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Issues: (i) Whether the delay of 1,165 days in filing the appeal deserved condonation under the principles governing sufficient cause; (ii) Whether the assessee, a non-government employee, was entitled to exemption on leave encashment up to Rs. 25,00,000 under section 10(10AA)(ii) for assessment year 2020-21.
Issue (i): Whether the delay of 1,165 days in filing the appeal deserved condonation under the principles governing sufficient cause.
Analysis: The explanation for the delay was examined in the light of the settled rule that the expression "sufficient cause" must receive a liberal and justice-oriented construction. The absence of mala fides or deliberate inaction was material, and the delay was attributed to subsequent legal and administrative developments rather than negligence. The governing approach preferred substantial justice over technical rejection.
Conclusion: The delay was condoned and the appeal was admitted.
Issue (ii): Whether the assessee, a non-government employee, was entitled to exemption on leave encashment up to Rs. 25,00,000 under section 10(10AA)(ii) for assessment year 2020-21.
Analysis: The exemption for non-government employees was held to be governed by the enhanced ceiling introduced by the later CBDT notification. The enhancement was treated as a beneficial and remedial measure intended to rationalise the relief and remove disparity, and therefore capable of being applied to pending matters. The amount received by the assessee was within the revised ceiling, and restricting the benefit to Rs. 3,00,000 was found unsustainable.
Conclusion: The assessee was entitled to exemption of the entire leave encashment amount and the restriction to Rs. 3,00,000 was rejected.
Final Conclusion: The appeal succeeded in full, the addition made on account of leave encashment was deleted, and the assessee obtained complete relief.
Ratio Decidendi: A beneficial and remedial enhancement of the leave-encashment exemption ceiling for non-government employees may be applied to pending matters where the assessee falls within the revised limit, and delay in filing an appeal must be condoned when explained by a bona fide, justice-oriented cause.
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