My client sat on an NFAC order restricting his leave encashment exemption for over a year, and only came to me after hearing that the limit is now Rs 25,00,000. Is the appeal dead on limitation?
Not necessarily. The Tribunal condoned a delay of the order of five hundred days and then allowed the enhanced exemption of Rs 25,00,000 under s.10(10AA), treating the subsequent development on the judicial front and the CBDT notification as themselves part of the sufficient cause for the delay.
Decided by the ITAT (Shri Aby T. Varkey, Judicial Member and Ms Padmavathy S., Accountant Member ('D' Bench, Chennai)) on 2026-09-02, reported as ITA No.3674/CHNY/2026; Assessment Year 2022-23. It bears on section 10(10AA), section 10(10AA)(ii), section 143(1), section 249(3), section 250 of the Income Tax Act 1961, in Salary & Perquisites, Capital Gains Exemptions and Appeals matters.
Most of these leave encashment cases involve retired employees who let the CIT(A) or NFAC order pass because they did not know the limit had moved. This order shows the Tribunal treating that ignorance, coupled with personal circumstances, as sufficient cause under a liberal and justice-oriented approach, and then deciding the merits in the assessee's favour. It also matters because it reproduces the full text of Notification No. 31/2023 including the commencement clause and the Explanatory Memorandum — a useful primary source when the departmental website is hard to navigate. The limitation of the order is that it decides nothing for itself on the merits: it simply follows a coordinate bench, and the coordinate bench's reasoning is set out in the order as a long quotation, so paragraph numbers in the twenties and thirties belong to that other order and not to this one.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a retired employee of State Bank of India, filed his return for AY 2022-23 on 3 July 2022 declaring total income of Rs 9,11,540 and claiming exemption of Rs 12,48,600 under s.10(10AA) towards leave encashment. CPC issued an intimation under s.143(1) on 17 March 2023 restricting the exemption to Rs 3,00,000. Before the CIT(A)/NFAC he argued that employment with State Bank of India falls within the category of Government service so that the whole receipt is exempt; the CIT(A) rejected that and upheld the disallowance by order dated 13 December 2024. The appeal to the Tribunal was filed on 24 June 2026, long out of time. The assessee's condonation affidavit said his son had undergone brain surgery twice during 2025, that he was occupied with his son's care and lost track of the proceedings, and that former colleagues later told him the s.10(10AA) claim had been enhanced from Rs 3,00,000 to Rs 25,00,000.
The delay was condoned and the appeal admitted (para 5). On the merits the Tribunal held that the assessee is eligible for the enhanced exemption limit of Rs 25,00,000 under s.10(10AA) in respect of leave encashment received on retirement and directed the Assessing Officer to delete the addition; the appeal was allowed (paras 7 and 8).
On limitation the Tribunal followed a coordinate bench order on identical facts which had applied Collector, Land Acquisition v. Mst. Katiji, N. Balakrishnan v. M. Krishnamurthy and CIT v. K.S.P. Shanmugavel Nadar for the proposition that 'sufficient cause' in s.249(3) must receive a liberal and justice-oriented interpretation, that the length of delay is not decisive and that denial of adjudication on merits in fiscal matters should be confined to gross negligence or deliberate inaction; it accepted that the delay here was explained by the subsequent development on the judicial front and by the CBDT notification, and condoned it (paras 3 and 5). On the merits it simply recorded that the facts were identical to those before the coordinate bench, which had reasoned that the enhancement of the ceiling by Notification No. 31/2023 is not the introduction of a new exemption but a rationalisation aimed at removing the disparity between government and non-government employees, that beneficial and remedial provisions are to be construed liberally and applied to pending proceedings, and that the absence of an express retrospective clause is not determinative; it followed that reasoning and allowed the claim (paras 6 and 7).
Considering that the facts in the assessee's case being identical respectfully following the ratio laid down by Coordinate Bench, we hold that the assessee is eligible for enhanced exempt limit of Rs.25,00,000/- u/s. 10(10AA) of the Act in respect of the leave encashment received on retirement.
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Handle my notice → Ask a CA on WhatsAppNot necessarily. The Tribunal condoned a delay of the order of five hundred days and then allowed the enhanced exemption of Rs 25,00,000 under s.10(10AA), treating the subsequent development on the judicial front and the CBDT notification as themselves part of the sufficient cause for the delay. This was decided by the ITAT (Shri Aby T. Varkey, Judicial Member and Ms Padmavathy S., Accountant Member ('D' Bench, Chennai)) and bears on section 10(10AA), section 10(10AA)(ii), section 143(1), section 249(3), section 250 of the Income Tax Act 1961. It is reported as ITA No.3674/CHNY/2026; Assessment Year 2022-23. Most of these leave encashment cases involve retired employees who let the CIT(A) or NFAC order pass because they did not know the limit had moved. This order shows the Tribunal treating that ignorance, coupled with personal circumstances, as sufficient cause under a liberal and justice-oriented approach, and then deciding the merits in the assessee's favour. It also matters because it reproduces the full text of Notification No. 31/2023 including the commencement clause and the Explanatory Memorandum — a useful primary source when the departmental website is hard to navigate. The limitation of the order is that it decides nothing for itself on the merits: it simply follows a coordinate bench, and the coordinate bench's reasoning is set out in the order as a long quotation, so paragraph numbers in the twenties and thirties belong to that other order and not to this one. If it applies to you, the first step is this: File the condonation petition on affidavit and plead two things separately: the personal circumstances that kept the assessee out of the process, and the change in the legal position brought about by the notification and the subsequent Tribunal decisions.
The assessee, a retired employee of State Bank of India, filed his return for AY 2022-23 on 3 July 2022 declaring total income of Rs 9,11,540 and claiming exemption of Rs 12,48,600 under s.10(10AA) towards leave encashment. CPC issued an intimation under s.143(1) on 17 March 2023 restricting the exemption to Rs 3,00,000. Before the CIT(A)/NFAC he argued that employment with State Bank of India falls within the category of Government service so that the whole receipt is exempt; the CIT(A) rejected that and upheld the disallowance by order dated 13 December 2024. The appeal to the Tribunal was filed on 24 June 2026, long out of time. The assessee's condonation affidavit said his son had undergone brain surgery twice during 2025, that he was occupied with his son's care and lost track of the proceedings, and that former colleagues later told him the s.10(10AA) claim had been enhanced from Rs 3,00,000 to Rs 25,00,000. The matter was decided on 2026-09-02 by the ITAT (Shri Aby T. Varkey, Judicial Member and Ms Padmavathy S., Accountant Member ('D' Bench, Chennai)). On those facts the ITAT held as follows. The delay was condoned and the appeal admitted (para 5). On the merits the Tribunal held that the assessee is eligible for the enhanced exemption limit of Rs 25,00,000 under s.10(10AA) in respect of leave encashment received on retirement and directed the Assessing Officer to delete the addition; the appeal was allowed (paras 7 and 8).
On limitation the Tribunal followed a coordinate bench order on identical facts which had applied Collector, Land Acquisition v. Mst. Katiji, N. Balakrishnan v. M. Krishnamurthy and CIT v. K.S.P. Shanmugavel Nadar for the proposition that 'sufficient cause' in s.249(3) must receive a liberal and justice-oriented interpretation, that the length of delay is not decisive and that denial of adjudication on merits in fiscal matters should be confined to gross negligence or deliberate inaction; it accepted that the delay here was explained by the subsequent development on the judicial front and by the CBDT notification, and condoned it (paras 3 and 5). On the merits it simply recorded that the facts were identical to those before the coordinate bench, which had reasoned that the enhancement of the ceiling by Notification No. 31/2023 is not the introduction of a new exemption but a rationalisation aimed at removing the disparity between government and non-government employees, that beneficial and remedial provisions are to be construed liberally and applied to pending proceedings, and that the absence of an express retrospective clause is not determinative; it followed that reasoning and allowed the claim (paras 6 and 7). In the words reproduced by the source cited on this page: "Considering that the facts in the assessee's case being identical respectfully following the ratio laid down by Coordinate Bench, we hold that the assessee is eligible for enhanced exempt limit of Rs.25,00,000/- u/s. 10(10AA) of the Act in respect of the leave encashment received on retirement." The decision followed or applied Balasubramanian Venkatachala Perumal v. DCIT, ITA No.96/Chny/2026, order dated 04.05.2026 — followed; Collector, Land Acquisition v. Mst. Katiji (167 ITR 471) (SC) — applied on condonation; CIT v. K.S.P. Shanmugavel Nadar (153 CTR 81) (Mad) — applied on condonation.
It was decided by the ITAT on 2026-09-02 and is reported as ITA No.3674/CHNY/2026; Assessment Year 2022-23. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 10(10AA), section 10(10AA)(ii), section 143(1), section 249(3), section 250, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The delay was condoned and the appeal admitted (para 5). On the merits the Tribunal held that the assessee is eligible for the enhanced exemption limit of Rs 25,00,000 under s.10(10AA) in respect of leave encashment received on retirement and directed the Assessing Officer to delete the addition; the appeal was allowed (paras 7 and 8). It arises in Salary & Perquisites, Capital Gains Exemptions and Appeals matters, on section 10(10AA), section 10(10AA)(ii), section 143(1), section 249(3), section 250 of the Income Tax Act 1961, and was decided by Shri Aby T. Varkey, Judicial Member and Ms Padmavathy S., Accountant Member ('D' Bench, Chennai). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Cite Collector, Land Acquisition v. Mst. Katiji (167 ITR 471) and, before the Madras benches, CIT v. K.S.P. Shanmugavel Nadar (153 CTR 81) for the proposition that sufficient cause must be given a liberal construction. Annex the notification: Notification No. 31/2023 [F. No. 200/3/2023-ITA-I] dated 24 May 2023, S.O. 2276(E), together with its clause 2 (deemed in force from 1 April 2023) and the Explanatory Memorandum certifying that no person is adversely affected by giving it retrospective effect. Note what clause 2 means: 1 April 2023 is the first day of previous year 2023-24, so on the text the enhanced ceiling applies from assessment year 2024-25 onwards and not from assessment year 2023-24 — which is why applying it to an earlier year needs the purposive argument and not merely the notification. Do not argue that an SBI or other bank employee is a Government employee under s.10(10AA)(i); the CIT(A) rejected that here and the Tribunal did not revive it. Check the appeal papers for the correct number of days of delay before filing — the figure is stated three different ways in this record and the Department will use any inconsistency.
Searched for later treatment; none was found. That is not the same as a source affirming it. A `citedby:` citator search on this order's Indian Kanoon id returns no later decision citing it. A second, differently worded probe - the assessee's name restricted to documents from 2 September 2026 onward, across all courts including the High Courts and the Supreme Court - turned up no judicial treatment either. Indian Kanoon carries the order twice (docs 188840875 and 183956459); both are the same 2 September 2026 order. In particular no appeal under section 260A, and so no High Court reversal, could be traced, and no later Bench was found taking the opposite view. This is a September 2026 order, so the silence reflects its age rather than any doubt about it: a practitioner may cite it as the only direct authority on the point but should not expect it to be treated as settled. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The delay is stated three inconsistent ways in the same order: paragraph 3 records 'a delay of 486 days', the assessee's own petition reproduced at paragraph 4 says 'a delay of 503 days', and the quoted coordinate-bench order at its paragraph 11 refers to 'the delay of 1165'. The last figure belongs to the quoted order and not to this appeal. Paragraphs 21 to 30 reproduced in the body are paragraphs of the coordinate bench order in Balasubramanian Venkatachala Perumal v. DCIT (ITA No.96/Chny/2026, dated 04.05.2026). This order itself has only eight numbered paragraphs, and only its own paragraph 7 is cited here. Paragraph 6 describes the coordinate bench as having considered exemption 'u/s.10(10A)', which is plainly a slip for s.10(10AA) given the quoted text. The Balasubramanian order has not been read in its own text, only as reproduced inside this one, so no paragraph of it is cited here as a locator. Two things about what the order settles. On limitation it condones the delay and says no more. The reasoning is that ignorance of the revised limit, coupled with the assessee's personal circumstances, is sufficient cause, which is a discretion exercised on facts and not a proposition another assessee can claim as of right. The provision that matters procedurally is s.249(3), which allows the first appellate authority to admit a late appeal on sufficient cause, and an appellant should put his explanation there rather than save it for the Tribunal. On the merits the order follows a coordinate bench and decides nothing for itself. The exemption question under s.10(10AA)(ii) turns on the notified limit applicable to the assessee's retirement, and the reasoning to cite is the coordinate bench's, which this order sets out at length. An adjustment under s.143(1) is what usually creates the dispute, and an order under s.250 dismissing the appeal on limitation alone leaves the merits untouched, which is the position this order corrects. Two further limits. The order condones the delay and then allows the appeal on the strength of the coordinate bench decision, so it contains no independent examination of the notification or of the years to which the revised limit applies; a reader who needs that examination must go to the coordinate bench order. And it is an order of a single assessee's appeal for one year, with no general direction, so it does nothing for a retiree whose own appeal has already been dismissed on limitation and who has not taken the point further. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The delay was condoned and the appeal admitted (para 5). On the merits the Tribunal held that the assessee is eligible for the enhanced exemption limit of Rs 25,00,000 under s.10(10AA) in respect of leave encashment received on retirement and directed the Assessing Officer to delete the addition; the appeal was allowed (paras 7 and 8).
TaxSphere, “Ramamoorthy Sundar v ITO”, https://taxnotice.vittsphere.com/caselaw/case/ramamoorthy-sundar-v-ito-leave-encashment-delay-condoned/ (validity last checked 2026-09-08)
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My client retired from a nationalised bank in April 2018 and CPC capped his leave encashment exemption at Rs 3,00,000. The Rs 25,00,000 limit came only in May 2023. Can he still get it for AY 2019-20?
My client is a private-sector retiree who was paid leave encashment. The Assessing Officer has restricted the exemption to three lakhs. What is the current limit, what instrument set it, and how is the exempt amount actually computed?
The department has filed its appeal hundreds of days late and its condonation application recites nothing but a list of file movements. Does the usual latitude for government litigants save it?
The other side says every day's delay must be explained; my client says the courts take a liberal view. Which line does the Supreme Court now apply?
