TRIMBAK SHRIPAD DHARURKAR,PUNE vs. ITO WARD 4(4), PUNE

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ITA 2633/PUN/2024Status: DisposedITAT Pune16 May 2025AY 2018-197 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the impugned order dated 29.10.2021 passed under Section 154 of the Act was bad in law. The reasoning was that the ADIT(CPC) had initially allowed the assessee's claim for exemption of leave encashment under Section 10(10AA) for the entire amount of Rs. 9,55,800/- both under Section 143(1) and subsequently under Section 154. The subsequent order under Section 154, again restricting the claim to Rs. 3,00,000/-, was outside the purview of Section 154. The Tribunal noted that Section 154 permits rectification of only apparent mistakes. The fact that the same authority had allowed the full exemption twice indicated that the decision was taken consciously based on the facts. The ADIT(CPC) failed to demonstrate how the earlier order allowing full exemption was wrong or how the assessee became ineligible. Therefore, the third order under Section 154, which disallowed the exemption, could not be upheld as there was no apparent mistake evident from the record. The grounds of appeal raised by the assessee were allowed.

What were the facts?

The assessee, Trimbak Shripad Dharukar, filed his return of income for Assessment Year 2018-19, claiming an exemption of Rs. 9,55,800/- for leave encashment under Section 10(10AA) of the Income Tax Act, 1961. The initial intimation under Section 143(1)(a) accepted the returned income. Subsequently, the ADIT(CPC) passed an order under Section 154 of the Act, disallowing the exemption and making an addition of Rs. 6,55,800/-. This was followed by a series of rectification orders under Section 154 by the same authority. The assessee appealed to the CIT(A), who upheld the addition. The assessee then filed an appeal before the ITAT against the CIT(A)'s order.

What were the issues?

1. Whether the addition of Rs. 9,55,800/- by way of rectification under Section 154, in respect of leave encashment claimed as exempt under Section 10(10AA), is justified as a mistake apparent from the record? (Question of law and fact, concerning Section 10(10AA) and Section 154). 2. Whether the question of the appellant being a government employee or not requires examination of facts and a long drawn inquiry, thus not falling within the scope of a mistake apparent from the record? (Question of law and fact, concerning Section 154). 3. Whether the order under Section 154 rectifying the intimation under Section 143(1)(a) is beyond the scope of permissible adjustment under Section 143(1)(a), given that the claim under Section 10(10AA) is not an incorrect claim apparent from any information in the return of income? (Question of law and fact, concerning Section 143(1)(a) and Section 154). 4. Whether the addition of Rs. 9,55,800/- on account of disallowance of exemption under Section 10(10AA) on the ground that the appellant is a 'non-government employee' is justified, when the appellant is a former employee of PMPML, a government body carrying out public functions? (Question of law and fact, concerning Section 10(10AA)). Assessee's contentions: The issue is debatable and outside the purview of Section 154 as the ADIT-CPC passed rectification orders multiple times, indicating inconsistency. No opportunity was provided during the Section 154 proceedings. Such disallowance is also outside the purview of Section 143(1). The appellant is a former employee of PMPML, a government body, and thus a government employee for the purpose of Section 10(10AA). Revenue's contentions: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 10(10AA),Section 154,Section 143(1)(a),Section 139(1),Section 10(10)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE

Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE

PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the assessee is against the order of ld.Commissioner of Income Tax(Appeals)[NFAC], passed under section 250 of the Income Tax Act, 1961; dated 19.11.2024 for Assessment Year 2018-19. The assessee has raised the following grounds of appeal : “1 Whether on facts and circumstances of the case addition of Rs.9,55,800/- by way of rectification u/s 154 in respect of encashment of leave salary at the time of retirement claimed as exempt from the total taxable income as per section 10(10AA), is justified as a mistake apparent from record.

2.

Whether the question as to the appellant being a Government employee or not is to be decided after examination of facts and a long drawn process of inquiry and would not fall within the scope of a mistake apparent from record.

3.

Whether the Order u/s 154 rectifying the intimation u/s 143(1)(a) is beyond the scope of permissible adjustment u/s 143(1)(a) in view of the facts that the claim u/s 10(10AA) is not an incorrect claim apparent from any information in the return of income

4.

Whether on the facts and circumstances of the cases the addition of Rs.9,55,800/-on account of disallowance of exemption u/s 10(10AA) on the ground that the appellant is a "non-government/government employee is justified when the appellant is a former employee of PMPML which is a government body carrying out public function cannot be said to be a non-government employee.

5.

The appellant craves leave to add, alter, modify or substitute any ground of appeal at the time of hearing." Findings & Analysis :

2.

We have heard both the parties and perused the records. In this case, Assessee is an individual. He filed Return of Income for A.Y.2018-19 on 18.08.2018 under section 139(1) of the Act. During the year in the Return of Income, assessee claimed Leave Encashment exempt under section 10(10AA) of the Act of Rs.9,55,800/-. Assessee also claimed Gratuity of Rs.7,00,000/-\exempt u/s.10(10) of the Act. Assessee in the Return of Income had shown total income of Rs.12,31,980/- after claiming the said exemptions. The order u/s.143(1) was passed by DCIT(CPC) on 25.09.2018 accepting the Returned income of Rs.12,31,980/-.

2.

1 Then, an order u/s.154 of the Act, was passed on 29.10.2021 by the ADIT(CPC) disallowing assessee's claim of exemption for Leave Encashment and made addition of Rs.6,55,800/-. Aggrieved by the order u/s.154 of the Act, Assessee filed appeal before the ld.CIT(A).

2.

2 Ld.CIT(A) upheld the addition made by the Assessing Officer(AO).

3.

Aggrieved by the order of the ld.CIT(A), Assessee filed appeal before this Tribunal.

4.

Ld.AR took us through the order u/s.154 of the Act and pleaded that the ADIT-CPC i.e.Assessing Officer passed rectification order u/s.154 of the Act, three times. Once in the order u/s.154, ADIT(CPC) disallowed assessee's claim of exemption for Leave Encashment, then subsequently suo-moto passed an order u/s.154 and allowed the assessee's claim of exemption for Leave Encashment. Then, again the ADIT-CPC passed an order u/s.154 disallowing assessee's claim of exemptions. Ld.AR pleaded that this itself shows that the issue is debatable issue and hence, outside the purview of Section 154 of the Act. Ld.AR also pleaded that no opportunity has been provided during entire proceedings u/s.154 of the Act. Ld.AR also submitted that this kind of disallowance is outside the purview of Section 143(1) also.

5.

We have gone through the impugned order u/s.154 of the Act, dated 29.10.2021. The reason mentioned on page no.4 of the said order for rectification is reproduced here as under : “It has been informed to the assessee by a notice from CPC regarding a claim in the return for A.Y.2018-19 which is not allowable. In the return, leave encashment in excess of Rs.3 lakhs has been claimed as exempt, u/s 10(10AA) of the Income Tax Act. In the case of other than government employees, maximum exemption allowable is Rs.3 Lakhs. In the intimation under 143(1)(a), full exemption as claimed in the return, was allowed though assessee is not a government employee as per the details in the return. Hence, an order u/s 154 was passed, restricting the claim of Rs.3 Lakhs. However, the order u/s 154 was erroneously taken up for rectification again, whereby full exemption, as claimed in the return, was allowed. As the assessee's claim of exemption, in excess of Rs 3 lakhs, is erroneous and is a mistake apparent from records, the exemption u/s 10(10AA) is restricted to Rs.3 lakhs in this order." (Emphasis supplied)

5.

1 Thus, it is clear from the “Reasons for Rectification” mentioned in the "impugned order u/s.154" that initially, u/s.143(1) of the Act, Assessee's claim for exemption was allowed fully. Then, by rectification u/s.154 of the Act, it was restricted to Rs.3,00,000/- only. However, this order u/s.154 of the Act was again rectified u/s.154 and assessee's claim for exemption of Leave Encashment u/s.10(10AA) of the Act, was fully allowed i.e.Rs.9,55,800/- was allowed as exempt income. Then, the ADIT- CPC again passed an order restricting the Leave Encashment exemption to Rs.3 lakhs. Assessee is in appeal before us against the said order. We agree with the ld.AR that once Revenue has allowed Assessee's claim for exemption of leave encashment u/s.10(10AA) of the Act for entire amount of Rs.9,55,800/- u/s.143(1) and then, u/s.154 of the Act, then, the impugned order dated 29.10.2021 passed u/s.154 of the Act, again restricting the assessee's claim to Rs.3,00,000/- is outside the purview of Section 154 of the Act. Under section 154 of the Act, only an apparent mistake from record can be rectified. In this case, the same office i.e.ADIT(CPC) had allowed assessee's claim of exemption for entire amount of Rs.9,55,800/- twice i.e.once u/s.143(1) of the Act and then u/s.154 of the Act, shows that the ADIT(CPC) had applied his mind and consciously taken the decision based on the facts of the case to allow exemption u/s.10(10AA) of the Act, for the entire amount. In these facts, the ADIT(CPC) has not brought on record how the earlier order u/s.154 allowing entire exemption claim was wrong. The ADIT(CPC) has not explained how the assessee was held to be eligible in earlier order u/s.154, becomes ineligible. In these circumstances, the third order u/s.154 of the Act, dated 29.10.2021 cannot be upheld as there is no apparent mistake evident from the record in the order allowing exemption fully. Only apparent mistakes can be rectified.

5.

1 Therefore, the impugned order u/s.154 of the Act, dated 29.10.2021 is held to be bad in law. In these facts and circumstances of the case, we allow the grounds of appeal raised by the assessee.

6.

In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 16 May, 2025. (VINAY BHAMORE) JUDICIAL MEMBER (DIPAK P.RIPOTE) ACCOUNTANT MEMBER पुणे / Pune; दिनांक / Dated: 16 May, 2025/ SGR आदेशकीप्रतिलिपिअग्रेषित /

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