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Facts
The assessee, a differently-abled individual, retired and received 'leave encashment' and 'ex-gratia' under a Voluntary Retirement Scheme (VRS). The Assessing Officer (AO) allowed partial exemption for leave encashment and a specific amount for ex-gratia. The assessee's appeal to the CIT(A) was unsuccessful. The appeal to the ITAT was filed with a significant delay, which the assessee sought to condone due to serious medical circumstances affecting him and his family.
Held
The Tribunal condoned the delay in filing the appeal, citing 'sufficient cause' and a justice-oriented approach. Regarding the leave encashment, the Tribunal allowed the appeal by following a CBDT notification that enhanced the exemption limit, which was applicable retrospectively. For the ex-gratia payment, the Tribunal admitted additional grounds arguing it should be treated as retrenchment compensation under section 10(10B) and remanded the issue to the AO for fresh adjudication.
Key Issues
Whether the delay in filing the appeal should be condoned due to medical reasons; whether the enhanced exemption limit for leave encashment under CBDT Notification No. 31/2023 applies to AY 2020-21; and whether ex-gratia payment under VRS can be treated as retrenchment compensation.
Sections Cited
10(10AA), 10(10C), 10(10B), 253(5), 143(3), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 12.06.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 22.08.2022 passed by learned Assessment Unit of Income-tax Department [“AO”] u/s 143(3) r.w.s. 144B of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2020-21, the assessee has filed this appeal.
The registry has informed that the present appeal is delayed by 547 days and therefore time-barred. The assessee has filed an application/
The averments made by assessee in Para 2 & 3 of above application, which are self-explanatory and which do not require repetition, were discussed. In those averments, it is submission of assessee that he is a differently-abled person and that he had to manage medical exigences of himself and his family members which has led to the delay. Ld. AR emphasized that the delay has occurred due to onerous circumstances and it is not attributable to assessee’s lethargy, negligence or malafide intention.
He prayed to condone delay. The Ld. DR for revenue does not have any objection if the bench condones delay and accordingly left it to the wisdom of bench. We have considered the explanation advanced by assessee and in absence of any contrary fact or material on record, the assessee is found to have a “sufficient cause” for delay in filing present appeal. We find that section 253(5) of the Act empowers the ITAT to admit an appeal after expiry of prescribed time, if there is a “sufficient cause” for not presenting appeal within prescribed time. It is also a settled position by Hon’ble Supreme Court in Collector, Land Acquisition Vs Mst. Katiji and others 1987 AIR 1353, 1987 2 SCC 387 that whenever substantial justice and technical considerations are opposed to each other, the cause of substantial justice must be preferred by adopting a justice-oriented approach. Thus, taking into account the facts of case, the provision of section 253(5) and the decision of Hon’ble Supreme Court, we take a judicious view, condone delay, admit appeal and proceed with hearing.
4. The background facts leading to present appeal are as under:
Narendra Kumar Mishra AY 2020-21 (i) The assessee-individual is a differently-abled person. Originally, he was a permanent employee of Central Govt. in the Department of Telecom for the period 01.12.1984 to 01.10.2000. Thereafter, w.e.f.
01.10.2000, he was absorbed in BSNL, a public sector enterprise owned by Central Govt. During previous year 2019-20 relevant to AY
2020-21, he retired from BSNL and received a sum of Rs. 12,85,132/- on account of ‘leave encashment’ and Rs. 15,54,304/- as ‘ex-gratia under Voluntary Retirement Scheme, 2019 (VRS)’. For AY 2020-21, the assessee filed his original return of income u/s 139(1) declaring a total income of Rs. 26,01,978/- on 26.12.2020. In the original return so filed, the assessee claimed exemption of Rs. 7,75,890/- u/s 10(10AA) in respect of leave encashment and exemption of Rs.
5,00,000/- u/s 10(10C) in respect of ex-gratia under VRS [the AO has mentioned Rs. 5,16,000/- in assessment-order which according to Ld.
AR consists of Rs. 5,00,000/- exemption u/s 10(10C) for ex-gratia under VRS (+) Rs. 16,000/- for exempted allowances].
(ii) Subsequently, the assessee filed a revised return of income u/s 139(4) declaring a total income of Rs. 20,92,736/- on 27.03.2021. In the revised return so filed, the assessee claimed full exemption of Rs.
12,85,132/- u/s 10(10AA) in respect of leave encashment. Further, the assessee claimed exemption of Rs. 5,00,000/- u/s 10(10C) in respect of ex-gratia under VRS without any change.
Narendra Kumar Mishra AY 2020-21 (iii) The case of assessee was selected for complete scrutiny under CASS and statutory notices u/s 143(2)/142(1) were issued from time to time which were responded by assessee. During scrutiny proceedings, the AO sought explanation from assessee qua the exemption of Rs.
12,85,132/- in respect of leave encashment. In response, the assessee filed a detailed explanation which is re-produced by AO in Para 5.3 &
5.4 of assessment-order. However, the AO rejected assessee’s submission vide Para 5.5 of assessment-order holding thus:
“5.5 The submission of the assessee is considered but the same is not acceptable. The provisions of section 10(10AA) of the are very clear that the exemption on account of leave encashment is exempt in respect of Central Government or State Govt employees and for other the exemption limit is Rs 3,00,000/-. Assessee ceased to exist as Central Govt employee on the day of absorption in BSNL. As per Rule 37A/37B clause (4), "on permanent absorption of the Govt services, such employees shall cease to be Govt servants and they shall be deemed to have retired from Govt service." Finally, the AO allowed exemption of Rs. 3,00,000/- only as per section 10(10AA)(ii) as against the exemption of Rs. 12,85,132/- claimed by assessee on account of leave encashment. In effect, the AO made an addition of Rs. 9,85,132/-.
(iv) Aggrieved, the assessee carried matter in first-appeal but did not get any success.
(v) Now, the assessee has come in next appeal before us.
5. Originally, the assessee raised following grounds in Appeal Memo (Form No. 36):
Narendra Kumar Mishra AY 2020-21 “1. The Ld. AO was not justified in passing the order, which is bad in law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.
2. The Ld. CIT(A) was not justified in confirming the order, which is bad-in- law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.
3. The Ld. CIT(A) was not justified in confirming the addition of Rs. 8,51,610/- without considering the facts and circumstances of the case.
4. The appellant carves leave to add, amend or modify any of the grounds of appeal
.” Subsequently, the assessee filed revised Appeal Memo (Form No. 36) modifying a mistake in the figure mentioned in Ground No.
3. The modified Ground No. 3 reads as under:
“3. The Ld. CIT(A) was not justified in confirming the addition of Rs. 9,85,132/- without considering the facts and circumstances of the case.” 6. Further, vide Application dated 16.01.2026, the assessee also filed following additional grounds:
"5. That, on the facts and in the circumstances of the case, the entire amount of ex-gratia payment of Rs. 15,54,304/- ought to have been treated as retrenchment compensation exempt under section 10(10B) of the Act, and not as voluntary retirement compensation under section 10(10C) of the Act.
6. That, in any case, the exemption in respect of the said ex-gratia amount ought not to have been restricted to Rs. 5,00,000/- [Ld. AR admitted in open court that the figure of “Rs. 5,16,000/-” is wrongly mentioned in assessee’s application, the correct figure shall be “Rs. 5,00,000/-”] as claimed in the Income Tax Return; instead, the entire amount of Rs. 15,54,304/- should have been allowed as exempt under section 10 of the Act."
7. During hearing before us, neither side has made any submission qua Ground No. 1, 2 & 4. Therefore, Ground No. 1, 2 & 4 are treated as non- pressed/non-pleaded and dismissed.
8. Now, we are required to adjudicate only Ground No. 3 and Additional Grounds. We proceed to adjudicate the same.
Ground No. 3:
9. In this ground, the assessee claims that the CIT(A) was not justified in confirming the addition of Rs. 9,85,132/- made by AO. Precisely, by means of this ground, the assessee wants to claim full exemption in respect of ‘leave encashment’ receipt of Rs. 12,85,132/- in place of exemption of Rs. 3,00,000/- given by AO.
10. In so far as this ground is concerned, the Ld. AR submitted that the ceiling limit of Rs. 3,00,000/- (as considered by AO in assessment-order) for giving exemption, was revised to Rs. 25,00,000/- by CBDT through Notification No. 31/2023/F.No. 200/3/2023-ITA-I dated 24.05.2023. He submitted that revised limit will apply to the previous year 2019-20 / AY 2020-21 with which we are concerned. For this proposition, Ld. AR relied upon following decisions:
Ld. DR for revenue supported the order of AO. He submitted that the notification revising the limit from Rs. 3,00,000/- to Rs. 25,00,000/- for the purpose of section 10(10AA)(ii) was issued on 24.05.2023, hence the same cannot apply to AY 2020-21 as being claimed by assessee. He requested to uphold the orders of lower authorities.
12. We have considered rival submissions of both sides and considered the issue, facts and the judicial rulings cited before us. At first, we re- produce the relevant parts of certain decisions cited by Ld. AR:
Govardhan Deepchand at S.No. 1:
“7. We have given our thoughtful consideration and perused the materials available on record. This issue of deduction u/s. 10(10AA)(ii) is no more res- integra based on the decisions passed by Co-ordinate Bench of this Tribunal in the case of Govind Chhatwani Vs. CIT(Appeals) in dated 31-10- 2023 wherein it is held as follows: “7. We have heard the rival contentions and perused the material placed on record. The bench noted that the apple of discord in this case that the assessee has received a sum of Rs. 17,68,479/- as leave encashment which was claimed in the return of income filed as exempt u/s 10(10AA) of the Act. The CPC and ld. CIT(A) contended that in the light of this specific notification being not issued the leave encashment allowable up to Rs. 3,00,000/- only whereas we note from the submission of the assessee that the assessee has relied upon the notification No. 31/2023/F.No. 200/3/2023-ITA-1 dated 24th May, 2023 and submitted that the revised limit of Rs. 25,00,000/- increased on account of leave salary is applicable and to be considered in the light of fact that government has issued this notification belatedly. The assessee has already claimed the leave salary as exemption the benefit should be given to the assessee. The similar issue has been decided by the bench in the case of Ram Charan Gupta in wherein the bench has already held 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 Kamal Kumar Kalia
Narendra Kumar Mishra AY 2020-21 & 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.
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 Suomotu 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.” On being consistent to the said finding, we held that the assessee is entitled to get the deduction as claimed in the return of income u/s 10(10AA) of the Act as the limit has been increased from 3 lac to 25 lacs.
8. Further this decision is followed in the case of Devendra Kumar Gupta Vs. CIT(Appeals) in M.A. No. 49/JP/2023 dated 18-02-2025. Thus, respectfully following the above decisions, the restricting the deduction u/s. 10(10AA) of Rs. 4,65,404/- made by the lower authorities are not sustainable in law. Therefore the same is liable to be deleted.
9. In the result, the appeal filed by the Assessee is hereby allowed.”
“22. As noted above, the issue related to denial of exemption under Section 10(10AA) amounting to Rs.13,12,806/-. The assessee is a salaried individual who had returned leave encashment salary received on retirement amounting to Rs.13,12,806/- and claimed exemption of the same u/s 10(10AA) of the Act. The same was however restricted to Rs.3 lacs while processing the return of income of the assessee by the CPC in terms of the provisions of Section 10(10AA) of the Act.
I have noted above the contention of the Ld. Counsel for the assessee before me of various Co-ordinate Bench decisions of the ITAT, in as much as 22 cases, holding that the limit of exemption of leave encashment as per Section 10(10AA) of the Act applicable for the impugned year would be Rs.25 lacs. The Ld. Counsel for the assessee submitted the list of the said decisions vide submission dated 25-11-2025 as under:-
Name of the Appellant and Sr Name of the Assessment Date of ITAT Bench No Year Order Mr. Ram Charan 1) Bank 2020-21 Jaipur 27/06/2023 Gupta 408/JPR/2022 Mr. Satish Kumar Electricity 2) 2018-19 Chandigarh 12/09/2023 Thakur ITA Board No211/CHD/2023 Himachal Pradesh Mr. Mangala Ram 3) BSNL 2018-19 Jaipur 04/10/2023 Nimbark Mr. Govind Electricity 4) 2020-21 Jaipur 31/10/2023 Chatwani Rajasthan 385/JPR/2023 Mr. Devendra Kumar Gupta Ajmer Vidyut 2020-21 Jaipur 5) 18/02/2025 MA No 49/JPR/2023 Vitaran Nigam (Arising out of Rajasthan 17/JPR/2023) Mr. Dashrath Kumar 6) BSNL 2020-21 Jaipur 05/03/2025 Sen ITA No 1258/JPR/2024 Mr. Devi Dutt Agrawal 7) State Bank of 2020-21 Jaipur 13/03/2 Mr. Suman Kumar Oil and 8) 2020-21 Ahmedaba 18/03/2025 Jha ITA No Natural d 1179/AHD/2024 Gas Commissio n Ltd Mr. Dinesh Kumar Medical 9) 2021-22 Jaipur 07/04/2025 Mittal ITA No Department 1570/JPR/2024 Rajasthan
Mr.Sham Sunder 10) Canara Bank 2021-22 Delhi 21/04/2025 Sahani Mrs. Neelam Gupta 11) Bank of 2020-21 Delhi 21/04/2025 ITANo081/DEL/2025 Baroda Mr. Sharad Shukla 12) 2020-21 Agra 22/04/2 State Bank of Mr. Vijay Kumar 13) 2019-20 Agra 18/06/2025 India Jain State Bank of Mr. Anil Kumar 14) 2020-21 Agra 18/06/2025 India Khatri 15) Punjab 2020-21 Ahmedaba 28/07/2025 Mr. Goverdhan National Bank d Bhambhani State Bank Mrs. Sujata Gupta 16) 2022-23 Jaipur 31/07/2025 of Bikaner ITA No & Jaipur 915/JPR/2025 17) Life 2022-23 Jaipur 06/08/2025 Mr. Om Prakash Insurance Khandelwal 887/JPR/2025 of India 18) Punjab & 2021-22 Delhi 28/08/2025 Mr. Ashok Arora Sind Bank ITA No 2942/DEL/2025 19) Mr. Chandra Prakash State Bank of 2021-22 Jaipur 07/10/2025 Vashishtha India ITA No 1139/JPR/2025 Canara Bank Mr. Rajiv Kumar 20) 2020-21 Delhi 29/10/2025 Wadhwa ITA No 5897/DEL/2025 21) Canara Bank 2021-22 Delhi 29/10/2025 Mr. Vijay Pal Gupta ITA No 5915/DEL/2025 22) State Bank of 2020-21 Pune 31/10/2025 Mr. Sudhakar G. India Paldewar ITA No 1781/PUN/2025
24. Ld. DR fairly agreed that the issue was covered in favour of the assessee as pointed out by the Ld. Counsel before me. He was unable to bring to my notice any contrary decision of the ITAT in this regard, nor was he able to bring to my notice any decision of a higher judicial authority holding to the contrary. In view of the above I hold that the disallowance of exemption claimed by the assessee of leave encashment received under Section 10(10AA) of the Act amounting to Rs. 13,12,806/- be deleted.
Thus, in these decisions, the benches of Tribunal have applied the revised limit of Rs. 25,00,000/- to earlier AYs 2018-19, 2019-20, 2020-21 & 2021-22 after due analysis. There is no contrary decision referred by Ld. DR. In that view of matter, we accept the claim of assessee that he is entitled to the benefit of revised ceiling limit of Rs. 25,00,000/- as per Notification.
Accordingly, we remand this issue to the file of Ld. AO for the limited purpose of re-computation of the quantum of exemption u/s 10(10AA) taking into account the revised limit of Rs. 25,00,000/- and give appropriate amount of exemption to assessee. Consequently, the Ground No. 3 is allowed for statistical purpose.
Additional Grounds:
14. In these additional grounds, the assessee claims that the entire amount of ex-gratia payment of Rs. 15,54,304/- received from BSNL must be treated as “Retrenchment compensation exempt u/s 10(10B)” and not as “VRS compensation exempt u/s 10(10C)”. Precisely, by means of these additional grounds, the assessee wants to substitute the exemption claimed by him in return [and allowed by AO in assessment-order] u/s 10(10C) by a different provision of section 10(10B).
15. The exact facts relating to this issue are such that the assessee received an ex-gratia sum of Rs. 15,54,304/- from BNSL under Voluntary Retirement Scheme, 2019. The assessee treated the impugned receipt as “VRS compensation” and claimed exemption upto ceiling limit of Rs.
Narendra Kumar Mishra AY 2020-21 5,00,000/- u/s 10(10C) in the original return as well as revised return filed to Department. While passing assessment-order, the AO allowed assessee’s claim as such without any variation. Thus, there was no controversy between assessee and AO at assessment stage. During first-appellate proceedings before CIT(A) also, there was no controversy for this issue. Now, for the first time before ITAT, the assessee has raised Additional Grounds claiming that the receipt of Rs. 15,54,304/- must be treated as “Retrenchment compensation exempt u/s 10(10B)” and not as “VRS compensation u/s 10(10C)”.
16. Ld. AR for assessee filed following justification in his Synopsis for admissibility as well as merit of the Additional Grounds:
Page 14 of 43 Narendra Kumar Mishra AY 2020-21 Page 15 of 43 Narendra Kumar Mishra – AY 2020-21 Page 16 of 43 Narendra Kumar Mishra AY 2020-21 Page 17 of 43 Narendra Kumar Mishra – AY 2020-21 Page 18 of 43 Narendra Kumar Mishra AY 2020-21
17. Ld. AR invited our specific attention to Harish Kumar Vs. ITO, ITAT, Chandigarh, cited by him at S.No. 2 in above Table. We re-produce below the relevant portion of order of ITAT:
"3. The brief facts of the case that the Assessee was an employee of the Department of Telecommunication Services and Department of Telecom Operations (DOT). The department had been transformed in BSNL w.e.f. 01/10/2000. The assessee had opted BSNL Retirement Scheme 2019 (Voluntary Retirement Scheme) and he received total emoluments of Rs. 30,17,000/-. The Assessee had claimed exemption of Rs. 30,17,000/- u/s 10(10B) of the Act in its ITR. However, the Assessing Officer disallowed Rs. 25,17,000/- out of total emoluments of Rs. 30,17,000/- and added back to the income of the Assessee as the scheme was on voluntary basis not compulsory as per 2nd proviso of Section 10(10B) of the Act. The Assessee has claimed that the Assessing Officer has wrongly added amount of Rs. 25,17,000/- on account of disallowing of compensation under BSNL Retirement Scheme 2019. Further, the Assessing Officer has wrongly allowed exemption u/s 10(10B) of Page 19 of 43
Narendra Kumar Mishra AY 2020-21 the Act on account of compensation under scheme approved by Central Government to the extent of Rs. 5,00,000/- only in place of Rs. 30,17,000/-. Since as per the A.O., the scheme was on voluntary basis and not compulsory therefore, he restricted exemption upto Rs. 5,00,000/- as per 2nd proviso of section 10(10B) of the Act. Aggrieved from the above order, the assessee preferred appeal before the CIT(A), how remained unsuccessful.
I have heard the rival contentions and gone through record. The Ld. counsel for the assessee has demonstrated before me that though, in the nomenclature, the scheme has been mentioned as VRS (Voluntary Retirement Scheme), however, in fact the same was retrenchment scheme. The Assessee was an employee of the Bharat Sanchar Nigam Limited (BSNL). The BSNL had incurred losses during the three consecutive years. The salaries of the employees were not paid. The Assessee and other employees were over the age of 50 years and were not conversant with the new technology adopted by the BSNL. The BSNL, therefore, launched Voluntary Retirement Scheme to shed the extra employees. The Ld. counsel in this respect has referred to the revival scheme of the Department of Telecommunications dated 29.12.2019, whereby, the purposes of the scheme was revival of BSNL and MTNL by way of reducing employees cost. Inter-alia, The compensation/exgratia on VRS was to be paid in two installments of 50% each during the financial years 1920-21 and 2020-21.
5. In this case, the Assessee received first installment of compensation/ exgratia on VRS during the financial year 2019-20 upon which the claim exemption u/s 10(10B) of the Act to the Assessee has been allowed by the Ld. CIT(A)in the appellate order in relation to the assessment year 2020-21. The relevant part of the order of Ld. CIT(A) is reproduced as under :-
“The appellant was employee of Department of Telecom Services. The Government of India in its Cabinet meeting dated 23.10.2019 approved the proposals of DOT for revival of BSNL and MTNL vide its Cabinet Note dated 22.10.2019. In its Circular Dated 04.11.2019 the BSNL envisaged a Scheme for effective implementation of VRS and invited options from employees under the scheme for seeking voluntary retirement. Reliance is also placed by the appellant upon the decision of Hon'ble Madras High Court in the case of M/S Hindustan Photo Film Workers Welfare Centre WP No. 18566 of 2015 dated 17.03.2017. Facts of this case is identical to the case of HTML-TD. Both the entitles were closed in similar situation. Therefore, the provisions of section 10(10B) of the Act are clearly attracted in the case of the appellant.
3.10 Further, the decision dated 20.09.2023 of Jurisdictional Hon'ble’ble ITAT Chandigarh A” Bench was also perused wherein several appeals of employees of HTML-TD were taken up. The Hon'ble ITAT opined in para 48 that the matter had been examined by the Hon'ble Madras High Court and thereafter has attained finality in view of dismissal of the SLP by Hon'ble Supreme Court and also added that: “such matters need not be litigated any further”.
3.11 Respectfully following the decision of the Jurisdictional Hon'ble ITAT and for the reasons mentioned above, the A.O. is directed to allow compensation received by the appellant at the time of VRS as exempt income u/s 10(10B) of the Act. Accordingly, Ground No.1 stands Allowed.”
7. Copy of ITAT order has been submitted, this decision dated 20.09.2023 Hon'ble ITAT Chandigarh Bench was perused wherein several appeals of employees of HTMLTD were taken up. The Hon'ble ITAT opined in Para 48 that the matter had been examined by the Hon'ble Madras High Court and thereafter has attained finality in view of dismissal of the SLP By Hon'ble Supreme Court and also added that “such matters need not be litigated any further”.
8. Respectfully following the decision of the Jurisdictional Hon'ble ITAT, the A.O is directed to allow compensation received by the appellant at the time of VRS as exempt income u/s 10(10B) of the Act.
Accordingly, the only one ground raised by the appellant in this appeal is allowed.”
6. However, in respect of the 2nd installment of compensation/exemption on VRS the claim of the assessee has been disallowed, which in my view is not justified. When the claim of the Assessee relating to the first installment has been accepted by the Ld. CIT(A). There was no question to reject the claim of the Assessee in relation to second installment of compensation received by the Assessee. Moreover, Ld. counsel for the Assessee had duly demonstrated that the Assessee had not been paid salary for the last so many months and there was no option to the assessee than to accept the VRS scheme which, in fact, was retrenchment scheme in the garb of the VRS scheme. The amount received by the Assessee was, in fact, the compensation on account of retrenchment.
7. Faced with somewhat similar facts and circumstances, the co-ordinate Bench of the Tribunal in the case of “Sh. Sarabjit Singh vs Income Tax Officer” ITGA No. 764/Chd/2018, vide order dated 06.04.2019 has held as under :-
“We have considered the rival submissions and have also gone through the record. The issue is squarely covered by the decision of the Co- ordinate Chandigarh Bench of the Tribunal the Case of other employees in similar facts and circumstances vide order dated 11.3.2019 passed in & Others titled as 'Sh.Rajeshwar Sharma & Others Vs. ITO'. This Tribunal observed as under:
“Though in strict terms, it may not be said that the amount received by the assessee was on account of commutation of pension, however, the fact on the file is that the aforesaid amount was given by the new employer who has taken over the company from the earlier employer and he had terminated the services of the employees on account of job retrenchment. The Page 21 of 43
Narendra Kumar Mishra AY 2020-21 amount was paid as a Compensation for retrenchment of services taking into consideration the length of service, basic salary, the age and other factors. In our view, the said amount is a compensation paid by the employer while terminating the services of the employee on account of 1oss of job and further subsistence, thus, the said amount was just a capital receipt in the hands of the assessee. In fact, no part of amount received by the assessee is taxable. We, therefore, allow the appeal of the assessee and delete the disallowance and consequent additions made by the Assessing officer in this respect. We further hold that the assessee is entitled to claim refund / adjustment of the tax paid in respect of the aforesaid compensation received, if so, claimed by the assessee. Following the above decision of the Tribunal in the identical facts and circumstances, this appeal of the appellant stands allowed with identical directions.”
8. In view of the above discussion and following the above decision of the Tribunal, the impugned disallowance made by the lower authorities is ordered to be deleted.”
18. Per contra, the Ld. DR for revenue made a strong objection against the admission of additional grounds itself. The contentions raised by Ld. DR are as under:
(i) The assessee received impugned compensation from BSNL under VRS, 2019. The scheme framed by BSNL and approved by Union Government itself mentions “voluntary retirement” at multiple places.
Further, the contents/covenants of scheme are in line with a package of voluntary retirement. Therefore, the assessee is wrongly claiming that it was a retrenchment compensation scheme.
(ii) The assessee has consciously considered the scheme and declared the impugned receipt as VRS scheme and accordingly claimed exemption u/s 10(10C) not only in original return but also the revised return filed to Department. Now, the assessee is taking a new and strange
Page 22 of 43 (iii) The AO allowed exemption as claimed by assessee and there had been no dispute between assessee and AO at assessment stage. During first-appeal before CIT(A) also, there was no such issue raised by assessee. Therefore, the assessee cannot be allowed to raise this issue before ITAT for the first time.
(iv) The assessee’s is relying upon National Thermal Power Co. Ltd. Vs.
CIT (1998) 97 Taxman 358 (SC) but that decision will not apply to assessee’s case. In Para No. 7 of order, the Hon’ble Supreme Court held thus:
“7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide, e.g., C.I.T, v. Anand Prasad (Delhi), C.I.T. v. Karamchand Premchand P. Ltd. and C.I.T. v. Cellulose Products of India Ltd. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.” [emphasis supplied] Thus, the Hon’ble Supreme Court has clearly observed that for allowing a new claim, the facts must be on record in the assessment proceedings. The position of present case is very much clear that the assessee himself treated the scheme of BSNL as “VRS” and claimed exemption u/s 10(10C) in the original return as well as revised return.
Further, there was is consideration/analysis of BSNL scheme at assessment stage by AO. Therefore, the relevant facts i.e. whether it was a kind of voluntary retirement or retrenchment, is not on record.
Hence, the assessee cannot invoke National Thermal Power Co. Ltd. (supra). (v) Reliance is placed on following decisions: (a) CIT Vs. Tolla Ram Hassomal (2006) 153 Taxman 532 (MP) (b) Oriental Science Apparatus Workshop Vs. ITO (1983) 6 ITD 541 (Chd) (c) Ram Kumar Jalan Vs. Commissioner of Income-tax (1977) 108 ITR 301 (Bom) (d) Ultratech Cement Ltd. Vs. Addl. Commissioner of Income-tax (2017) 81 Taxmann.com 74 (Bombay)
Since there was a serious opposition from Ld. DR against admission of additional grounds, an opportunity was given to assessee/Ld. AR to make a detailed submission for this issue and accordingly hearing was adjourned.
On next hearing, the Ld. AR for assessee filed following Supplementary Submission in continuation to his earlier Synopsis:
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The Ld. AR reiterated above Supplementary Submission orally.
Further, as stated by him in Para 5 of Supplementary Submission, the assessee also attached following Representation dated 21.07.2025 given by “All India Bharat Sanchar Nigam Limited Retired Executives’ Association” to the Chairman, CBDT:
Finally, Ld. AR submitted that the assessee is a differently-abled person and does not have any technical knowledge of the provisions of income-tax law i.e. whether section 10(10B) or 10(10C) was applicable to him. Therefore, the bench must take a judicious view and allow the legitimate benefit to assessee. Alternatively, he also agreed that if the bench thinks fit, this issue may be remanded to the file of AO for a fresh adjudication.
We have considered rival contentions of both sides and perused the documents to which our attention has been drawn including the judicial rulings applicable. Admittedly, the assessee is a differently-abled person who was an employee of Telecom Department of Govt. of India from Page 30 of 43
Narendra Kumar Mishra AY 2020-21 01.12.1984. Subsequently, he was transferred to BSNL, an undertaking of Govt. of India, w.e.f. 01.10.2000. Ultimately during current year, the assessee retired from BSNL under a scheme framed/approved by Govt. of India for revival of BSNL. The Ld. AR has filed the documents of scheme at Pages 10 to 20 of original Synopsis. The assessee received an ex-gratia of Rs.
15,54,304/- from BSNL on such retirement. The assessee filed original return and also revised return for current year and in both of the returns so filed, the assessee claimed exemption of Rs. 5,00,000/- u/s 10(10C) treating the impugned receipt as “VRS compensation”. The AO allowed assessee’s claim without any interference. During first-appeal before CIT(A) also, the assessee did not raise any grievance qua this receipt. Now, for the first time, the assessee is raising additional grounds to accept the impugned receipt in the nature of “Retrenchment compensation” entitled for full exemption u/s 10(10B). The Ld. AR has filed various decisions in which the appellate forums have accepted the compensation received in identical circumstances as “Retrenchment compensation” eligible for exemption u/s 10(10B). The Ld. AR has filed decisions of Ranbaxy and Hindustan Photo films. Further, he has also cited a direct decision of Harish Kumar (supra) in the case of BSNL employees. Thus, prima facie, the assessee has a strong case.
23. However, the factual position of assessee is that the assessee has not claimed exemption u/s 10(10B) in the return of income or during assessment before AO or even in first-appeal before CIT(A). This is for the first time that the assessee is claiming this benefit before ITAT by means of Page 31 of 43
Narendra Kumar Mishra AY 2020-21 additional grounds, relying upon the decision of National Thermal Power Corporation (supra). The Ld. DR is having a serious objection against admissibility of the additional grounds/new claim itself. Basically, the Ld.
DR’s contention is that the facts relevant to this claim are not on record and hence the assessee’s new claim cannot be accepted. In contending so, Ld. DR is relying upon Para 7 of National Thermal Power Corporation (supra). However, we find that in preceding Para 6 of National Thermal Power Corporation (supra), the Hon’ble Supreme Court observed thus:
“6. In the case of Jute Corporation of India Ltd. v. C.I.T. (1991) 187 ITR 688, this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. [emphasis supplied]
Thus, there are important observations made by Hon’ble Supreme Court in Para 6 of their order, namely (i) the appellate authorities are vested with all plenary powers which the subordinate authority must have, (ii) there is no good reason to curtail the powers of appellate authorities, (iii) the Page 32 of 43
Narendra Kumar Mishra AY 2020-21 appellate authority must be satisfied that the ground raised was bonafide and that the same could not have been raised earlier for good reasons, and (iv) these all observations would apply to appeals before the Tribunals also.
Furthermore, in Para 7 of their order (which is relied by Ld. DR for revenue and we have re-produced earlier) also, the Hon’ble Supreme Court has observed that the Tribunal will have the discretion to allow or not allow a new ground to be raised. Thereafter, the Hon’ble Court has expressed “But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, we fail to see why such a question should not be allowed to be raised when it is necessary to consider that This question in order to correctly assess the tax liability of an assessee.” expression by Hon’ble Court gives a straight power to admit a new question of law where the facts are on record in assessment proceedings. However, it does not act against admission of additional ground where facts are not available on record. If the additional ground raises a legal claim, it is within Tribunal’s authority to allow such claim and if the facts are not on record, the matter can be remanded to the file of AO for re-adjudication. This proposition is fully supported by the decisions relied by Ld. AR in his Synopsis as well as Supplementary Submission. We quote the relevant paras of decisions relied:
(a) DCM Benetton India Ltd. Vs. CIT (2008) 173 Taxman 283 (Delhi):
“4. The assessee is aggrieved by an order dated 28-7-2006 passed by the Income-tax Appellate Tribunal, Delhi Bench 'G' in relevant for the assessment year 2001-02.
5. The assessee had incurred an expenditure of an amount of Rs. 13,10,566 as business expenditure. This was shown by the assessee as a prior period expenditure in its balance sheet for the previous year relevant to the assessment year 2003-04. However, the expenditure pertained to the previous year relevant to the assessment year 2001-02.
6. The issue was, therefore, not raised by the assessee before the Assessing Officer when its assessment for the assessment year 2001-02 was being completed nor was it raised before the Commissioner of Income-tax (Appeals) ['CIT(A)'].
7. Before the Income-tax Appellate Tribunal ('the Tribunal'), the assessee sought to raise an additional ground in this regard but this was declined by the Tribunal on the ground that the accounts of the assessee were audited and finalized on 5-8-2003 whereas the order was passed by the CIT(A) on 30-9-2003. Consequently, according to the Tribunal, the assessee could have raised this ground before the CIT(A) but did not do so. Under the circumstances, the Tribunal declined to permit the assessee to raise the additional ground by relying upon the decision of the Supreme Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 as well as the decision of the Andhra Pradesh High Court in CIT v. Gangappa Cables Ltd. [1979] 116 ITR 778. It was further held by the Tribunal that since the facts were not before the Tribunal, it could not adjudicate the claim.
8. Learned counsel for the assessee submits that under these circumstances, even though the expenditure incurred by the assessee is a genuine expenditure, it cannot get the benefit thereof either for the assessment year 2003-04 or for the assessment year 2001-02.
9. Learned counsel for the assessee relied upon CIT v. Kerala State Co-operative Marketing Federation Ltd. [1992] 193 ITR 624 (Ker.) wherein it has been held by the Kerala High Court that in the event relevant facts are not on record, the Tribunal can always remand the matter to the file of the Assessing Officer to investigate and determine the facts. It is submitted that the Tribunal ought to have remanded the matter to the file of the Assessing Officer rather than decline to permit the assessee to raise the additional ground.
10. Following the view expressed by the Kerala High Court, with which we have no reason to disagree, particularly since it relies upon a decision of the Madras High Court in CED v. P. Brahadeeswaran [1987] 163 ITR 680, which in turn relies upon three decisions of the Supreme Court in CIT v. McMilan & Co. [1958] 33 ITR 182 ; Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 and CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710, we answer the question of law in the affirmative, in favour of the assessee and against the revenue and remand the matter to the file of the Assessing Officer to determine the claim of the assessee on merits.
11. The appeal is disposed of.”
680 (Madras):
“4. We think that too much is read into the expression "any person accountable objecting to any order passed by the Appellate Controller". In our view, in order to be able to object to an order, it is not necessary that the objector should already have lodged his objection in that matter at any earlier stage. An objection is an objection even if it is put forward for the first time against a particular order. The real question, however, is whether the Tribunal can have jurisdiction to entertain and decide some point of law or of fact which had not been raised by the appellant, or dealt with by any of the authorities either in the course of assessment or in the course of an appeal from the assessment. For considering this question, we think, it is permissible to regard the Act, as belonging to a group, or joint family of direct tax enactments, the other fiscal measures being the Income-tax Act, 1961 the Wealth-tax Act, 1957, the Gift-tax Act, 1958 and so on. Under all these taxing enactments which form an integrated direct tax system the Tribunal has the same role to play, namely, the role of the ultimate appellate authority of fact and the penultimate decision-making authority on law. It may also be stated as a general observation covering all these enactments, that an order of assessment can be questioned in an appeal, before the first appellate authority and subsequently before the Tribunal by way of a further appeal against the order of the appellate authority. In both the appeals the subject of controversy would be the order of assessment. A common feature of these enactments levying direct taxes is that an appeal before the Tribunal may be preferred either by the taxpayer or by the taxing authority. There may be slight variations between one direct tax and another in the enumeration of the Tribunal's powers in appeal. But by and large, we may take it that the Tribunal has got the power, after giving the parties to the appeal an opportunity of being heard, to pass such orders thereon as the Tribunal thinks fit. In the Act, section 63(5)' employs the following words: "The Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders therein as it thinks fit." The preferred expression in this provision is therein involving a slight variation from the usual expression thereon used in the Income-tax Act, in the Wealth-tax Act, in the Gift-tax Act and other direct tax enactments. There have been many oases in the books which have gone into the scope of the Tribunal's appellate jurisdiction, particularly, as to what is meant by passing such orders thereon as it thinks fit. The list of these decisions, which may be described as the cases thereon is legion. Three decisions of the Supreme Court, however, stand out from amongst the rest. Not only because they are the decisions of the Supreme Court in the land, but also because, with respect, they lay down the width of the Tribunal's jurisdiction clearly. They are of overwhelming importance for the decision of the question which we are asked to decide in this case, namely, of the competency of the Tribunal to decide a new point raised for the first time before the Supreme Court in CIT v. McMillan & Co. [1958] 33 ITR 182, Hukumchand Mills Ltd. v. CIT [1967] 63 ITR
The decision of the Supreme Court in McMillan & Co.'s case (supra)was that the appellate authority's powers are co-equal to those of the assessing authority. The Court laid down further, that even though a particular statutory provision mentions by name, only the assessing authority and not the appellate authorities, as the repository of a given power connected with the assessment, yet, as a matter of construction, that power must be held to inhere even in the appellate authorities, exercisable by the appellate authorities at the appellate stage, in the same way the assessing authority would do in the assessment in the first instance.
In Hukumchand Mills Ltd.'s case (supra) a new point was raised for the first time before the Tribunal not by the appellant in that case, who happened to be taxpayer, but by the respondent department. The Supreme Court held that the Tribunal possessed the requisite power to entertain that new point. Referring to the rules framed by the Tribunal for regulating their own procedure, the Supreme Court held that those rules including the one relating to additional ground and the like are merely self-regulating in character and do not in any way circumscribe, or control, the power of the Tribunal as an appellate body under the Income-tax Act.
In Mahalakshmi Textile Mills Ltd.'s case (supra) the Supreme Court held that there was nothing in the Income-tax Act, which restricted the Tribunal to the determination of questions raised before the depart mental authorities, but, on the contrary, all questions whether of law or of fact which related to the assessment of the assessee may be raised before the Tribunal. The Court proceeded to hold that in such cases it would be open to the Tribunal, and indeed, they would be under a duty, to grant relief, on the principle that the right of the assessee to relief is not restricted to the plea raised by him before the departmental authorities.
This trilogy of the Supreme Court cases, all of them addressed to the precise coverage of the Tribunal's jurisdiction in appeal, show clearly that an appellant before the Tribunal can raise any new or additional point for the first time in the appeal before that body even though it had not been raised in any form at early stages, and in such a situation the Tribunal are under a duty bound to entertain that ground and render a determination either themselves or by remanding the matter if further investigation into the facts was warranted. This view of the Tribunal's jurisdiction had commended itself to the Supreme Court because, the appellate power under the taxing enactments is in no way different in substance from the assessment power exercisable by the assessing authority in the first instance.
9. We pointed out that the three Supreme Court cases summed above arose under the Income-tax Act, but the reason of the decisions rendered by the Court apply with full force to the powers of the Tribunal under other direct tax enactments as well, including the Estate Duty Act. If anything, the comprehensive power of the Tribunal to entertain new grounds is Page 36 of 43
Narendra Kumar Mishra AY 2020-21 a fortiori under the Act. This is because the Tribunal can be more closely equated to the assessing authority under this Act than, possibly, under any other direct tax enactment, under section 63(5) the Tribunal has been conferred with an additional power of enhancing the estate duty, from the figure at which it had been originally assessed by the assessing authority, or sustained by the first appellate authority.
We are, therefore, satisfied that in this case, the Tribunal while hearing the appeal grounds was not incommoded in the least, by the fact that the accountable person had not objected to the inclusion of the lineal descendant's share in the dutiable estate at any of the earlier stages of the proceedings. As the Supreme Court observed in the Mahcdukshmi Textile Mills Ltd.'s case (supra) hearing an appellant on a new or additional point is not a mere matter of discretion with the Tribunal, but the Tribunal are duty bound to hear and determine that point. In the present case, the objection put forward by the accountable person was based on a decision of this Court, striking down section 34(1)(c). The clubbing of the lineal descendant's share in the dutible estate was done by the assessing authority under this provision in the statute. When once this Court, in exercise of its special powers under the Constitution, had struck down a part of the statute as violative of article 14, that decision has got to be given effect to by the Tribunal, the moment their attention was drawn to it, in the appeal. The Tribunal could not very well ignore the effect of this Court's decision nullifying section 34(1)(c) merely on the feeble technicality that it had not occurred to the accountable person to invoke the decision of this Court at any earlier stage of the proceedings. We are, therefore, satisfied that the Tribunal acted perfectly legitimately when they entertained the objection to the inclusion of the lineal descendant's share and rendered their decision in accordance with the ruling of this Court in V. Devaki Ammal's ease (supra). This conclusion of ours is based on our summation of the three decisions of the Supreme Court we have earlier discussed.
11. The learned counsel for the department referred to a recent decision of the Supreme Court in Addl. CIT v. Gurjargravures (P.) Ltd. [1978] 111 ITR 1. We do not think this decision of the Supreme Court can be regarded as going against the grain of the three earlier Supreme Court decisions none of which incidentally has been cited in this later case. The question before the Court on this last case released to a claim for relief under section 34 of the Income-tax Act. This claim happened to be put forward by the taxpayer for the first time before the AAC. The AAC did not entertain the claim on the score that it had not been raised at the assessment stage before the ITO. On further appeal, the Tribunal took the view that the AAC ought to have entertained the claim for relief. They accordingly sent the case back to the ITO for working out the relief. The Supreme Court held that the Tribunal was wrong in holding that the AAC should have entertained the claim for relief, which was put forward before him, in the appeal for the first time. A reference to the concluding portion of the Supreme Court's judgment in this case shows that the Court were impressed by the fact that there was no material even before the ITO, on the basis of which the assessee
Narendra Kumar Mishra AY 2020-21 could apply for grant of relief under section 84 even in the appeal. The implication of this last observation by the Supreme Court seems to us to be that where there are already materials in the record of the assessment brought before the Tribunal on a given matter of relief asked for in the appeal, but the assessee had omitted to make a claim before the ITO, he is not precluded from putting forward the claim before an appellate authority, because the basic materials are already on record. So understood, this case can be regarded as a decision turning on its own peculiar facts. To regard this decision otherwise and accept it as a new precedent, generally on the scope of the appellate jurisdiction in taxing enactments, would to be read into this decision, by implication, an intention on the part of the Supreme Court to overrule the three decisions which have stood without a word of contradiction in later decisions of that Court. As we pointed out McMillan & Co.'s case (supra), Hukumchand Mills Ltd.'s case (supra) and Mahalakshmi Textile Mills Ltd.'s case (supra) have not been noticed in the latest case cited for the department we do not think that the Supreme Court could have intended to throw overboard, by implication, all these well considered judgments.
Although we have considered the scope of the Tribunal's appellate jurisdiction purely on the basis of the decisions of the Supreme Court, we must mention that there is yet another way of reaching the same conclusion, especially that expressed by the Supreme Court in the Mahalakshmi Textile Mills Ltd.'s case (supra). In that case, as a matter of construction of the Indian Income-tax Act, the Court held that there was nothing in the taxing statute which restricts the Tribunal to the determination of question raised before the assessing authority and all Questions, whether of law or of fact, which relate to the assessment, can be raised before the Tribunal. This conclusion can be arrived at by considering the essentials of fiscal jurisprudence. The central purpose of any taxing enactment is to relieve the taxpayer of some of the contents of his purse. All the same it is part of the fundamental jurisprudence of liberal democracies, such as ours, that the tax which can be levied on, and collected from, the taxpayer must be precisely that which is sanctioned by a statute passed by an accredited Legislature. No taxation without representation is the time honoured slogan behind the first principles of fiscal jurisprudence. This doctrine has been incorporated in our Constitution in article 265. Because of these fundamental compulsions of the law, a popular legislative body not only lays down the charge as accurately as possible in the words of the taxing enactment but also takes care to ensure that the machinery created under the statute for administering the provisions closely adheres to the precise terms of the charge. Not a pie more, nor a pie less than what is actually due from a taxpayer can be levied or collected by the authorities charged with those tasks. This is one reason why the taxing authorities are armed with special powers for rectification of mistakes for reopening of assessments, for making reassessments and the like. These provisions ensure that nothing which the statute seeks to get at escapes from being brought under the charge in an assessment. In the same way, the taxing enactment carries provisions which act as a corrective to tendencies of quite an opposite kind, namely, over assessments, wrong assessments on those, who are not really liable and cases of that kind.
Narendra Kumar Mishra AY 2020-21 Provisions are invariably enacted into the taxing statutes which enable a person assessed to contest the assessment order in appeal, revision, review, reference and the like. These measures are all directed to the end that the taxpayer is not mulcted with more than what is strictly due from him under the taxing enact- ment. However fair and equitable a taxing legislation might look on paper, actual enforcement of its provisions may lead to horrible distortions. By and large, it is the harassments and the repressive over assessments which bring a bad name to the taxing statutes. This aspect of credibility of the legislative measure among the citizenry also accounts for the provisions for appeal, revision and the like. Indeed the absence of an appeal provision in a taxing enactment might render the enactment not only non- liberal, but also bad in point of constitutional law.
13. Given the indispensable requisites of a taxing enactment, the real function of an appeal against an assessment must be considered to be the same as the function of the assessment itself and not in any way different from it. That function, as we have earlier pointed out, is to adjust the taxpayer's liability, as far as it is humanly possible, to the correct pie and make it accord with the relevant taxing pro visions. If an assessing authority for any reason, either owing to ignorance or overzealousness or sheer devilment, makes an over-assessment and an appeal is carried from his order, the function of the appellate authority in that appeal is to set right the assessment and adjust the taxpayer's liability in accordance with the statutory provisions. In the appeal, as in the assessment, the task is one of adjustment of the tax payer's liability. This is a phrase which English Judges are fond of employing in discussion of tax matters. The function of a tax appeal is thus precisely the same as that of a tax assessment. All other questions are irrelevant in a discussion as to what the scope of a tax appeal is for the scope of the appeal is the same as the scope of the assessment. The statute sometimes confers on the appellate Tribunal the power of enhancement of tax in which event also the scope of the appeal is only the scope of the assessment. Enhancement is only in the nature of a supplementary assessment. The power of enhancement implies that the Tribunal has power to do what the assessing authority ought to have done, even in the first instance.
There is yet another aspect to this discussion. A taxpayer who carries the assessment in appeal is not to be regarded as being engaged in a lie with the taxing department. He is only interested in ensuring that he is not burdened with payment of an amount which is more than that what is due from him as tax. In this sense, an appeal is merely a re consideration of the assessment by a higher authority. Such an appeal is not to be regared as a forensic controversy between two parties ranged on opposite sides as adversaries. The taxpayer, on the one side, and the department on the other, are not to be treated as litigants, in the ordinary sense. Indeed, there cannot be any difference, in the ultimate objective, between the department and the taxpayer. For both are interested in making the assessment as accurate as possible in accordance with the statutory provisions. In this sense, there is no lis at all. It must always be common ground between an assessee and the assessing officer that the assessment must be in accordance with the statute. Even where the statute provides for a representation of the assessing
Narendra Kumar Mishra AY 2020-21 authority before the appellate body at the time of the appeal hearing, still, the nature and function of the appeal remains precisely the same, that is to say, a correct assessment of the tax payer's liability.
Civil litigation between the private parties is notoriously procedure- ridden. In the early stages of the development of the law, even substantial rights and obligations of parties used to be discovered by reference to the particular forms of action with legal procedure prescribed for them. Much of the criticism of modern Court systems stems from the obstacles placed in the way of a just determination of legal disputes by a surfeit of procedure. Mercifully, as it were, our fiscal enactments do not adopt the procedure codes excepting to a limited extent in the matter of summoning witnesses and the like. But we have made the mistake of adopting in our tax legislations the phraseology of the civil law, especially while establishing the machinery for the correction of errors in tax assessments. We have called these institutions of correction 'appellate Tribunals' or by some appellation containing the cognates of appeal. Thereby, however, the intention is not to make these bodies into the very images of civil appellate Courts. Those who preside over the Tribunals, as well as the professional gentlemen who practise before them, might have been instrumental in endowing these bodies with the aura or the external trappings of appellate Courts. But that is no reason why we should regard these bodies as replicas of appellate Courts functioning in civil litigation, and hem them in on all sides by procedural shackles and technical rules of all kinds, which really hinder the administration of fiscal justice according to law.
These are the philosophic, or basic, considerations on which we have got to comprehend the real scope of the jurisdiction of the Tribunal in an appeal. In a recent decision of a Full Bench of this Court, this broad approach had been pursued for determining the scope of the appellate powers of a similar tax Tribunal, namely, the Sales Tax Appellate Tribunal in State of Tamil Nadu v. Arulmurugan & Co. [1982] 51 STC 381 (Mad.). The decision of the Pull Bench in this case is an echo of one of the judgment rendered in an earlier sales tax case in Dy. Commissioner v. Govindaraju Chettiar [1980] 46 STC 341 (Mad.). The Pull Bench, while dealing with the powers of the Sales Tax Appellate Tribunal observed that an appeal is a continuation of the process of assessment, that the appellate authority is as much committed to the assessment process as the assessing authority, that it can itself enter the arena of assessment and, hence, functionally speaking the appellate authority is no different from the assessing authority itself.
The Full Bench decision in Arulmurugan & Co.'s case (supra) has been adopted in an income-tax reference concerning the powers of the Tribunal in a recent judgment of a Division Bench of this Court in Tax Case No. 59 of 1977 dated 9-11-1982. Incidentally as the Supreme Court have observed, even sales tax statutes can be regarded as being in part material with direct tax enactments, especially in matters concerning the machinery of assessment, collection, and recovery—Ghanshyamdas v. Regional Asstt. CST [1963] 14 STC 976 (SC). We, therefore, adopted the reasonings of the Full Bench of this Court in Arulmurugan Co.'s case (supra)and apply the same as expounding the jurisdiction of the Tribunal under section 63 as well.
For the reasons stated above, our answer to the reference as a whole is in favour of the accountable person and against the estate duty office. The department will pay the accountable person the costs of this reference. Counsel's fee Rs. 500.”
In so far as the bonafides of not raising this issue before lower authorities and now raising for the first time before ITAT is considered, the Ld. AR has rightly stated that the assessee is a differently-abled person; that the assessee does not have technical knowledge of taxation provisions; and more importantly the assessee came to know of the relief available u/s 10(10B) after the decisions of ITAT, Chandigarh in Harish Kumar (supra) and the Representation made by “All India Bharat Sanchar Nigam Limited Retired Executives’ Association” to the Chairman, CBDT (supra).
The decisions relied by Ld. DR are clearly distinguishable. The first decision of CIT Vs. Tolla Ram Hassomal (2006) 153 Taxman 532 (MP) has not considered the decision of Hon’ble Supreme Court in National Thermal Power Co. Ltd. (supra). Furthermore, this decision is not against admission of additional ground/claim. In this decision, the Hon’ble High Court has approved the Tribunal’s order accepting additional ground. The only thing which has happened is that the Hon’ble High Court took a view to remand matter to CIT(A). The second decision of Oriental Science Apparatus Workshop Vs. ITO (1983) 6 ITD 541 (Chd) is dated 23.03.1983 which was given before the decision of Hon’ble Supreme Court in National Thermal Power Co. Ltd. (supra) dated 04.12.1996. The third decision of Page 41 of 43
Narendra Kumar Mishra AY 2020-21 Ram Kumar Jalan Vs. Commissioner of Income-tax (1977) 108 ITR 301 (Bom) is also dated 15.07.1976 rendered before the decision of Hon’ble Supreme Court in National Thermal Power Co. Ltd. (supra) dated 04.12.1996 and also the facts of case are also different. The fourth and last decision of Ultratech Cement Ltd. Vs. Addl. Commissioner of Income-tax (2017) 81 Taxmann.com 74 (Bombay) is such that the Hon’ble Court rejected additional ground because the assessee could not satisfy the bonafides i.e. the good and sufficient reason as to why the ground could not be raised before lower authorities. The relevant para of the order of Hon’ble High Court clearly says so:
“27. There can be no dispute that whether or not to allow an additional ground to be raised before the appellate authority is to be decided by the appellate authority in exercise of its discretion considering the facts and circumstances of the case before it. Where only a pure question of law arises from facts which are already on record, then there is no reason why the appellate authority should not consider the question of law so as to determine the correct tax liability of an assessee in accordance with law. However, where evidence is to be examined and that is not on record, then it will be considered only if the parties seeking to raise the additional ground satisfies the authority concerned that for good and sufficient reasons, the ground could not be raised before the lower authorities. In the present facts, no such ground has been made out by the assessee before the Tribunal. In the present facts, as pointed out above and being reiterated once more, the additional ground, which is raised, is not a pure question of law, but would depend upon the satisfaction of the authority as to the facts existing in the subject assessment year for allowing the benefit of Section 80IA of the Act. The additional ground is being raised for the first time before the Tribunal without relevant evidence being on record. [emphasis supplied]
However as noted earlier, in present case, the assessee has provided bonafides of raising additional ground for the first time before ITAT. Thus,
Narendra Kumar Mishra AY 2020-21 taking into account the peculliar facts of present case and in the light of various decisions cited by Ld. AR as discussed above, we admit the issue of ex-gratia raised by assessee through additional grounds. At the same time, we also find that the issue requires a fresh examination at AO level.
Therefore, we remand this issue to the file of AO for a fresh adjudication.
The assessee shall file a detailed submission to the AO narrating all facts and the judicial rulings. The AO shall consider entire submission of assessee judiciously with open/uninfluenced mind and decide this issue afresh. Consequently, the additional grounds are allowed for statistical purpose.
Resultantly, this appeal is partly allowed for statistical purpose.
Order pronounced in open court on 27/02/2026.