therein held that the provisions of section 87A of the Act provide rebate on the entire tax liability computed on the "total income" without drawing any distinction between income taxable at normal rates and income taxable at special rates. It was accordingly concluded that rebate u/s.87A of the Act

P a g e | 5 ITA No.303/JPR/2026 Shreyansh Surana is available even in respect of such incomes taxed under special provisions. The relevant findings are extracted below for ease of reference:-

"5.0 been concluded that to claim the rebate total income is to be computed after excluding any special rate income so as to determine the final tax liability. We have noted that the view taken by the Ld.CIT(A) of assessee filing return u/s 115BAC and consequently ineligible for rebate is not in order. The only controversy in this case is whether rebate u/s 87A is available on all the incomes or there is any exclusion. We have noted that the provisions of section 87A do not provide for such an exclusion. The first proviso to section 87A includes an exemption qua total income falling u/s 115BAC (1A) however the impugned amendment has been brought by Finance Act 2024 w.e.f 01.04.2025. The present AY-2024 25 would not be hit by the same. We have noted that Hon'ble Bombay High Court in the case of Rajiv G Shah supra has held that "...there is no indication in the plain language of Section 87A that any category of income or tax should be excluded from the computation. If the total income is within the threshold prescribed, rebate cannot be denied....". It istrite law that when provisions of the statute granting any benefit to the tax payer are unambiguously clear, no different interpretation thereof can be adopted. Accordingly, we are of the view that the assessee is entitled for claim of rebate u/s 87A. The orders of lower authorities are therefore set aside and the Ld.AO is directed to allow the assessee its claim of rebate u/s 87A. All the grounds of appeal raised by the assessee are therefore allowed."

“5.8 The amended first proviso to Section 87A [inserted by the Finance Act, 2023 w.e.f. A.Y. 2024-25] provides: "Where the total income of the assessee is chargeable to tax under sub section (1A) of section 115BAC and the total income (a) does not exceed seven hundred thousand rupees, the assessee shall be entitled to a deduction...'

5.9 This provision applies to any resident individual whose total income does not exceed Rs.7,00,000 and who is assessed under section 115BAC(1A). The statute does not draw any distinction between normal income and income chargeable at special rates, nor does it contain any express exclusion for tax arising under section 111A.

5.10 By contrast, the legislature has inserted an express bar on availability of section 87A rebate in section 112A(6), which states:

P a g e | 6 ITA No.303/JPR/2026 Shreyansh Surana (6) Where the total income of an assessee includes any long-term capital gains referred to in sub-section (1), the rebate under section 87A shall be allowed from the income-tax on the total income as reduced by tax payable on such capital gains.

5.11 The absence of a corresponding clause in section 111A is legally significant and supports the principle that when the legislature intended to deny rebate in respect of special income (as in section 112A), it has done so expressly. In contrast, the absence of any exclusion in section 111A or in section 87A must be construed in favour of the assessee.

5.12 At this point we discuss the interplay of Section 115BAC(1A) with Chapter XII where the scope is Confined to Computation of Tax Rates. Section 115BAC(1A) opens with the phrase:

"Notwithstanding anything contained in this Act but subject to the provisions of this Chapter..."

5.13 The purpose of this clause is to enable the computation of income tax under the concessional rate regime, subject to existing special rate provisions under Chapter XII, such as sections 111A, 112, 112A, etc. This clause governs the computation of tax and doesnot ipso facto affect eligibility to rebates or deductions unless specifically restricted. Section 87A is not part of Chapter XII; it is an independent rebate provision under Chapter VIII of the Act. Therefore, the overriding clause in section 115BAC(1A) does not derogate or modify section 87A, unless section 87A itself provides for exclusion, which, in the present case, it does not. Thus, section 87A operates on the total tax computed, whether it includes tax at slab rates or special rates, and applies so long as the total income threshold is met.

5.14 The CIT(A) placed strong reliance on the Explanatory Memorandum to the Finance Bill 2025, which clarified that rebate under section 87A is not available on tax arising from special rate incomes, including those under section 111A. However, we find this reliance to be misplaced for two reasons:

-Firstly, the Finance Bill 2025 itself proposes to insert new restrictions on rebate under section 87A w.e.f. A.Y. 2026-27, which implies that the existing law (i.e., as applicable to A.Y. 2024-25) does not contain such a restriction.

-Secondly, the Explanatory Memorandum cannot override the plain language of the statute. It is a tool of interpretation, not a source of substantive law. Therefore, the prospective amendment in the Finance Act 2025 supports the view that under the unamended provision applicable for A.Y. 2024-25, rebate under section 87A cannot be denied merely because tax arises under section 111A. 5.15 In the recent judgment dated 24.01.2025 in the case of The Chamber of Tax Consultants vs. Director General of Income Tax (Systems) [TS 5026-HC-

P a g e | 7 ITA No.303/JPR/2026 Shreyansh Surana 2025(Bombay)-O], the Hon'ble Bombay High Court considered the issue of system- based denial of 87A rebate on STCG under section 111A for assessees who had opted for 115BAC(1A). While the Hon'ble Court refrained from interpreting the substantive provisions, it held that the assessee must be allowed to claim rebate under section 87A, and it is for the quasi-judicial authority to decide on merits. Thus, the Hon'ble High Court clearly held that the CPC utility or system configuration cannot override statutory rights, and that each case must be adjudicated on its own merits. We at the Tribunal, being such a quasi-judicial authority, are therefore duty-bound to examine the claim in light of the statutory framework and not be influenced by automated denial or procedural logic adopted by the CPC. 5.16 The assessee has also relied on an appellate order dated 27.05.2025 passed by CIT(A)-1, Nagpur in the case of Avni Milanbhai Maniya, wherein on identical facts the CIT(A) allowed the claim of rebate under section 87A in respect of STCG taxable under section 111A. We also note that such decision was taken by the JCIT/AddI.CIT(A) relying on the decision of Beena ManishbhaiFofaria for the A.Y. 2024-25. While not binding, the said appellate order affirms that divergent views exist and such benefit has been allowed in similar factual circumstances. 5.17 In view of the above discussion, we find that the assessee is a resident individual and the total income declared for the assessment year 2024-25 does not exceed Rs. 7,00,000. It is also an admitted position that the assessee has exercised the option to be assessed under the new tax regime in accordance with the provisions of section 115BAC(1A) of the Act. On a plain reading of the statutory provisions, there exists no express bar either in section 87A or section 111A for denial of rebate in respect of tax payable on short-term capital gains arising from transfer of listed equity shares taxable at special rates under section 111A. The legislative intent is further clarified by the subsequent amendment proposed in the Finance Bill, 2025, which is prospective in nature and thereby reinforces that no such restriction was in force during the relevant assessment year. The denial of rebate under section 87A by the CPC, Bengaluru, appears to be based solely on system-driven logic and not on any statutory mandate. Moreover, the interpretation adopted by the CIT(A) in upholding such denial is, in our considered view, not in consonance with the plain and unambiguous language of the law as applicable for A. Y. 2024-25." 9. Respectfully following the ratio laid down in the above cases, we hold that the assessee in the instant case is entitled to rebate u/s.87A of the Act for the impugned assessment year, notwithstanding that the total income includes taxable long term capital gains chargeable at special rates. The AO is accordingly directed to allow the rebate of Rs.25,000/- claimed by the assessee u/s.87A of the Act and recompute the tax liability. Thus, the grounds of appeal raised by the assessee are allowed. 9. The ITAT in the other decisions has also reiterated the proposition of law as above. The decision rendered by the ITAT in the cases above, squarely applies to the facts of the present case, following which, we hold that there is no infirmity in the order of the Ld.CIT(A)

P a g e | 8 ITA No.303/JPR/2026 Shreyansh Surana holding the assessee entitled to rebate u/s 87A of the Act on the taxes paid on short term capital gain. ……. 6. Before us, ld. DR was unable to draw our attention to any contrary decision of either the Jurisdictional High Court or the Hon’ble Apex Court in this regard. 7. We therefore hold that the Ld. CIT(A) has grossly erred in holding the assessee ineligible to rebate u/s 87A of the Act on the taxes paid on short term capital gain. The CPC/ AO is directed to allow the claim of rebate u/s 87A of the Act amounting to Rs.25,000/-. 8. In effect, the appeal of the assessee is allowed. Order pronounced in the Open Court on 27.10.2026

Sd/- Sd/- (T.R. Senthil Kumar) (Annapurna Gupta) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 27.10.2026 Mittali, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT By Order, Mittali Digitally signed by: Mittali DN: CN = Mittali email = Asst. Registrar mittaligupta34671@gmail.com C ITAT, Jaipur = IN O = Personal Date: 2026.10.30 12:40:26 +05'30'