The Income Tax Appellate Tribunal (ITAT) set aside the Commissioner of Income Tax (Appeals)’s dismissal of two appeals, held that compensation received under the BSNL Voluntary Retirement Scheme 2019 is fully exempt under Section 10(10B) of the Income Tax Act, 1961, and that a delay of 1,578 days in filing the appeal qualifies as "sufficient cause" under Section 249(3). The decision underscores a liberal approach to procedural delays and confirms that a fresh claim for exemption may be raised at the appellate stage.
Background & Facts
The Dispute
The appellant, Mr. Mayank Gunvantray Joshi, an individual assessee, received ex-gratia compensation of Rs.15,02,192 under the Bharat Sanchar Nigam Limited Voluntary Retirement Scheme 2019 (BSNL VRS-2019) during the Assessment Year 2020-21. Believing the amount to be taxable, he did not claim exemption under Section 10(10B) in his original return. The return was processed by the Assessing Officer under Section 143(1) on 28-08-2021.
Key Facts
- Compensation received: Rs.15,02,192 (AY 2020-21) and Rs.32,97,143 (AY 2021-22).
- Original return filed without claiming exemption under Section 10(10B).
- Intimation Orders issued under Section 143(1) on 28-08-2021 (AY 2020-21) and 20-08-2021 (AY 2021-22).
- Appeal filed before the Learned Commissioner of Income Tax (Appeals) (CIT(A)).
- CIT(A) dismissed the appeal on 31-03-2026, citing a delay of approximately 1,578 days and treating the claim as a "new claim" not permissible at the appellate stage.
- The appellant contended that the delay was due to lack of professional guidance and genuine misunderstanding of the law.
- The appellant relied on several Tribunal decisions that had condoned similar delays and granted exemption under Section 10(10B) for BSNL VRS compensation.
Procedural History
- 28-08-2021: Intimation Order under Section 143(1) for AY 2020-21.
- 20-08-2021: Intimation Order under Section 143(1) for AY 2021-22.
- 09-04-2026: Order of the Learned CIT(A) dismissing the appeal on limitation grounds.
- 31-03-2026: Another order of the Learned CIT(A) dismissing the appeal.
- 05-08-2026: Hearing of the appeals before the ITAT (Ahmedabad Bench).
- 25-08-2026: Pronouncement of the ITAT order (present judgment).
- Relevant precedents cited: Harish Kumar v. ITO (30-05-2025), Suman Nandlal Raval v. ITO (18-02-2026), Chhaganlal Bhimabhai v. ITO (17-03-2026), Meghmala Sudhir Pathak & Others v. ITO (24-03-2026), Manojkumar Parmar v. ITO (23-04-2026), Collector, Land Acquisition v. Katiji (1987), Goetze (India) Ltd. v. CIT (284 ITR 323).
Parties' Positions
- Appellant: Argues that the delay was bona-fide, qualifies as "sufficient cause" under Section 249(3), and that exemption under Section 10(10B) may be claimed even if omitted in the original return. Relies on multiple ITAT decisions and Supreme Court pronouncements favoring substantial justice.
- Respondent (Income Tax Officer): Maintains that the appeal is barred by limitation, that the claim is a fresh claim not permissible at the appellate stage, and that the CIT(A) correctly exercised discretion in rejecting the appeal.
Relief Sought
The appellant sought:
- Condemnation of the delay in filing the appeal as "sufficient cause".
- Set-aside of the CIT(A) orders dated 09-04-2026 and 31-03-2026.
- Grant of exemption under Section 10(10B) for the BSNL VRS compensation for both assessment years.
- Refund of any tax deducted on the compensation.
- Withdrawal of the double exemption previously granted under Section 10(10C) for Rs.5,00,000.
The Legal Issue
Whether a delay of 1,578 days in filing an appeal can be condoned as "sufficient cause" under Section 249(3) of the Income-Tax Act, and whether the appellate authority may entertain a claim for exemption under Section 10(10B) when such claim was not made in the original return of income.
Arguments Presented
For the Appellant
- The delay resulted from genuine ignorance of the correct legal position and lack of professional advice; therefore it satisfies the liberal test of "sufficient cause" under Section 249(3).
- Citing Collector, Land Acquisition v. Katiji and a series of ITAT decisions, the appellant argued that substantial justice outweighs procedural technicalities.
- Asserted that the appellate authority possesses plenary powers to consider any question of fact or law arising from the assessment proceedings, including fresh claims for exemption under Section 10(10B).
- Emphasised that the compensation is retrenchment compensation, a capital receipt, and thus falls squarely within the ambit of Section 10(10B).
For the Respondent
- Contended that the appeal is barred by limitation and that the appellant’s claim is a new claim, which cannot be entertained at the appellate stage.
- Relied on the CIT(A)’s discretion under Section 250 to reject the appeal on the ground of delay and procedural default.
- Asserted that the exemption claim should have been raised in the original return; otherwise, the appellate authority cannot create a fresh right.
The Court's Analysis
The Tribunal began by interpreting the phrase "sufficient cause" in Section 249(3). It held that the expression is not defined in the Act and must be given a liberal, justice-oriented construction. Referring to Collector, Land Acquisition v. Katiji, the Tribunal emphasized that "substantial justice should prevail over technical considerations".
"The expression 'sufficient cause' used in section 249(3) of the Income-tax Act, 1961 is not defined under the Act and is therefore to be interpreted in a liberal and justice-oriented manner."
The Tribunal noted that the appellant’s delay of 1,578 days was attributable to bona-fide ignorance and lack of professional guidance, which the Tribunal classified as a bona-fide reason falling within the ambit of "reasonable and bona-fide circumstances". It distinguished the respondent’s reliance on Goetze (India) Ltd. v. CIT, observing that the latter dealt with a different factual matrix and could not be applied here.
On the issue of a fresh claim, the Tribunal reiterated that appellate authorities have "wide and plenary powers" to examine all questions of fact and law arising from the assessment proceedings. Citing Manojkumar Parmar v. ITO and Harish Kumar v. ITO, the Tribunal held that a claim for exemption under Section 10(10B) may be entertained even if not made in the original return, provided the facts are on record. The Tribunal further observed that the CBDT Circular No. 14 of 1955 imposes a duty on tax authorities to grant lawful reliefs even when not specifically claimed.
The Tribunal also addressed the double exemption issue. Since the compensation qualifies under Section 10(10B), the earlier exemption of Rs.5,00,000 under Section 10(10C) was withdrawn to avoid double benefit.
In sum, the Tribunal concluded that the CIT(A) erred both in refusing to condone the delay and in rejecting the appellant’s claim for exemption. The appellate authority’s discretion was exercised improperly, and the correct legal position is to grant the exemption and the corresponding refund.
The Verdict
Both appeals are allowed. The compensation of Rs.15,02,192 received in AY 2020-21 and Rs.32,97,143 received in AY 2021-22 are held exempt under Section 10(10B) of the Income-Tax Act. The Assessing Officer is directed to recompute taxable income accordingly and to grant any refund due. The earlier exemption of Rs.5,00,000 under Section 10(10C) is withdrawn as double exemption is not permissible. The orders dated 09-04-2026 and 31-03-2026 passed by the Learned CIT(A) are set aside.
What This Means For Similar Cases
Liberal Construction of "Sufficient Cause"
- Practitioners should emphasize bona-fide reasons such as lack of legal advice when seeking condonation of delay.
- Courts will likely follow the Katiji line, focusing on substantial justice rather than strict timelines.
Fresh Claims Can Be Raised at Appellate Stage
- A claim for exemption under Section 10(10B) may be introduced even if omitted in the original return, provided the factual basis is on record.
- Cite ITAT precedents like Harish Kumar and Manojkumar Parmar to support the argument.
Avoid Double Exemption
- When claiming exemption under Section 10(10B), ensure any earlier exemption under Section 10(10C) is withdrawn to prevent duplication.
- Verify that the compensation falls squarely within the definition of retrenchment compensation.
