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Facts
The assessee, an individual formerly employed by J.P. Morgan Services India Private Limited, had his income tax return for A.Y. 2018-19 selected for scrutiny. The Assessing Officer disallowed various exemptions/deductions totaling Rs. 20,19,743/- due to a lack of documentary evidence, completing the assessment under Section 143(3). The assessee's subsequent appeal to the Ld. CIT(A) was dismissed ex parte as he failed to comply with notices.
Held
The Tribunal focused solely on Ground No. 6 concerning the taxability of Rs. 18,08,973/- received as a superannuation fund upon cessation of employment. Noting that the assessee could not produce the crucial release agreement before the CIT(A), the Tribunal remanded the matter back to the CIT(A) for de novo adjudication of this specific ground, instructing the CIT(A) to grant the assessee a proper opportunity to furnish evidence and be heard.
Key Issues
Whether the amount received by the assessee as a superannuation fund upon cessation of employment is a taxable receipt under Section 17(3)(i) of the Income Tax Act or a non-taxable ex-gratia payment.
Sections Cited
143(2), 143(3), 143(3A), 143(3B), 17(3)(i)
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
(निर्धारण वर्ा/Assessment Year:2018-19) Shri Imran Azad Wallani, Income Tax Officer, Vs. Hyderabad. Ward-8(1), PAN:AAMPW2967J Hyderabad. (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri K.A. Sai Prasad, C.A. रधजस् व द्वधरध/Revenue by: Dr. Sachin Kumar, SR-DR सुिवधई की तधरीख/Date of hearing: 17/07/2025 घोर्णध की तधरीख/Pronouncement: 25/07/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by Shri Imran Azad Wallani (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 18.02.2025 for the A.Y. 2018-19.
The assessee has raised the following grounds of appeal :
3. The brief facts of the case are that, the assessee is an individual who was employed with J.P. Morgan Services India Private Limited and left the said employment on 17th November 2017. The return of income of the assessee for Assessment Year 2018–19 was selected for complete scrutiny. Accordingly, notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was served on the assessee on 28.09.2019. During the course of assessment proceedings, the learned Assessing Officer (“Ld. AO”) observed that the assessee had claimed various exemptions/deductions aggregating to Rs.20,19,743/- during the year under consideration. In the absence of documentary evidences furnished by the assessee in support of such claims, the Ld. AO disallowed the said amount and completed the assessment under section 143(3) read with sections 143(3A) and 143(3B) of the Act, vide order dated 24.03.2021 by making addition of Rs.20,19,743/- in the hands of the assessee.
4. Aggrieved by the order of Ld. AO, the assessee filed an appeal before the Ld. CIT(A). However, the assessee failed to comply with the notices issued by the Ld. CIT(A), and accordingly, the appeal of the assessee was dismissed ex parte.
5. Aggrieved with the order of Ld. CIT(A), the assessee has preferred the present appeal before this Tribunal. At the outset, the Learned Authorised Representative (“Ld. AR”) submitted that the assessee is pressing only Ground No. 6 of the total seven grounds raised in the appeal. Accordingly, ground no.1 to 5 and 7 of the appeal is dismissed being not pressed.
6. The ground no.6 of the assessee pertains to the allowability of exemption in respect of superannuation fund received by the assessee amounting to Rs.18,08,973/- from his employer upon cessation of employment. In this regard, the Ld. AR submitted that the said amount was received pursuant to a release agreement dated 24.10.2017, and the nature of payment was ex gratia, falling outside the ambit of “salary” or “profits in lieu of salary” and, therefore, not taxable. The Ld. AR placed reliance on the decision of the Hon’ble ITAT, Delhi Bench, in the case of ITO vs. Avirook Sen [2024] 161 taxmann.com 462 (Delhi – Trib.), wherein similar receipt was held to be non-taxable in the hands of the employee. It was contended that the payment was not made as compensation for termination of employment, but rather as a voluntary ex gratia amount, which is not covered under the deeming provisions of section 17(3)(i) of the Act.
Per contra, the learned Departmental Representative (“Ld. DR”) submitted that the payment received by the assessee was clearly in the nature of compensation for cessation of employment, and therefore squarely falls within the ambit of section 17(3)(i) of the Act, which deems such compensation as taxable salary income. The Ld. DR relied upon the decisions of the Hon’ble ITAT in the case of Yatindra Kumar Vs. ITO (2011) 14 taxmann.com 154 (Pune); Sam Patel Vs. ITO (2007) 11 SOT 566 (Mumbai); ITO Vs. V.R. Ganti (1985) 13 ITD 901 and V. Pathoor Vs. ITO (1982) 1 ITD 1127 (Madras), wherein similar termination-related payments were held to be taxable. It was submitted that there is no error in the order of the Ld. AO and the payment is rightly brought to tax.
We have considered the rival submissions and gone through the orders of the lower authorities and documents placed on record. The short issue under consideration is whether the amount of Rs.18,08,973/- received by the assessee on cessation of employment from J.P. Morgan Services India Private Limited constitutes a taxable receipt under section 17(3)(i) of the Act or is in the nature of non- taxable ex gratia payment.
8.1 It is noted that the assessee relied on the release agreement dated 24.10.2017 to support his claim that the amount was voluntary in nature and not contractual or compensatory. However, the Ld. CIT(A) has dismissed the appeal ex parte, as the said release agreement could not be produced by the assessee before the Ld. CIT(A). Therefore, the Ld. CIT(A) could not adjudicate the appeal on merits. Accordingly, in the interest of substantive justice, we deem it appropriate to remand the matter back to the file of the Ld. CIT(A) for de novo adjudication of Ground No. 6, after examining the release agreement and any other additional evidence the assessee may wish to furnish in support of his claim. The Ld. CIT(A) shall grant proper opportunity of being heard to the assessee before deciding the issue.
In the result, the appeal of the assessee is partly allowed for statistical purposes.