ANNASAHEB DEVAGOUDA PATIL ,NASHIK V. ITO WARD 2(1),NASHIK, NASHIK

ITA 3358/PUN/2025

AI Insights

The case revolves around an appeal by Annasaheb Devagouda Patil against the rectification order passed by the Assistant Director of Income Tax (CPC) under section 154 of the Income Tax Act, 1961. The rectification pertained to the exemption claimed on leave encashment exceeding Rs. 3,00,000, which is the maximum exemption allowable for non-government employees under section 10(10AA)(ii). The CPC had initially accepted the full exemption in the revised return but later rectified this to restrict the exemption to Rs. 3,00,000, citing it as a mistake apparent from the record. The assessee contested this rectification, arguing that it was a debatable issue and that no opportunity to be heard was provided before the rectification was made.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840039 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2019-2020
• Appeal Filed On: 31-12-2025
• Other Referred Cases: Goverdhan Deepchand Bhambhani vs ITO, Govind Chhatwani vs CIT(A), Sudhakar Gundappa Paldewar
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SADANANDA
• Assessee Lawyers: RAJENDRA AGIWAL
• Keywords: Opportunity of being heard; Revised return; Rectification of order
• Section: 154; 10AA; 139(5); 10(10AA)

Judgement Text

" आयकर अपीलीय अधिकरण ”एस एम सी” न्यायपीठ पुणे में। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC” :: PUNE BEFORE DR.DIPAK P. RIPOTE, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपऩल सं. / ITA No.3358/PUN/2025 निर्धारण वषा / Assessment Year: 2019-20 Annasaheb Devagouda Patil, Flat No.8, Srushti Cop. Hsg. Society, Nakshatra Colony, Gangapur Road, Nashik – 422001. V s Income Tax Officer, Ward-2(1), Nashik. PAN: AARPP1955E Appellant/ Assessee Respondent /Revenue Assessee by Shri Rajendra Agiwal Revenue by Shri Sadananda – JCIT Date of hearing 12/02/2026 Date of pronouncement 24/02/2026 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee against the order of ld.Additional/Joint Commissioner of Income Tax(Appeal)-2, Ahmedabad passed under section 250 of the Income Tax Act, 1961 for the A.Y.2019-20 dated 09.10.2025 emanating from the Order passed under section 154 of the Income Tax Act, dated 29.10.2021. The Assessee has raised the following grounds of appeal : Printed from counselvise.com ITA No.3358/PUN/2025 [A] 2 “1. On the facts and circumstances of case and in law the Ld. AO has erred in determining the total income at Rs.17,71,060 as against returned income of Rs.10,02,450 2. On the facts and in the circumstances of the case and in law the Ld. AO has erred in suo-moto rectifying, the Intimation dated 14/10/2020 which was passed u/s 143(1) of the Income Tax Act, 1961 by processing the revised ITR filed by the appellant on 27/09/2020 by declaring total income of Rs. 10,02,450, by assuming jurisdiction u/s 154 of the Act. Erroneous assumption of jurisdiction U/s 154 on debatable issue of leave encashment exemption to non-government employees U/s 10(10AA)(ii) 3. On the facts and in the circumstances of the case and in law the Ld. AO, CPC failed to appreciate that the issue is debatable in view of the various decisions of the Hon’ble Tribunal including the decision of Hon’ble Pune Bench i.e. Jurisdictional Tribunal and hence assumption of jurisdiction U/s 154 is bad in law. 4. On the facts and in the circumstances of the case and in law the Ld. AO, CPC has erred in passing rectification order u/s 154 of the Act against the revised return filed by the assessee on 27/09/2020 without granting any opportunity of being heard to the assessee. 5. On the facts and in the circumstances of the case and in law the appellant is aggrieved on the claim of the CPC that the appellant was issued notice before passing the rectification when in fact no such notice was issued. The rectification order is liable to quash. Printed from counselvise.com ITA No.3358/PUN/2025 [A] 3 6. On the facts and in circumstances of the case and in law the declaration by the CPC that earlier order U/s 154 was passed accepting the claim of the appellant and later on 2nd rectification order is passed is also contradictory to the material on records. Hence the rectification order is liable to quash. Limit of exemption U/s 10(10AA) of the act for non-government employees and consequential disallowance 7. On the facts and in the circumstances of the case and in law the Ld. AO, CPC has erred in making the addition on account of leave encashment exemption of Rs. 7,68,618/- out of the total claim of the appellant of Rs.10,68,618/- u/s 10(10AA) of the Income Tax Act, 1961 being in excess of Rs.3,00,000/- 8. On the basis of the above grounds of appeal the necessary relief on merits of the case and law may kindly be granted, 9. The appellant craves leave to add, alter, modify, delete all or any of the grounds of appeal on or before hearing.” Submission of Ld.AR : 2. Ld.Authorised Representative(ld.AR) for the Assessee filed case law paper book and factual paper book. 3. The written submission filed by the Assessee is reproduced here as under : Printed from counselvise.com ITA No.3358/PUN/2025 [A] 4 “1. The appellant ANNASAHEB DEVAGOUDA PATIL is an individual. He was employee of Dena Bank now merged with Bank of Baroda. For AY 2018-19 the appellant has filed original return of income U/s 139(1) on 28.07.2019 declaring total income of Rs. 17,71,060 and paid taxes of Rs. 3,54,975 Please refer page no. 50 of factual paper book. The said return was processed by CPC vide intimation dated 20.09.2019. In the said intimation the returned income was accepted. In the said computation of income, the appellant had claimed leave encashment exemption U/s 10(10AA) (ii) of Rs. 3,00,000 as against the actual leave encashment of Rs. 10,68,618. The amount of Rs. 7,68,618 can be referred at page no. 29 of factual paper book. Revised return U/s 139(5) 2. The appellant filed revised return U/s 139(5) on 27.09.2020. In the revised return the appellant disclosed the income at Rs. 10,02,450. Please refer page no. 58 of the factual paper book. The appellant claimed refund of Rs. 2,39,810. The said return was processed by CPC vide intimation dated 14 10.2020. The said intimation can be referred at page no. 59 to 65 of the factual paper book. No adjustment was carried out and returned income was accepted. The difference of income as declared in original return and revised return is of Rs. 7,68,618 and fully attributable to the exemption on account of leave encashment CPC suo-motu rectified intimation 3. The CPC suo-motu has rectified intimation U/s 154 and granted exemption on account of leave encashment of Rs. 3,00,000 as against the claim of the appellant of Rs.10,68,618 as per revised return of income filed U/s 139(5). This adjustment can be seen at page no. 29 of the factual paper book. Printed from counselvise.com ITA No.3358/PUN/2025 [A] 5 4 The CPC has indicated details of rectification on page no. 22 to 29 of the factual paper book. It is stated that \"It has been informed to the assesse by a notice from CPC regarding a claim in the return for A.Y 2019-20 which is not allowable In the return, leave encashment in excess of Rs. 3 lakhs have been claimed as exempt, u/s 10(10AA) of the Income Tax Act. In the case of employee other than government employees, maximum exemption allowable is Rs.3 Lakhs. In the intimation under 143(1)(a), full exemption as claimed in the return, was allowed though assessee is not a government employee as per the details in the return. Hence, an order u/s 154 was passed, restricting the claim of Rs.3 Lakhs. However, the order u/s 154 was erroneously taken up for rectification again, whereby full exemption, as claimed in the return, was allowed. As the assessee's claim of exemption, in excess of Rs 3 lakhs, is erroneous and is a mistake apparent from records, the exemption u/s 10(10AA) is restricted to Rs. 3 lakhs in this order\" 5. It is submitted that while CPC carried out the rectification suo-moto no opportunity of being heard was given to the appellant, as per the provision of section 154(3).” Findings & Analysis : 4. We have heard both the parties. In this case Assessee has filed Revised Return of Income on 27/09/2020 declaring Total Income at Rs.10,02,450/- and claiming exemption of Rs.30,68,618/-. The said Revised Return of Income was processed u/s 143(1) on 14/10/2020, accepting the Returned Income shown in the Revised Return of Printed from counselvise.com ITA No.3358/PUN/2025 [A] 6 Income and also allowing exemption of Rs.30,68,618/- as claimed by assessee in the Revised Return of Income. 4.1 Then, the Assistant Director of Income Tax (CPC) [ADIT(CPC)] passed a suo-moto Rectification Order on 29/10/2021 reducing the claim of exemption on the ground that exemption u/s.10AA has been claimed more than Rs.3,00,000/- and exemption u/s.10AA is allowable only Rs.3,00,000/- as Assessee is NON Government Employee. 5. It has been submitted by Ld.AR that no opportunity was granted by CPC before passing the Rectification order suo-moto. Ld.Departmental Representative(ld.DR) for the Revenue could not file any evidence that assessee was provided any opportunity before passing the Rectification order. 6. In this case the ADIT(CPC) has restricted the exemption u/s.10AA to Rs.3,00,000/- as Assessee is Non-Government Employee. Admittedly, the Assessee is a Retired Bank Employee and Assessee has claimed Leave Encashment exempt u/s.10AA which was more than Rs.3,00,000/-. Printed from counselvise.com ITA No.3358/PUN/2025 [A] 7 7. The ITAT in following cases has allowed exemption u/s.10AA for Bank Employee of more than Rs.3,00,000/-.  Goverdhan Deepchand Bhambhani vs ITO 289/Ahd/2025  Govind Chhatwani vs CIT(A) ITA 385/JP/2023  Sudhakar Gundappa Paldewar ITA 1781/PUN/2025 8. In this case, the ADIT(CPC) has suo-moto rectified the Order u/s.143(1) disallowing the Assessee’s claim for exemption u/s 10AA. 8.1 Rectification u/s.154 is allowable only for mistakes apparent from record. In this case the issue involved is debatable as some Benches of ITAT have decided the issue of exemption u/s 10AA in favour of the Assessee. 9. In such circumstances of the case, there is no apparent mistake in the Order u/s.143(1) dated 14/10/2020. Hence no rectification u/s 154 is permissible in such situation. 10. In these facts and circumstances of the case we are of the considered opinion that the Order u/s.154 is beyond the jurisdiction u/s.154 of the Act, hence bad in law. Printed from counselvise.com ITA No.3358/PUN/2025 [A] 8 11. In these facts and circumstances of the case, Appeal of the Assessee is allowed in above terms. Order pronounced in the open Court on 24 February, 2026. Sd/- Sd/- VINAY BHAMORE Dr.DIPAK P. RIPOTE JUDICIAL MEMBER ACCOUNTANT MEMBER पपणे / Pune; ददिधंक / Dated : 24 Feb, 2025/ SGR आदेशकीप्रनिनलनपअग्रेनषि / Copy of the Order forwarded to : 1. अपऩलधर्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. नवभधगऩयप्रनिनिनर्, आयकर अपऩलऩय अनर्करण, “एस एम सऩ” बेंच, पपणे / DR, ITAT, “SMC” Bench, Pune. 6. गधर्ाफ़धइल / Guard File. आदेशधिपसधर / BY ORDER, / / TRUE COPY / / सहधयक रनिस्ट्रधर /Assistant Registrar आयकर अपऩलऩय अनर्करण, पपणे/ITAT, Pune. Printed from counselvise.com "