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Facts
The assessee's appeal for AY 2020-21 concerns the disallowance of leave encashment claim from Rs. 8,20,020/- to Rs. 3 lakhs, which was upheld by the lower authorities. The CIT(A)/NFAC had also refused to condone a significant delay of 1333 days in filing the assessee's appeal.
Held
The Tribunal condoned the delay in filing the appeal, emphasizing substantial justice over technicalities. It also held that the restriction of the leave encashment exemption under Section 10(10AA) was impermissible during the Section 143(1) processing, as it did not fall under the categories of arithmetical errors or apparent incorrect claims.
Key Issues
Whether the delay in filing the appeal can be condoned and if the disallowance of leave encashment exemption under Section 10(10AA) was permissible under Section 143(1) processing.
Sections Cited
10(10AA), 143(1), 143(1)(a)(i), 143(1)(a)(ii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: “SMC” NEW DELHI
Before: SHRI SATBEER SINGH GODARA
Date of hearing 09.02.2026 Date of pronouncement 09.02.2026 ORDER This assessee’s appeal for assessment year 2020-21, arises against the Commissioner of Income Tax (Appeals)/ Addl./JCIT(A)- 2, Ahmedabad’s DIN and order no. ITBA/APL/S/250/2025- 26/1083032617(1), dated 26.11.2025 involving proceedings under section 143(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.
It emerges during the course of hearing with the able assistance coming from both the parties that the learned CIT(A)/NFAC has refused to condone delay of 1333 days in filing of the assessee’s lower appeal instituted on 23.08.2025 against the Assessing Officer’s assessment framed on 29.11.2021, thereby holding that the same had not been explained in light of the justifiable reasons.
That being the case, I hereby quote Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC), settling the issue long back that all such technical aspects must make way for the cause of substantial justice. Accordingly, the delay caused in filing the appeal before the CIT(A)/NFAC is condoned.
Next comes the issue of claim of leave encashment by the assessee wherein the learned lower authorities have restricted his section 10(10AA) leave encashment claim of Rs.8,20,020/- to Rs.3 lakhs only, in the course of section 143(1) intimation dated 29.11.2021 and upheld in the lower appellate discussion. It is in this factual backdrop that the assessee’s first and foremost argument before us is such a course of action disallowing section 10(10AA) leave encashment exemption is nowhere permissible in an instance involving section 143(1)(a)(i) & (ii) of the Act. A perusal of the above statutory provision indicates that the same gets
2 | P a g e attracted in a case of an arithmetical error apparent from incorrect claim and information in the return disallowance of loss, disallowance of expenditure, disallowance of deduction and addition of income as per Form 26AS etc. than the issue involving the interpretation of the “State” Government as to whether it includes the assessee’s employer or not.
The Revenue vehemently argues that the assessee’s case would be covered under section 143(1)(a)(ii) since it is apparently incorrect claim for leave encashment under section 10(10AA) of the Act. The assessee’s return has nowhere declared any such information, which could be treated as an apparently incorrect one attracting disallowance under Section 10(10AA) in processing itself. I thus reverse the learned lower authorities’ impugned action rejecting the assessee’s section 10(10AA) leave encashment exemption claimed in above terms. Necessary computation shall follow as per law.