TMI Blog2024 (4) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... er which full exemption of retirement benefit claimed in the ITR filed was in first not incorrect in its entirety and certainly it was bonafied and not synthetic one (ii) secondly, the explanation offered by the appellant in support of his mistaken but bonafied belief and disclosed all material facts of his service the circumstance which swayed to claim full exemption in his ITR in our considered view squarely falls within clause (a) of s/s (6) of section 270A of the Act, therefore pardonable (iii) and finally, the imposition of penalty is at the discretion of Ld. AO, since s/s (1) of section 270A of the Act, refers to the word 'may' and not as shall . However, the tax authorities below in our considered view were failed to apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9730/- as his retirement benefit in the year under consideration. 2.2 The assessee in his return of income [in short ITR ] had claimed above amount of Gratuity u/s 10(10)(i) and Leave Encashment receipts u/s 10(10AA)(ii) of the Act as fully exempt from taxes. 2.3 While framing scrutiny assessment u/s 143(3) of the Act vide order dt. 25/03/2021, the Ld. AO bringing the fact on record that MSCDL is a public sector undertaking and not a government, hence restricted the claim of exemption of Gratuity to ₹10,00,000/- u/c (ii) of section 10(10) and Leave Encashment to ₹3,00,000/- u/c (ii) of section 10(10AA) of the Act. As result application of ceiling, the excess of exemption claimed were disallowed and assessed to tax in the hands o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istribution through restructuring and assigned it to three newly formed companies for the stated purpose. The appellant s employer MSEDCL is one of such company engaged in distribution of electricity, from which the appellant assessee received afforested gratuity leave encashment as his retirement entitlement/benefits in terms of MSEDCL employee service regulation, 2005. 5. Undisputedly, the appellant joined his services with MSEB as GoM employee, however owning to its restructuring his employer became State owned PSU company i.e. MSEDCL from which the appellant ultimately retired. In stricter sense, the appellant rendered part of his service tenure as State Government employee and balance part of it was as an employee of PSU. This led to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit as on the date he became an employee of state PSU i.e. MSEDCL must qualify for full exemption u/c (i) of section 10(10AA) and balance receipt should have only been subjected to ceiling limit of ₹3Lakhs since such encashment was attributable to service rendered to MSEDCL. However the tax authorities have perfunctory pressed into service the ceiling without first analysing the facts holistically while dealing with assessment. In the penalty proceedings there were indifferent in dealing with the matter, which led the institution of this appeal before us. 7. Having holistically considered 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) admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retirement is to be considered, cannot be completely ruled out. However, the Ld. AO disallowed the excess claim of exemption which stands fortified by the Hon ble Apex Court in CCE Vs Calcutta Springs [2008] 229 ELT 161(SC) which has been followed subsequently in landmark judgement CoC Vs Dilip Kumar Co reported in [2018] 9 SCC 1 (SC) wherein their Hon ble lordship have held that, in case of benefit of doubt or ambiguity in taxing the income, the benefit of doubt goes to State . However, in respect of penalty in fiscal laws the principle followed is more like the principle in criminal cases. That is to say the benefit of doubt is more easily given to the assessee, and this finds expounded in V Bonafede Iyer Vs CC [1999] 110 ELT 414 (SC). I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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