IN INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA.No.1809/Ahd/2013 Asstt. Year: 2007-2008 Gopalkrishna Haribhai Dave ITO, Ward-2 11, Ratnagiri Society Vs Nadiad. Nana Ratnakar Mata Road Kapadwanj. (Appellant) (Respondent) Assessee by : Shri Sunil Talati, AR Revenue by : Shri James Kurian, Sr.DR Date of Hearing : 30/09/2016 Date of Pronouncement: 07/10/2016 ORDER PER RAJPAL YADAV, JUDICIAL MEMBER Assessee is in appeal against order of ld.CIT(A)-IV, Baroda dated 12.3.2013 for Astt.Year 2007-08. 2. Grievance of assessee is that ld.CIT(A) has erred in confirming order of AO dated 10.6.2011 passed under section 154 of Income Tax Act, 1961 vide which ld.AO has rejected claim of assessee for exemption under section 10(10C) of amounts received under VRS scheme. 3. Brief facts of case are that assessee has filed his original return of income for Asstt.Year 2007-08 on 25.7.2007 declaring total income at ITA No.1809/Ahd/2013 2 Rs.2,01,940/-. assessee has attached note with computation of income demonstrating that sum of Rs.5 lakhs was shown as exempt income under VRS scheme. assessee had, therefore, claimed refund of Rs.1,99,660/-. Subsequently, assessee has revised this return on 28.3.2008. He offered sum of Rs.5 lakhs for taxation. refund worked out by assessee was at Rs.51,564/-. This return was processed under section 143(3) of Act on 17.4.2008. assessee, thereafter, moved application on 17.2.2011. He prayed that sum of Rs.5.00 lakhs received by him under VRS scheme would be exempt under section 10(10C) of Income Tax Act. This application of assessee was rejected by AO vide order dated 10.6.2011. 4. Appeal to ld.CIT(A) did not bring any relief to assessee. ld.CIT(A) has observed that there is no apparent error in order of AO. assessee himself has revised return, and he himself has offered sum of Rs.5.00 lakhs for taxation. 5. With assistance of ld.representatives, we have gone through record carefully. We find that when assessee has revised return on 28.3.2008, there was fluid situation about taxability or non-taxability of such VRS compensation. Under this dilemma, assessee has filed revised return. When assessee has filed application for rectification of this mistake, by that time, CBDT has issued circular no.F.No.173(1)/32. It was issued on 8.5.2009. Vide this circular, Board has advised that it has accepted decision of Hon ble Bombay High Court in case of CIT Vs. Koodathil Kallyatan Ambujakshan, (2008) 219 CTR (Bom) 80 and observed that employees of Reserve Bank of India and others who have opted for VRS will be entitled for deduction under section 10(10C) of Income Tax Act, 1961. After this circular, AO ought to have rectified his order passed under section 143(1) of Act. Hon ble Gujarat High Court in case of ITA No.1809/Ahd/2013 3 S.R.Koshti Vs. CIT, 276 ITR 165 has considered almost similar situation. Hon ble Court has observed that authorities under Income Tax Act are under obligation to act in accordance with law. Tax can be collected only as provided under Act. If assessee, under mistake, misconception or on not being properly instructed, is over-assessed, authorities under Act are required to assist and ensure that only legitimate tax dues are collected. In this case also, assessee is working as Assistant Manager with Industrial Financial Corporation of India Ltd. He took VRS and received compensation of Rs.7.50 lakhs of which employer has deducted TDS and did not inform assessee regarding exemption from tax that petitioner would be entitled, and accordingly, assessee has offered that for taxation. assessee, thereafter, filed application under section 154, which was accepted by AO, but ld.Commissioner sought to revise that order of AO. Hon ble Court has allowed writ petition of assessee and imposed cost of Rs.5,000/- on ld.Commissioner. It directed Revenue to recover cost from Commissioner. Had Revenue authorities have examined facts of present cases, in light of Hon ble Gujarat High Court s decision, as well as in light of CBDT circular, then, probably, application for rectification would have been allowed. Accordingly, we allow appeal of assessee, and direct AO to grant exemption of Rs.5.00 lakhs under section 10(10C) of Income Tax Act. 7. In result, appeal of assessee is allowed. Order pronounced in Court on 7th October, 2016 at Ahmedabad. Sd/- Sd/- (MANISH BORAD) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 07/10/2016 Gopalkrishna Haribhai Dave v. ITO, Ward-2 Nadiad