CHITRA JAIKUMAR,CHENNAI V. NATIONAL FACELESS ASSESSMENT, INCOME TAX DEPARTMENT

ITA 2412/CHNY/2024

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The case involves Chitra Jaikumar, a former employee of the Telecom Department, who claimed an exemption on leave salary received upon voluntary retirement, which was partially denied by the Assessing Officer (AO). The AO levied a penalty under section 270A for misreporting income, which was upheld by the Commissioner of Income Tax (Appeals). Jaikumar appealed to the Income Tax Appellate Tribunal, arguing that the issue was debatable and no malafide intent was present. The Tribunal agreed with Jaikumar, referencing a similar case and emphasizing the discretionary nature of penalty imposition under section 270A.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29325 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Other Referred Cases: Adinath Vasantrao Wandhekar Vs Income Tax Officer [ITA No.1388/PUN/2023 dated 08.03.2024]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.K. SENTHIL KUMAR
• Assessee Lawyers: Y. SRIDHAR; F
• Keywords: Revised return
• Section: 271(1)(c); 246A; 10(10AA)

Judgement Text

" आयकर अपीलीय अिधकरण ‘बी’’’ Ɋायपीठ चेɄई मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI माननीय ŵी मनु क ुमार िगįर, Ɋाियक सद˟ एवं माननीय ŵी जगदीश, लेखा सद˟ क े समƗ। BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI JAGADISH, ACCOUNTANT MEMBER आयकरअपील सं./ ITA No.2412/Chny/2024 (िनधाŊरणवषŊ / Assessment Year: 2020-2021) Chitra Jaikumar, 12-54, I Street, Bhakthavachalam Colony, Vadapalani, Chennai 600 026. [PAN: AFDPC 0079B] Vs. The Income Tax Officer, Non Corporate Ward 4(6) Chennai. (अपीलाथȸ/Appellant) (Ĥ×यथȸ/Respondent) अपीलाथȸ कȧ ओर से/ Appellant by : Shri Y. Sridhar, F.C.A. Ĥ×यथȸ कȧ ओर से /Respondent by : Shri P.K. Senthil Kumar, Addl. CIT. सुनवाई कȧ तारȣख/Date of Hearing : 27.01.2025 घोषणा कȧ तारȣख /Date of Pronouncement : 31.01.2025 आदेश / O R D E R MANU KUMAR GIRI (Judicial Member) The appeal is arising out of the order dated 18.07.2024 of the Commissioner of Income Tax (Appeals), NFAC, Delhi (in short the ‘’ld. CIT(A)’’). The penalty order u/s 270A of the Income Tax Act, 1961 (hereinafter the ‘Act’), was levied by the Assessment Unit for the assessment year 2020-21, vide order dated 16.03.2023. 2. Grounds of appeal are as under: ’1. That the Order of the CIT-A which upheld the levy of penalty under section 270A-9 passed by the Ld. Assessing Officer is erroneous on the facts and the 2 ITA No.2412 /Chny/2024 merits of the case and provisions of Law as well and hence requires to be quashed. 2. That the CIT-A erred in failing to appreciate that the levy of penalty on a debatable issue is prohibited under the law, when no malafide intention on the part of the appellant has been established by the AO. 3. For those and other reasons that may be adduced at the time of hearing, it is prayed by the Appellant that the Honourable ITAT may be pleased to delete the unjust and inexplicable levy of penalty and thus render justice’. 3. The brief facts of the case are that assessee is an erstwhile employee of Telecom Department, Government of India, which was later converted into a Central PSU, BSNL. The appellant had sought voluntary retirement during the FY 2019-20 and as a result had received leave salary of Rs.11,78,949/- at the time of her retirement, which was claimed as exempt under section 10-10AA - in the ITR filed by her on 31.05.2021 for the AY 2020-21, thereby resulting in a claim of refund of Rs.2,87,440/-. The ITR was taken up for scrutiny and during the course of the assessment proceedings, the claim of exemption under section1010-10AA-i on the entire sum of leave salary received was accentuated, as it was universally informed to the retirees of BSNL that being a Central PSU, which was an erstwhile Central Govt. Department, the entitlement was indeed in order. However, the AO did not accept this logical claim of exemption and brought a sum of Rs.8,78,949/- to taxation, while restricting the exemption to the extent of Rs.3 lakhs available under section10-10AA –ii to an employee other than Central/State Govt. The amount of compensation that pertains to unutilized leave in Telecom Department is eligible for total exemption and only in respect of service with BSNL it needs to be restricted. However, the order so passed without considering this distinction was not contested 3 ITA No.2412 /Chny/2024 further in order to avoid protracted litigation and the age and health condition of the appellant was unfavorable to further challenge. Penalty under section 270A was initiated through a separate notice dated 08.09.2022 and finally, ignoring the pleas of the appellant that the provisions of Section 270A-6-are squarely applicable, while the claim having been subject to disputes at various courts, is therefore debatable and hence levy of penalty is unsolicited. However, the AO, in the order dated 16-03-2023 levied penalty under section 270A-9- computed at 200 percent resulting a demand of Rs.5,48,464/-. The same was contested under section 246A and statement of facts and Grounds of Appeal were clearly submitted. Amongst various grounds, the appellant had attempted to impress that when the claim of exemption is debatable and while no malafide intentions could be attributed on such claim, which also stood corrected, there could be no case for levy of penalty’’. However, the ld.CIT(A) dismissed the appeal of the assessee holding as under: ‘’In this ground of appeal, the appellant contends that since this issue is debatable one, penalty u/s. 270A of the Act cannot be levied on her. As already discussed, in the preceding ground of appeal no. 2 and 4, that nothing has been brought on record by the appellant to suggest what is debatable revolving the issue under consideration. The contentions of the appellant has been grossly found to be misplaced. Further, during the course of this appellate proceedings, the appellant has tried to rely on various judicial pronouncements of multiple appellate authorities, their close perusal reveal that all the judicial pronouncements relied upon by the appellant are in respect of provisions of section 271(1)(c) of the Act and not concerning the provisions of section 270A of the Act. Clearly they are not applicable to the facts of the appellant's case as provisions of section 271(1)(c) of the Act are not pari materia with provisions of section 270A of the Act. Further, the provisions of section 270A(9) gives an exhaustive list of the cases when it would be deemed that the assessee has misreported its income. Clause (a) of the said section includes 'misrepresentation' or suppression of the facts. In the appellant's case, it is amply demonstrated that she has wrongly claimed full exemption of leave encashment received from BSNL on termination of h services. As such the penalty levied by the AO u/s. 270A(9)(a) of the Act has been correctly done and consequently this ground of appeal raised by the appellant is dismissed’’. 4 ITA No.2412 /Chny/2024 4. Before us, the ld. Counsel submitted that the assessee has disclosed everything in her return of income. The ld. Counsel further submitted that the assessee under bonafide reasons claimed exemption u/s 10(10AA) which is found excess by the AO. The ld. Counsel filed the order of the Pune Tribunal in the case of Adinath Vasantrao Wandhekar Vs Income Tax Officer [ITA No.1388/PUN/2023 dated 08.03.2024] and contended that in similar circumstances the Tribunal quashed the order of penalty on the same issue in controversy. Per contra, the ld. DR, Mr. P.K. Senthil Kumar, ACIT supported the order of the ld. CIT(A) and tried to distinguish the case referred by the assessee. 5. We have heard the rival submissions and perused the record and case law citation filed. Looking into entirety, we find from the orders of the lower authorities, the facts and circumstance of the case, levy of penalty in this case in our considered view was not warranted for the reasons that: (i) Admittedly for part of the service (Appointment letter was dated 24.04.1980) the appellant was with the Indian Post and Telegram Department (Central Govt.). Subsequently, the Government of India had issued a declaration and order of appointment under Rule 3 and 4 of the Central Civil Services (Temporary Service) Rules 1965 dated 22.06.1983 to the effect that the appellant on being found suitable to be appointed in a quasi-permanent capacity under the Government of India Department of Telecommunication. Further, the Government of India, Ministry of Communication and IT Department of Telecommunication vide their dated 19.01.2004 had permanently absorbed the assessee in MTNL (PSU), a the 5 ITA No.2412 /Chny/2024 Government of India undertaking with effect from 01.10.2000 inaccordance with the provisions of Rule 37A-A of CCs(Pension) Rules. In these scenario the return was revised by the assessee. Therefore, the belief under which full exemption of retirement benefit claimed in the revised ITR which was bona fide and not synthetic one (ii) secondly, the genuine explanation offered by the appellant in support of her mistaken but bona fide belief and disclosed all material facts of her service & the circumstance which swayed to claim full exemption in her revised ITR. We are of the considered view that her conduct squarely falls within clause (a) of sub-section (6) of section 270A of the Act, therefore the under-reported income shall not include the bona fide explanation hence, pardonable (iii) and finally, the imposition of penalty is at the discretion of Ld. AO, since sub-section (1) of section 270A of the Act, refers to the word 'may' and not as 'shall'. The word “may” used in sub-section (1) of section 270A shall have to be read as an enabling discretionary provision and not mandatory. The legislature has in its wisdom and foresight refrained from using the word “shall”. The interpretation of the word “may” as “shall” will lead to consequences which are never intended by the legislature. It will also lead to disastrous consequences. From another angle, we observe that the word “bona fide’ in clause (a) of sub-section (6) of section 270A itself shows that the word “may” be is discretionary and not mandatory. 6. We also find that the order of the Pune Tribunal in the case of Adinath Vasantrao Wandhekar Vs Income Tax Officer [ITA No.1388/PUN/2023 dated 08.03.2024] is aptly apply in this case. We, further find that the AO in the assessment order while refusing to partial claim on merits has relied upon the 6 ITA No.2412 /Chny/2024 judgments of the Hon’ble Supreme Court in the cases of Officers & Supervisors of I.D.P.L Vs Chairman & M.D.I.D.P.L. AIR 2003 SC 2870 and K. Bindal Vs UOI (2003) 5 SCC 163 interpreting the legal rights of the employees of the government companies/PSUs and government employees. Hence, the issue of claim of leave encashment was not free from shadow while filing the revised return by the assessee. In view of above, we set-aside the impugned order of Ld. NFAC and quashed the order of penalty. 7. In result, the appeal of the assessee is allowed. Order pronounced in the open court on 31st day of January, 2025 at Chennai. Sd/- Sd/- (जगदीश) (JAGADISH) लेखा सद˟ / ACCOUNTANT MEMBER (मनु क ुमार िगįर) (MANU KUMAR GIRI) Ɋाियक सद˟ / JUDICIAL MEMBER चेɄई Chennai: िदनांक Dated : 31-01-2025 KV आदेश कȧ ĤǓतͧलͪप अĒेͪषत /Copy to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT, Chennai/Coimbatore/Madurai/Salem. 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF "