TaxTMI 
TaxTMI 
2024 (11) TMI 1296
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....case of the assessee was selected for complete scrutiny under the E-assessment Scheme, 2019 on the basis of selection being salary income and refund claim. Out of gross salary of Rs. 70,29,533/- the assessee claimed a total of Rs. 55,85,920/- as exempt on account of death cum retirement gratuity amounting to Rs. 31,86,180/- u/s 10(10) and earned leave encashment on retirement exempt u/s 10(10AA) amounting to Rs. 23,99,740/-. Statutory notice(s) u/s 143(2) and 142(1) of the Act along with questionnaire were issued and served upon the assessee, in response to which the assessee furnished his reply providing partial details and supporting documents called for including therein proof of retirement of the assessee on 30.11.2018 and receipt of retirement gratuity of Rs. 31,86,180/- and leave encashment of Rs. 23,99,740/-. However, no computation/explanation was provided with regard to the exempt amount of gratuity and leave encashment claimed by the assessee. Taking support of the relevant provisions of the Act, the Ld. Assessing Officer ("AO") observed that the exemption u/s 10(10) and 10(10AA) of the Act is available only in the case of employees of State and Central Civil Services and....
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.... not to allow its benefit to the assessee based on the content provided therein. 2.2 The Ld. AO therefore, concluded the assessment on 28.09.2021 u/s 143(3) r.w.s. 144B of the Act by making the following additions : i. Rs. 32,85,920/- (Rs. 11,86,180/- on account of excess exemption claimed for gratuity + Rs. 20,99,740/- on account of excess claimed for leave encashment u/s 16 of the Act); and ii. Rs. 50,00,000/- on account of unexplained investment u/s 69 of the Act. 3. Aggrieved, the assessee carried the matter before the Ld. CIT(A) challenging the above additions made by the Ld. AO. Before the Ld. CIT(A) the assessee contended that he is eligible for full exemption for retirement gratuity and leave encashment as he is the employee of a company which was formed by Notification in the Official Gazette of Industries Energy and Labour Department of Government of Maharashtra and under Electricity Act, 2003. The employees of these statutory establishments are holders of civil post. The assessee also referred to Annexure 1 of Question No. 1923 on 14.03.2013 in Rajya Sabha by Hon'ble Minister of State in the Ministry of Personnel Public Grievances and Pensions and....
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....n made dated 05/11/2018 for Rs. 25,00,000/- in Mutual Funds, dated 24/12/2018 for Rs. 25,00,000/- in Mutual Funds, dated 26/12/2018 for Rs. 11,00,000/- in Mutual funds. A deposit of Rs. 32,00,000/-has been made in the account dated 07/12/2018. However, no details regarding the deposit have been submitted. Even if it is presumed that Rs. 32,00,000/- deposited out of retirement benefits, the investment of Rs. 25,00,000/- in Mutual Funds dated 05/11/2018 remains unexplained in the absence of explanation." 4. Dissatisfied, the assessee in appeal before the Tribunal against the order of the Ld. CIT(A) by raising the following grounds of appeal : "1. National Faceless Appeals Centre (hereinafter referred to as "learned CIT(A)") erred in law and on facts in confirming the assessed income of the appellant to the tune of Rs. 69,99,930 thereby partially sustaining the additions made by National Faceless Assessment Centre. 2. The learned CIT(A) erred in law and on facts in not appreciating the fact that, the appellant was a Government employee as covered in Section 10(10)(i) and Section 10(10AA) (i) of Income Tax Act, 1961. 3. The learned CIT(A) erred in law and ....
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.... by the provisions of section 10(10)(i) and section 10(10AA)(i) of the Act available to State Government employees or holders of Civil Posts under the State. 5.1 The Ld. AR also raised an alternate plea that the exemption for retirement gratuity and leave encashment should be allowed to the assessee on pro-rata/proportionate basis. He submitted that the assessee should be eligible for full exemption in respect of receipts attributable to the period of his employment with State Government i.e. Maharashtra State Electricity Board and thereafter as per the prescribed limits under section 10(10)(ii) and 10(10AA)(ii) of the Act for the period of his employment with PSU i.e. Maharashtra State Electricity Transmission Co. Ltd. The Ld. AR therefore urged that full exemption of retirement gratuity amounting to Rs. 20,36,601/- u/s 10(10)(i) and full exemption of leave encashment amounting to Rs. 15,33,910/- u/s 10(10AA)(i) of the Act being portions of retirement benefits accrued to the assessee during his employment with State Government i.e. Maharashtra State Electricity Board should be allowed. He further submitted that the Ld. CIT(A) ought to have allowed full exemption for retirement ....
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....in mutual funds of Rs. 25,00,000/-, the Ld. AR submitted that all the investments were made out of retirement benefits which duly explains the source of investments. The assessee has filed the bank statement of HDFC Bank Limited Saving Account No. 02221000019047 for the period 01.09.2018 to 20.03.2019 showing the details of deposits made during this period out of which the investments in mutual funds were made (Pages 6 to 12 of the Paper Book-I refers). The Ld. AO made an addition of Rs. 50,00,000/- for the want of satisfactory explanation regarding the source of investments by the assessee which has been reduced to Rs. 25,00,000/- by the Ld. CIT(A). He, therefore, urged that this issue may be remanded back to the file of Ld. AO for verification of the assessee's claim. 5.3 The Ld. AR relied upon the various judicial precedents in support of its above contentions which are listed below : i. Som Prakash Rekhi Vs. Union of India, 1981 AIR 212 (SC), dated 13.11.1980; ii. Dr. P. Balasubramanian Vs. CCIT, 448 ITR 318 (Madras-HC), dated 10.08.2022; iii. Mohan Baliramji Thakre and Ors. Vs. ITO in ITA No. 375/NAG/2022 (Nagpur-Tribunal), dated 19.04.2024; ....
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....5. He attained superannuation on 30.11.2018. Perusal of the chart submitted by the Ld. AR (reproduced above) reveals that the assessee joined Maharashtra State Electricity Board on 02.07.1981 and he retired on 30.11.2018 from Maharashtra State Electricity Transmission Co. Ltd. Out of his total service tenure of about 37 years, his tenure with Maharashtra State Electricity Board was about 24 years and with Maharashtra State Electricity Transmission Co. Ltd. was about 13 years. Accordingly, the assessee is entitled to claim exemption for retirement gratuity and leave encashment received by him at the time of superannuation on the proportionate/prorata basis based on his employment tenure with the State Government i.e. Maharashtra State Electricity Board and his employment tenure with PSU i.e. Maharashtra State Electricity Transmission Co. Ltd. For his employment tenure with the State Government, he should be entitled to claim full exemption of the proportionate amount of gratuity i.e. Rs. 20,36,601/- and the exemption with respect to the balance amount of Rs. 11,49,579/- shall be available to him as per the prescribed limits under the provisions of section 10(10)(ii) of the Act. The ....