MAHESH CHAND METHI,KOTA vs. INCOME TAX OFFICER, WD-2(2), KOTA, KOTA

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ITA 621/JPR/2026Status: DisposedITAT Jaipur02 November 2026AY 2020-218 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 decided both issues in favour of the assessee. Firstly, regarding the delay, the Tribunal condoned the 442-day delay, finding that the assessee had made out a reasonable cause by explaining that the delay was due to seeking legal advice after encountering technical confusion, and by citing the Supreme Court's precedent in M/s. Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi and others, which emphasizes a liberal approach in condoning delays when there is no deliberate intention to delay. Secondly, on the issue of exemption for leave encashment, the Tribunal held that the enhanced exemption limit of Rs.25,00,000/- prescribed by CBDT Notification No.31/2023 dated 24.05.2023 is applicable to the assessee's claim for Assessment Year 2020-21. The Tribunal respectfully followed the decisions of its coordinate Benches, which had allowed the benefit of the enhanced limit in similar cases. It reasoned that CBDT circulars, when beneficial to the assessee, can mitigate the rigors of law and cannot curtail benefits conferred by the Act. Since the assessee's leave encashment amount of Rs. 9,54,104/- was below the enhanced limit, the assessee was entitled to claim the entire amount as exempt. The Tribunal set aside the order of the Addl. CIT(A) and directed the AO to allow the assessee's claim.

What were the facts?

The assessee, Mahesh Chand Methi, filed an appeal against the order dated 04.10.2024 passed by the Addl./Joint Commissioner of Income Tax (Appeals), Panchkula. This order arose from an intimation under section 143(1) of the Income Tax Act, 1961, for Assessment Year 2020-21. The assessee, a retired employee of Bank of Baroda, received Rs. 9,54,104/- as leave encashment and claimed it as exempt under section 10(10AA)(ii). The Central Processing Centre (CPC) restricted the exemption to Rs. 3,00,000/-, disallowing Rs. 6,54,104/-. The Addl. CIT(A) upheld this decision. The appeal was filed with a delay of 442 days, which the assessee attributed to seeking legal advice after encountering technical confusion as a senior citizen. The Revenue opposed the condonation of delay.

What were the issues?

1. Whether the delay of 442 days in filing the appeal should be condoned, considering the assessee's explanation of seeking legal advice after technical confusion. Assessee's contention: The assessee argued that the delay was not intentional and was due to seeking proper legal advice after encountering technical confusion, citing the Hon'ble Supreme Court's decision in M/s. Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi and others, which allows condonation based on legal advice and liberal principles in the interest of justice. Revenue's contention: The Revenue strongly opposed the condonation of delay. 2. 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 during the year relevant to Assessment Year 2020-21. Assessee's contention: The assessee contended that the enhanced limit should apply retrospectively to his claim, relying on CBDT Notification No.31/2023 and decisions of coordinate Benches of the Tribunal, including Ram Charan Gupta Vs. ITO and Govardhan Deepchand Bhambhani Vs. 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, “SMC”, BENCH, JODHPUR

Before: Shri T. R. Senthil Kumar & Shri Prakash

For Appellant: Shri Subhash Porwal, CA

Per T.R. Senthil Kumar, Judicial Member:

This appeal is filed by the assessee as against the order dated 04.10.2024 passed by the Addl./Joint Commissioner of Income Tax (Appeals), Panchkula (hereinafter referred to as “Ld. Addl. CIT(A)”), arising out of the intimation order passed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) relating to the Assessment Year 2020-21

2.

The Registry has noted that there is a delay of 442 days in filing the above appeal. The assessee by way of Notarized Affidavit dated

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26.02.2026 explained that during the F.Y. 2019-20, he retired from the service of Bank of Baroda and received Rs. 9,54,104/- as leave encashment and claimed the same as exempt u/s. 10(10AA)(ii) of the Act. When the return was processed by the Central Processing Centre, Bengaluru, had restricted exemption to Rs. 3,00,000/- and disallowed a balance of Rs. 6,54,104/- by passing intimation u/s. 143(1) of the Act. The assessee filed the appeal before Addl./Jt. CIT(A) who was also confirmed the same without considering the CBDT Notification dated 24.05.2023. The assessee being a senior citizen was not aware of the technical confusion, then based on proper legal advice filed the appeal with delay of 442 days thereby requested to condone the delay, which is not intentional. Ld. Sr. DR appearing for the Revenue strongly opposed the condonation of delay.

2.1. The Hon’ble Supreme Court in the case of M/s. Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi and others, reported in AIR 1979 SC 1666 (SC), has held that a legal advice tendered by a professional and the litigant acting upon it one way or the other could be a sufficient cause to seek condonation of delay and coupled with the other circumstances and factors for applying liberal principles and then said delay can be condoned. Eventually, an overall view in the larger interest of justice has to be taken. None should be deprived of an adjudication on merits unless the Court of law or the Tribunal/Appellate Authority finds that the litigant has deliberately and intentionally delayed filing of the appeal, that he is careless, negligent and his conduct is lacking in bona fides.

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2.2. Considering the above submission of the assessee, where reasonable cause has been made out, thereby the delay of 442 days in filing the above appeal is hereby condoned.

3.

Brief facts of the case are that the assessee is a retired employee of Bank of Baroda. The assessee filed his return of income for the A.Y. 2020-21 on 16.09.2020 showing total income of Rs. 11,11,220/- wherein claimed deduction of entire leave encashment amount of Rs. 9,54,104/- 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. 6,54,104/-.

4.

Aggrieved against the same, the assessee challenged before the Ld. Addl. CIT(A) claiming exemption in respect of the entire amount of Rs. 9,54,104/-. The Ld. Addl. CIT(A) observed that section 10(10AA)(i) of 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:-

“That the Ld ADDL/JCIT(A), Panchkula has wrongly restricted the leave encashment amount exemption to Rs. 300000/- u/sec. 10(10AA)(ii) of Act

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instead actual received and claimed at Rs. 954104/- in view of CBDT Notification in S.O. 2276(E) [Notification No. 31/2023/F. No. 200/3/2023-ITA-I dated 24.05.2023 RETROSPECTIVE EFFECT.”

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. 9,54,104/-, and his claim is that, he was entitled to the entire leave encashment being treated as exempt in terms of provisions of Section 10(10AA) of the Act.

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.

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

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received by the assessee on retirement during the year relevant to Assessment Year 2020-21.

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. Very recently in the case of Renu Moongia-Vs-The ITO, Ward-4(2), the Co- ordinate Bench of this Tribunal in ITA No. 1196/JPR/2025, 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 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

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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 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

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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."

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. 9,54,104/-, 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. 9,54,104/- 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. 9,54,104/-under section 10(10AA) of the Act. The grounds of the appeal of the assessee are accordingly allowed.

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13.

In the result, the appeal filed by the assessee is hereby allowed.

Order is pronounced in the open Court on 02-11-2026

Sd/- Sd/- (Prakash) (T. R. Senthil Kumar) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 02.11.2026 Dhananjay K., Sr. PS

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