ITAT Jaipur Judgments — November 2026

The Tribunal held that the Ld. CIT(E) did not grant adequate opportunity of hearing to the assessee regarding the issues of non-registration under the RPT Act and the genuineness of activities. The Tribunal noted that the CIT(E) rejected the application stating a lack of bills and vouchers without dealing with the other documents submitted by the assessee. Regarding the application being filed under the wrong clause, the Tribunal observed that the assessee had been granted provisional registration twice previously, and the current application was filed in terms of Section 12A(1)(ac)(iii) as the previous provisional registration was about to expire. The Tribunal found that the CIT(E) did not apply his mind to these facts and that mentioning the wrong clause is a curable defect. Therefore, the Tribunal restored the issue of grant of registration back to the file of the Ld. CIT(E) to provide an adequate opportunity of hearing to the assessee to furnish all facts regarding RPT registration, genuineness of activities, and the issue of the application being filed under the wrong clause, and to consider all other necessary matters for grant of registration.

The Tribunal held that the delay of 105 days in filing the appeal was condoned. The Tribunal found 'sufficient cause' for the delay, considering that the assessee was a household lady, lacked technical knowledge, and her tax affairs were managed by her deceased father-in-law. The appeal was heard on merits. On the substantive issue, the Tribunal held that the ad-hoc disallowance of breakage expenses claimed by the assessee was not sustainable. The assessee was running a wine shop and had declared a turnover of Rs. 4,03,28,175/- with a net profit of 0.96%. It was noted that the assessee's books of accounts were audited under Section 44AB and accepted by the AO. The Tribunal reasoned that a mere difference in net profit compared to other businessmen in the same line of business does not justify an ad-hoc disallowance, especially when the books of accounts are duly audited and accepted. Factors such as individual expertise, trained staff, and marketing strategies can lead to variations in profit. Therefore, breakage expenses, which were duly detailed in the audited financials, could not be disallowed on an ad-hoc basis. The disallowance was ordered to be deleted. The appeal filed by the assessee was allowed.

The Tribunal held that the Learned CIT(A) erred in deciding the penalty appeal without adjudicating the quantum appeal, which was still pending before the same authority. The Tribunal reasoned that a consequential penalty appeal cannot be decided independently as it is contingent upon the outcome of the quantum appeal. The Tribunal acknowledged that this might have been an oversight due to workload. Consequently, the impugned order of the CIT(A) was deemed unsustainable and liable to be set aside. The matter was remanded back to the CIT(A) for a fresh decision after the quantum appeal is decided, and with an adequate opportunity of being heard to the assessee. The Tribunal allowed the appeal for statistical purposes.

The Tribunal decided both issues in favour of the assessee. Firstly, regarding the delay, the Tribunal condoned the 442-day delay, finding that the assessee had made out a reasonable cause by explaining that the delay was due to seeking legal advice after encountering technical confusion, and by citing the Supreme Court's precedent in M/s. Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi and others, which emphasizes a liberal approach in condoning delays when there is no deliberate intention to delay. Secondly, on the issue of exemption for leave encashment, the Tribunal held that the enhanced exemption limit of Rs.25,00,000/- prescribed by CBDT Notification No.31/2023 dated 24.05.2023 is applicable to the assessee's claim for Assessment Year 2020-21. The Tribunal respectfully followed the decisions of its coordinate Benches, which had allowed the benefit of the enhanced limit in similar cases. It reasoned that CBDT circulars, when beneficial to the assessee, can mitigate the rigors of law and cannot curtail benefits conferred by the Act. Since the assessee's leave encashment amount of Rs. 9,54,104/- was below the enhanced limit, the assessee was entitled to claim the entire amount as exempt. The Tribunal set aside the order of the Addl. CIT(A) and directed the AO to allow the assessee's claim.