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Facts
The assessee claimed House Rent Allowance (HRA) exemption under Section 10(13A) of the Income Tax Act. The Centralized Processing Centre (CPC) initially disallowed the entire HRA claim of Rs. 2,17,760/-, increasing the assessed income under Section 143(1), and the Ld. CIT(A) subsequently restricted the disallowance to Rs. 37,767/-. The assessee filed an appeal to the Income Tax Appellate Tribunal with a 700-day delay, attributed to a wrong email ID entered in Form 35 by the chartered accountant, leading to non-receipt of the NFAC order.
Held
The Tribunal condoned the 700-day delay, finding it to be for sufficient cause due to an inadvertent error in providing a wrong email ID, in line with Supreme Court precedents on condonation of delay. On the merits of the HRA disallowance, the Tribunal remitted the issue back to the Assessing Officer for re-verification, instructing him to consider the assessee's evidence and provide a proper opportunity of being heard. The appeal was allowed for statistical purposes.
Key Issues
Whether there was sufficient cause to condone the 700-day delay in filing the appeal; and whether the disallowance of House Rent Allowance by the CPC under Section 143(1) was justified and correctly computed under Section 10(13A) read with Rule 2A.
Sections Cited
10(13A), 143(1), 143(1)(a), 17(1), Section 51 of the Limitation Act, 1963, Order XXI of the Code of Civil Procedure, 1908, Rule 2A
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Income Tax Appellate Tribunal, “K(SMC
Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 11/11/2022 passed by NFAC, Delhi for assessment year 2020-21 on following grounds of appeal :
1. On the facts and in law, the CPC [Centralized Processing Centre], Bengaluru grossly erred in disallowing exempt income of the Appellant claimed under Section 10(13A) of the Act, which is 2 ITA 929/Mum/2025; A.Y. 2020-21 Ashutosh Girish Bharkhada without jurisdiction as the said addition is a debatable issue and hence, could not have been made under Section 143(1) of the Act.
2. On the facts and in law, the impugned addition made by CPC, Bengaluru is beyond jurisdiction of 143(1)(a) of the Act as the CPC is only allowed to make adjustment in relation to criteria set out in the Section. It is Appellants case that, the adjustment made in the impugned Order intimation under Section 143(1) is beyond the scope of criteria mentioned in the Section and therefore, it is bad in law.
3. On the facts and in law, the impugned Order under Section 143(1) of the Act is passed in gross violation of principles of natural justice as CPC, Bengaluru failed to consider the reply filed by the Appellant in response to Notice under Section 143(1) of the Act.
4. On the facts and in law, the Assessing officer has erred in disallowance of claimed made u/s 10(13A) being allowance to meet expenditure incurred on house rent at Rs. 2,17,760/-.
5. On the facts and in law, the Assessing officer states that "Exempt Allowance u/s 10(13A) is more than minimum of (a) 50% of (Basic + DA or b) HRA hence exempt u/s 10(13A) is recomputed" as 0 (zero). It is submitted that in the return of income salary stated as defined u/s 17(1) is Rs. 29,09,830/- and house rent included therein Rs. 2,21,760/-Form-16, Part-B issued by the employers also indicates salary u/s 17(1) is (2010712 + 899118 = 2909830) and house rent allowance u/s 10(13A) is (97316 + 124444 = 221760). Therefore, disallowance is mistake apparent from record. The disallowance is without jurisdiction and bad in law and ought to be deleted.
6. The appellant craves, leave to add to alter, modify, revise, or delete any ground (s) in the interest of justice.” Brief facts of the case are as under:
The assessee filed the return of income declaring income of Rs. 24,35,380/-. The assessee mainly income from salary capital gain. The Assessing Officer disallowed the claimed of Rs. 2,17,760/- made u/s 10(13A) being house rent allowance and assessed income at Rs. 26,57,140/-. The claim was disallowed 3 ITA 929/Mum/2025; A.Y. 2020-21 Ashutosh Girish Bharkhada stating that the allowance is more that 50% of the salary (Basic+DA). Aggrieved by the intimation by CPC assessee filed appeal before the Ld.CIT(A).
The Ld.CIT(A) after considering the submission of the assessee restricted the disallowance at Rs.37,767/- by observing as under: “On perusal of record, it is seen that as per Intimation/order u/s 143(1), the AO, CPC has calculated the exempt allowance u/s 10(13A) at NIL, whereas the appellant had claimed it at Rs. 2,21,760/-. As per law, the exempt allowance u/s 10(13A) is calculated as least of the following: (a) Actual House Rent allowance received: 2,21,760/-Rs. (b) Rent paid 10% of salary: (Rs. 3,28,750 - Rs. 2,90,983) 37,767/-Rs. (c) 50% of salary (Since house is at metro city): Rs. 14,54,914/ 14,54,914/- 7. From the above, it is clear that only Rs. 37,767/- is exempt u/s 10(13A), as against the claim of the appellant at Rs. 2,21,760/-. Accordingly, A.O. is directed to modify the Intimation u/s 143(1) and issue such modified Intimation to the appellant.” Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal.
The Ld.AR brought to the notice that, there is delay of 700 days in filing the present appeal before this Tribunal. The Ld.AR submitted condonation petition, wherein it is stated that, the e- mail ID mentioned in form 35 was of the charted accountant who was representing assessee. He submitted that, inadvertently the charted accountant entered a wrong e-mail Id which was not operated by his office. The Ld.AR has placed before this Tribunal the affidavit by the charted accountant narrating the event and explaining the inadvertent mistake. The Affidavit of the CA is scanned and reproduced as under :
4 ITA 929/Mum/2025; A.Y. 2020-21 Ashutosh Girish Bharkhada 5 ITA 929/Mum/2025; A.Y. 2020-21 Ashutosh Girish Bharkhada 4.1 The Ld.AR submitted that, it is due to the above reasons the notices were not actually received by the assessee as it was sent to a wrong email-Id. The Ld.AR thus prayed for the delay to be condoned which cannot be attributed to the assessee and there was no malafide intention on behalf of the assessee or the authorised representative in putting a wrong email-Id in form 35.
6 ITA 929/Mum/2025; A.Y. 2020-21 Ashutosh Girish Bharkhada 4.2 On the contrary, the Ld.DR placed reliance on the order passed by authorities below. We have perused the submissions advance by both sides in the light of record placed before us. 4.3 In our view, the assessee has made out a reasonable cause for the delay that is caused in filing the present appeals before this Tribunal. Nothing to establish any contrary intention has been filed by the revenue before this Tribunal. In our opinion there is a sufficient cause for condoning the delay as observed by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 in support of his contentions. 4.4 We place reliance on following observations by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 wherein, Hon’ble Court observed as under:- “The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits". The expression “sufficient cause” employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that :
1. 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.
7 ITA 929/Mum/2025; A.Y. 2020-21 Ashutosh Girish Bharkhada ......................................................1.Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.” 4.5 Considering the submissions by both sides and respectfully following the observation by Hon’ble Supreme Court, we find it fit to condone the delay caused in filing the present appeals as it is not attributable to the assessee. In any event, though the procedural law pertaining to the limitation has been drafted to construe it strictly, the fact remains that, considering such technicalities will not advance the cause of justice.
On merits primary argument of the Ld.AR was that, disallowance of HRA could not have been made by the CPC as the issue is debatable. The Ld.AR contended that near fact that the Ld.CIT(A) has partially granted relief shows that it is debatable issue and needs to be verify based on the documents. 5.1 The Ld.AR submitted that, the assessee is a salaried employee of Tata Sky Limited for the period 01/04/2019 to 08/11/2019 earned Salary of Rs. 20,10,712/- which includes House Rent Allowance of Rs. 97,316/- which is exempt u/s. 10(13A). The assessee employed with Oxyzo Financial Services Pvt Ltd for the period 11.11.2019 to 31.03.2020, earned Salary of Rs. 8,99,118/- which includes House Rent Allowance of Rs. 1,24,444/-. It is submitted that, total House Rent Allowance received Rs. 97,316/- plus Rs. 1,24,444/- amounting to Rs. 2,21,760/-. It is submitted that, the House allowance rent is within limit prescribed under Rule 2A. The assessee has incurred 8 ITA 929/Mum/2025; A.Y. 2020-21 Ashutosh Girish Bharkhada rent expenses Rs. 4,20,000/- for the year under consideration at Rs. 35,000/- per month. Under these facts and circumstances of the case it is submitted that, disallowance of house rent allowances is without jurisdiction and bad in law. 5.2 The Ld.AR emphasised that, the From 6B issued by the employer includes house rent allowance, and that as the assessee is residing in Mumbai, HRA claimed is in accordance with limits prescribed under Rule 2A. The Ld.AR thus submitted that, all the above facts have not being considered for appreciating the claim of assessee by the authorities below. 5.3 On the contrary, the Ld.DR relied on the orders passed by the authorities below. We have perused the submissions advance by both sides in the light of record placed before us.
It is noted that, the claim of assessee deserves to be considered in accordance with law. We therefore remit this issue back to the Ld.AO to verify. The claim of assessee having regards to the evidences filed by him. Needless to say that proper opportunity of being heard must be granted to the assessee. Accordingly the grounds raised by the assessee stands allowed for statistical purposes. In the result the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 30/06/2025 Sd/- Sd/- (RENU JAUHRI) (BEENA PILLAI) Accountant Member Judicial Member Mumbai:
9 ITA 929/Mum/2025; A.Y. 2020-21 Ashutosh Girish Bharkhada Dated: 30/06/2025 Poonam Mirashi, Stenographer Copy of the order forwarded to:
(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.