The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench has held that compensation received by an employee under the Bharat Sanchar Nigam Limited Voluntary Retirement Scheme, 2019 (BSNL VRS-2019) is exempt under Section 10(10B) of the Income Tax Act, 1961. 

The bench of Rahul Chaudhary (Judicial Member) and Gangadhar Panda (Accountant Member) reiterated that the Commissioner of Income Tax (Appeals) can entertain a fresh claim made for the first time in appellate proceedings where the relevant facts are already on record.

The controversy arose after the assessee received compensation under BSNL VRS-2019 but, under a mistaken belief that the amount was taxable, did not claim exemption under Section 10(10B) while filing the return. For Assessment Year 2020-21, the compensation involved was ₹15,02,192, and the return was subsequently processed by the Centralised Processing Centre under Section 143(1) on August 28, 2021. 

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Subsequently, relying upon the Chandigarh Bench’s decision in Harish Kumar v. ITO, where compensation under BSNL VRS-2019 was held exempt under Section 10(10B), the assessee approached the CIT(A), seeking condonation of delay and raising an additional claim for exemption. The assessee maintained that the delay was bona fide and arose due to absence of proper professional guidance and lack of awareness of the correct legal position. The CIT(A), however, declined to condone the delay and dismissed the appeal. 

The Tribunal noted that the issue was no longer res integra and had already been considered in the case of Jayeshkumar Tulsidas Sutaria v. ITO. In that case, involving an identically placed BSNL employee, the coordinate Bench had condoned a similar delay in filing an appeal against an intimation under Section 143(1) and directed the Assessing Officer to grant refund after holding that compensation received under BSNL VRS-2019 was exempt under Section 10(10B). 

The Bench further observed that the same position had been followed in Kirtida Rajeshkumar Shah v. ITO and Chhaganlal Bhimabhai v. ITO, reinforcing the consistent approach adopted in cases concerning employees receiving compensation under the BSNL VRS-2019 scheme. 

Significantly, the Tribunal recorded that “there is no change in the legal proposition and the factual matrix” and that the Revenue had failed to distinguish the earlier Tribunal decisions either on facts or in law. 

On the question of delay, the ITAT found support in the Supreme Court’s judgment in Collector, Land Acquisition, Anantnag and Others v. Katiji and Others, which deals with the principles governing condonation of delay.

The Tribunal also referred to CBDT Circular No. 14 of 1955, noting that it directs tax officers not to take advantage of an assessee’s ignorance regarding his rights and instead to assist taxpayers in claiming and securing reliefs and refunds to which they are lawfully entitled. 

The ruling is particularly significant because the assessee had originally treated the VRS compensation as taxable and sought the exemption only after becoming aware of judicial decisions supporting the claim. The Tribunal’s decision recognises that a bona fide failure to make the claim in the original return does not, by itself, extinguish the assessee’s entitlement to relief available under law.

Another important issue before the Tribunal concerned whether an exemption not claimed in the original income-tax return could subsequently be claimed before the appellate authority.

The Revenue had relied on the Supreme Court’s decision in Goetze (India) Ltd. v. CIT. The ITAT, however, held that such reliance was “clearly misplaced.”

The Bench specifically observed that the CIT(A) could entertain a fresh claim raised by an assessee for the first time in appellate proceedings, provided the relevant facts were already on record. 

This finding assumes importance in cases where an assessee, because of a bona fide misunderstanding of the law, fails to claim a deduction or exemption in the original return but later raises the claim before an appellate authority.

The assessee had also argued that appellate authorities possess wide powers to consider questions of fact and law arising out of assessment proceedings and that legitimate relief cannot be refused merely because it was omitted from the original return. The appeal specifically invoked CBDT Circular No. 14 of 1955 in support of the proposition that tax authorities should grant lawful relief even where the taxpayer failed to specifically claim it. 

Allowing the appeal for Assessment Year 2020-21, the ITAT categorically held that the ₹15,02,192 received under BSNL VRS-2019 was exempt under Section 10(10B).

The Assessing Officer was consequently directed to recompute the taxable income and grant the refund due, if any, in accordance with law. 

However, the Tribunal made an important qualification concerning double exemption. Since the assessee’s claim for exemption of the compensation under Section 10(10B) was accepted, the ₹5 lakh exemption earlier granted under Section 10(10C) was ordered to be withdrawn.

The Bench made it clear that double exemption cannot be granted in respect of the same ₹5 lakh component of compensation under both Sections 10(10B) and 10(10C). The assessee was directed to furnish before the Assessing Officer the details of the BSNL VRS-2019 compensation and computation of income claiming exemption under Section 10(10B). 

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