Surinder Pal Khurana vs Ward 67(1), Delhi

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short 'the CIT(A)'] dated 05.09.2022, for Assessment Year 2020-21.

The appeal is time barred by 1206 days. The assessee has filed an application supported by an affidavit citing reasons causing delay in filing of appeal. After perusal of the same, I am satisfied that delay in filing of appeal is not intentional, the delay has been caused for the reasons stated in petition which appears to be bonafide. The Hon'ble Apex Court in an unequivocal manner has held that acceptance of reason explaining delay should be the rule and refusal an exception. By taking a pedantic and hyper technical view the explanation furnished should not be rejected, causing loss and irreparable injury to the party against whom the lis terminates. The expression “sufficient cause” should be liberally construed so as to sub-serve the ends of justice.

3 The Hon’ble Supreme Court of India in the case of Collector Land Acquisition vs. Mst. Katiji&Ors., 167 ITR 471 has held that liberal approach should be adopted while dealing with an application praying for condonation of delay. Refusing to condone delay can result in meritorious matter being thrown out at the very threshold and cause of justice being defeated. Pedantic and hyper technical approach should not be adopted while dealing with an application for condonation of delay.

In the case of Ram Nath Sao @ Ram Nath Sahu & Others vs Gobardhan Sao and Others, 2002 SCC (3) 195/2002 SCR (2) 77 the Hon’ble Apex Court held that the expression “sufficient cause” within the meaning of Section 5 of the Limitation Act or Order 22 Rule 9 of Civil Procedure Code or any other similar provision should receive a liberal construction so as to advance substantial justice. The courts should not proceed with the tendency of finding fault with cause shown and reject the petition by a slipshod order in over jubilation of disposal derive. Acceptance of explanation furnished should be the rule and refusal, an exception, more so when no negligence or inaction or want of bonafide can be imputed to the defaulting party.

In light of the reasons explained by the assessee causing delay and the law expounded by the Hon’ble Apex Court in adopting liberal approach in construing ‘sufficient cause, the delay of 1206 days in filing of appeal is condoned and appeal is admitted for decision on merits.

The facts of the case in brief as emanating from records are; the assessee retired from Bank.On superannuation the assessee received leave encashment of Rs.5,30,193/-. The assessee in his return of income claimed entire amount of leave encashment as exempt under section 10(10AA) of the Income Tax Act, 1961 (herein after referred to as ‘the Act’). The return of assessee was processed under section 143(1) of the Act. The Centralized Processing Center, Bengaluru while processing return of income of the assessee restricted the claim of exemption under section 10(10AA) to Rs.3,00,000/- only. Against said Intimation under section 143(1) dated 19/10/2021, the assessee filed appeal before the CIT(A) for allowing exemption of the remaining amount of leave encashment Rs.2,30,193/- u/s.10(10AA)(ii) of the Act, but remained unsuccessful. Hence, the present appeal by the assessee.

The assessee appearing in person filed written submissions and placed reliance on various decisions of the Tribunal to contend that in light of revised limit of exemption u/s 10(10AA) of the Act to Rs.25,00,000/- vide notification no.31/2023 issued by the Ministry of Finance, entire leave encashment received by the assessee is eligible for exemption.

Per Contra Shri Manoj Kumar representing the department vehemently supported the impugned order and prayed for dismissing appeal of the assessee. The ld. DR submits that the assessee was not a Government Employee, therefore, was eligible for exemption on leave encashment u/s.10(10AA)(ii) of the Act to the extent of Rs.3,00,000/- only and the same was allowed to the assessee by CPC.

Both sides heard, orders of the authorities below examined and the decisions on which assessee has placed reliance considered. At the time of superannuation, the assessee received leave encashment of Rs.10,65,113/-. The claim of assessee u/s 10(10AA) of the Act was restricted to Rs.3,00,000/- by the AO and the CIT(A). The Ministry of Finance vide notification dated 20.5.2023 revised the amount of exemption of leave encashment under section 10(10AA) of the Act to ₹25,00,000. The assessee is seeking exemption of entire leave encashment in view of revised limit.

The Hon’ble Delhi High Court in the case of Kamal Kumar Kalia vs. UOI reported as 111 taxmann.com 409, where the petitioners who had retired from various Nationalized Banks had received leave encashment upon their retirement and had claimed exemption of the full amount received u/s.10(10AA) of the Act. The AO restricted the claim of exemption in respect of leave encashment to Rs.3,00,000/-. The petitioners challenged the disallowance of exemption and had also sought revision in the exemption limit in Writ Petition. The Hon’ble High Court observed as under:

The Pune Bench of Tribunal in the case of Sudhakar GundappaPaldewar vs. CIT, reported as 180 taxmann.com 123 (ITAT-Pune), in a case of appellant who had received leave encashment consequent to his retirement during AY 2020-21 and had claimed exemption of the entire leave encashment received on superannuation, the AO restricted the exemption to Rs.3,00,000/-. In appeal, the Tribunal allowed the claim of assessee in terms of notification dated 24th May, 2023 (supra).

Similarly, in the case of Neelam Gupta vs. Addl. CIT in ITA No.81/Del/2025 for AY 2020-21 decided on 21.04.2025, the Coordinate Bench allowed the benefit of revised limit vide notification dated 24th May, 2023 (supra) in respect of leave encashment received by the assessee during FY 2019-20.

The Tribunal in a series of decisions have taken a similar view and has allowed benefit of revised limit of exemption u/s 10(10AA) of the Act to the similarly placed assessees who had superannuated prior to the date of notification (supra). Some of the decisions referred by the assessee are as under:

Thus, in facts of the case and the decisions discussed above, the AO is directed to allow exemption in respect of leave encashment u/s.10(10AA) of the Act as per the revised limit under notification dated 24^th May, 2023 (supra).

In the result, appeal of the Assessee is allowed.