2017 (2) TMI 1517 - AT - Income Tax

Addition on account of arrears of gratuity and the arrears of leave encashment received from the State Government after retirement - assessee was an employee of the Chaudhary Charan Singh Haryana Agricultural University, Hisar and retired and after retirement, the assessee received arrears of gratuity and claimed the same as exempt u/s 10(10) - Assessee also received a sum on account of arrears of leave encashment which was claimed as exempt u/s 10(10AA)(i) - HELD THAT - As decided in DHARAM JEET DAHIYA VERSUS INCOME TAX OFFICER, WARD-1, HISAR 2017 (6) TMI 165 - ITAT DELHI AR submitted that there is not much difference in the language of section 10(10)(i) and 10(10AA)(i) and the view taken in respect of arrears of gratuity u/s 10(10) should be followed for arrears of leave encashment u/s 10(10AA). DR supported this proposition. As both the sides are consensus ad idem on the position that the view taken in the context of section 10(10) as applicable to leave gratuity be followed here in the context of section 10(10AA) in the context of leave encashment, we are desisting from independently examining the later provision. In view of the fact that held the assessee to be entitled to exemption u/s 10(10)(i) in respect of arrears of gratuity, following the same, extend the benefit of exemption u/s 10(10AA)(i) in respect of arrears of leave encashment. - Decided in favour of assessee.

Summary

Issues Involved:
1. Initiation of proceedings under Section 147 of the Income Tax Act, 1961.
2. Addition of Rs. 6,50,000/- on account of arrears of gratuity.
3. Addition of Rs. 1,94,770/- on account of arrears of leave encashment.
4. Issuance of notice by the Commissioner of Income Tax (Appeals) before the hearing of the appeal.

Detailed Analysis:

1. Initiation of proceedings under Section 147:
The appellant raised issues regarding the initiation of proceedings under Section 147 of the Income Tax Act, 1961, and the completion of assessment under Sections 147/143(3) at an income significantly higher than the returned income. However, these grounds were not pressed by the appellant and were dismissed as not pressed.

2. Addition of Rs. 6,50,000/- on account of arrears of gratuity:
The main grievance of the assessee was the addition of Rs. 6,50,000/- received as arrears of gratuity from the State Government after retirement. The Assessing Officer (AO) did not allow the claim of exemption under Section 10(10)(i) of the Income Tax Act, 1961, stating that the employee of the Chaudhary Charan Singh Haryana Agricultural University (CCS HAU) cannot be termed as a Government employee. The AO concluded that university employees are covered under Section 10(10)(iii) and restricted the exemption to Rs. 3,50,000/-.

Upon appeal, it was observed that similar cases had been adjudicated by various benches of the ITAT New Delhi in favor of the assessee. The Tribunal noted that employees of CCS HAU are considered as holding a civil post under a State, thus qualifying for exemption under Section 10(10)(i). Accordingly, the Tribunal directed the AO to allow the claim of the assessee on account of gratuity, setting aside the addition made by the AO and sustained by the CIT(A).

3. Addition of Rs. 1,94,770/- on account of arrears of leave encashment:
The assessee also contested the addition of Rs. 1,94,770/- received as arrears of leave encashment, which was claimed as exempt under Section 10(10AA)(i). The AO had restricted the exemption stating that the university employees are covered under Section 10(10AA)(ii).

The Tribunal, following the rationale applied to the gratuity issue, extended the benefit of exemption under Section 10(10AA)(i) for the arrears of leave encashment as well. The Tribunal directed the AO to allow the claim, thereby deleting the addition made by the AO and sustained by the CIT(A).

4. Issuance of notice by the Commissioner of Income Tax (Appeals):
The assessee contended that the CIT(A), Hisar, did not issue a notice before the hearing of the appeal, rendering the order illegal. The Tribunal did not specifically address this issue in the detailed analysis but focused on the substantive issues of gratuity and leave encashment.

Condonation of Delay:
The appeal filed by the assessee was delayed by 217 days. The Tribunal considered the reasons provided by the assessee, including the serious illness of his wife and the lack of action on his application for recall of the order by the CIT(A). The Tribunal found the reasons to be reasonable and plausible, condoning the delay and admitting the appeal.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the AO to allow the claims for exemption on account of gratuity and leave encashment, thereby deleting the additions made. The judgment emphasized the applicability of Section 10(10)(i) and Section 10(10AA)(i) for employees holding a civil post under a State, aligning with precedents set by similar cases adjudicated by the ITAT New Delhi.