2014 (8) TMI 792 - AT - Income Tax

Taxability of ex gratia payment received under Exit Option Scheme of State Bank of India - Income do not form part of total income u/s 10(10C) - Exemption Held that - The assessee declared income which was processed u/s 143(1) of the Act - assessee has claimed exemption u/s 10(10C) of the Act, being the amount received as ex gratia under Exit Option Scheme of State Bank of India - The assessee was asked to explain his stand - the assessment proceedings were attended from time to time and also preferred written submission - The assessee was a bank employee, disclosed income from salary at ₹ 10,50,211/- and claimed exemption of ₹ 5,00,000/- u/s 10(10C) of the Act the AO in view of Circular No. CIRDO/HR/72/2006-07 dated 8.8.2006 of Human Resources Department held that the ex gratia payment will be added to the income of the employee made the addition - CIT(A) also affirmed the stand taken by the AO Relying upon SAIL DSP Vs Employees Association Vs Union of India 2003 (2) TMI 46 - CALCUTTA High Court - the assessee entitled to exemption u/s 10(10C) of the Act Decided in favour of Assessee.

Summary

Issues:
1. Validity of proceedings initiated under section 147 of the Income Tax Act.
2. Denial of exemption under section 10(10C) for relief under section 89(1) of the Act.

Analysis:

Issue 1: Validity of proceedings under section 147:
The appellant challenged the initiation of proceedings under section 147 of the Income Tax Act, contending that it was a mere change of opinion without fresh material, rendering it invalid. The appellant argued that the notice issued lacked the reasons for belief regarding escaped income, making it unlawful. The appellant cited legal precedents to support their claim that a change of opinion alone does not justify reopening assessments. Furthermore, the appellant raised objections that were not adequately addressed by the lower authorities. However, during the hearing, the appellant did not press several grounds, leading to their dismissal. The Tribunal noted the appellant's arguments but ultimately dismissed most grounds as not pressed.

Issue 2: Denial of exemption under section 10(10C):
The core argument revolved around the denial of exemption under section 10(10C) for relief under section 89(1) of the Act. The appellant, a bank employee, had claimed exemption for ex gratia received under an Exit Option Scheme of State Bank of India. The Assessing Officer added the ex gratia payment to the appellant's income, following a circular. On appeal, the CIT(A) upheld this decision. However, the Tribunal, after considering the appellant's submissions and relevant judicial pronouncements, allowed the appeal. Citing precedents in favor of the appellant, the Tribunal held that the appellant was entitled to the exemption under section 10(10C). The Tribunal's decision was based on the self-explanatory reasoning in previous orders and the absence of contradictory decisions.

In conclusion, the Tribunal partly allowed the appeal, granting relief to the appellant on the issue of exemption under section 10(10C). The judgment highlighted the importance of legal precedents and the need for proper consideration of arguments in tax matters.