Sangli 416415 PAN : ABFPB8850K अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Amol R. Kulkarni Department by : Shri Ramnath P. Murkunde Date of hearing : 16072024 Date of 10102024 Pronouncement : आदे श / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the assessee is directed against the order dated 28.03.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi ["CIT(A)"] pertaining to Assessment Year ("AY") 201920. 2. Briefly stated, the facts of the case are that the assessee is a retired employee of Maharashtra State Electricity Transmission Co. Ltd. He retired from the service on 30.11.2018. For AY 201920 he filed his return of income declaring total income of Rs.12,49,980/ on 24.06.2019 which was subsequently revised by filing revised return on 13.12.2019. He has also shown income u/s 44AD of the Income Tax Act, 1961 (the "Act") from engineering and technical consultancy along with salary income from Maharashtra State Electricity Transmission Co. Ltd. The case of the assessee was selected for complete scrutiny under the Eassessment 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 2 ITA No.900/PUN/2024, AY 201920 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 Armed Forces in the entirety. The assessee being an employee of Maharashtra State Electricity Transmission Co. Ltd. which is a Public Sector Undertaking (PSU), cannot be said to be a member of State or Central Service. In any other case, exemption for gratuity received is subject to a limit of Rs.20,00,000/ as prescribed by the Payment of Gratuity (Amendment) Act, 1972 effective from 29.03.2018. Similarly, exemption for leave encashment, for civilian employees other than members of State and Central Civil Service, is subject to a limit of Rs.3,00,000/ vide Notification No. SO 588(E) dated 31.05.2002. In the draft assessment order the Ld. AO therefore proposed a disallowance of Rs.11,86,180/ (Rs.31,86,180/ Rs.20,00,000/) and Rs.20,99,740/ (Rs.23,99,740/ Rs.3,00,000/) on account of excess exemption claimed by the assessee for retirement gratuity and leave encashment respectively. A show cause notice was thereafter issued to the assessee requiring him to show cause as to why the assessment proceedings should not be concluded as per the draft assessment order. In the absence of any response to the said SCN, the Ld. AO made the addition of Rs.11,86,180/ on account of excess exemption claimed by the assessee for retirement gratuity u/s 10(10) and Rs.20,99,740/ on account of excess exemption claimed for leave encashment u/s 10(10AA) of the Act, to the assessee's income from salary. 2.1 The Ld. AO also found from the information available on Department's database that during the AY 201920 under consideration, the assessee has invested Rs.50,00,000/ in mutual funds. The assessee was asked to explain the source of investment in mutual funds made during the year vide issue of notice(s) u/s 142(1)