The Income-Tax Appellate Tribunal, Jaipur, on 04 August 2026, set aside a technical bar of limitation, condoned a delay of 1038 days and upheld the assessee’s claim for full exemption of leave encashment under the revised limit of Section 10(10AA).
Background & Facts
The Dispute
The appellant, Ashok Bansal, a retired bank employee, challenged the order of the Commissioner of Income-Tax (Appeals) dated 03 January 2023 which limited his exemption on leave encashment to Rs 3 lakhs under Section 10(10AA) of the Income-Tax Act, 1961. The appellant claimed that the revised statutory limit of Rs 25 lakhs, notified by the Ministry of Finance on 31 May 2023 (Notification No. 31/2023), was applicable retrospectively to the assessment year 2021-22.
Key Facts
- 03 Jan 2023: Ld. CIT(A) order restricting exemption to Rs 3 lakhs.
- 24 Mar 2022: Acknowledgement No. 412769850240322 filed for appeal (original filing deadline 60 days from the order).
- 01 Feb 2026: Affidavit supporting condonation of delay filed; delay amounted to 1038 days.
- 15 Jul 2026: Oral arguments before the Tribunal.
- 04 Aug 2026: Tribunal’s order pronounced.
- 31 May 2023: Notification No. 31/2023 raising exemption limit to Rs 25 lakhs.
- 27 Jun 2023: ITAT Jaipur Bench decision in Ram Charan Gupta v. ITO (ITA No. 408/JPR/2022) affirming the Rs 25 lakh limit.
- 08 Nov 2019: Delhi High Court decision in Kamal Kumar Kalia v. Union of India (2020) on government employee status.
- Various ITAT decisions (62 cited cases, e.g., Chandra Prakash Vashishtha v. ITO (ITA No. 1139/JPR/2025), Mangala Ram Nimbark v. CIT(A) (ITA No. 542/JPR/2023), Satish Kumar Thakur v. ITO (ITA No. 211/CHD/2023)).
Procedural History
- 03 Jan 2023: Ld. CIT(A) order restricting exemption.
- 24 Mar 2022: Appeal acknowledgement filed (Ack No. 412769850240322).
- 01 Feb 2026: Appeal filed before ITAT after 1038 days delay; application for condonation of delay submitted with sworn affidavit.
- 15 Jul 2026: Hearing before Accountant Member Annapurna Gupta.
- 04 Aug 2026: Tribunal’s order.
Parties' Positions
- Appellant: Argues that the delay was not deliberate, was caused by reliance on erroneous tax advice, and that the revised exemption limit of Rs 25 lakhs should apply, granting full exemption of the leave encashment amount of Rs 9,95,670.
- Respondent (IT Department): Contends that the appellant failed to file within the statutory period, that the exemption limit is Rs 3 lakhs for non-government employees, and that the delay reflects laxity.
Relief Sought
The appellant sought (i) condonation of the 1038-day filing delay, and (ii) a direction to the Assessing Officer to allow the full exemption of Rs 9,95,670 under Section 10(10AA).
The Legal Issue
The central questions were: (1) Whether a delay of 1038 days in filing an appeal can be condoned under Section 5 of the Limitation Act, 1963; and (2) Whether the revised exemption ceiling of Rs 25 lakhs under Notification No. 31/2023 applies retrospectively to the assessment year 2021-22, thereby permitting full exemption of the appellant’s leave encashment.
Arguments Presented
For the Appellant
- The appellant relied on the liberal approach endorsed by the Supreme Court in Collector Land Acquisition, Anantnag v. Katiji and Balakrishnan v. Krishnamurthy, emphasizing that “sufficient cause” is elastic and must be interpreted to advance substantial justice.
- Cited Concord of India Insurance Co. Ltd. v. Nirmala Devi (AIR 1979 SC 1666) that bona-fide reliance on professional advice constitutes sufficient cause.
- Submitted that the revised limit of Rs 25 lakhs, notified on 31 May 2023, is retrospective and has been consistently upheld by multiple ITAT benches.
- Asserted that the appellant is a government employee (bank employee of a nationalised bank) and therefore eligible for the full exemption.
For the Respondent
- Argued that the appellant’s delay was a result of his own negligence and that the statutory limitation period is mandatory.
- Maintained that the exemption limit of Rs 3 lakhs applies to non-government employees, and the appellant, being a bank employee, does not qualify as a government employee for the purpose of Section 10(10AA).
- Relied on the CIT(A) order and earlier case law limiting exemption to Rs 3 lakhs for similar categories of employees.
The Court's Analysis
The Tribunal began by reiterating the principles laid down in Collector Land Acquisition, Anantnag that the purpose of Section 5 Limitation Act is to advance substantial justice and that “sufficient cause” must be given a liberal construction. It noted that the delay of 1038 days was not deliberate; it stemmed from the appellant’s reliance on erroneous professional advice and health issues, both of which are recognised grounds for condonation.
"there being sufficient cause adduced before us for condoning the delay in the filing of the present appeal before me by 1038 days, it is a fit case for condoning the delay."
The Tribunal then examined the applicability of the revised exemption limit. It observed that Notification No. 31/2023 expressly raised the ceiling to Rs 25 lakhs and that the ITAT benches, notably Ram Charan Gupta v. ITO (27 Jun 2023) and Chandra Prakash Vashishtha v. ITO (07 Oct 2025), had held the revised limit to be retrospective. The Tribunal rejected the respondent’s contention that the appellant, as a bank employee, is a non-government employee, citing Kamal Kumar Kalia v. Union of India (08 Nov 2019) which clarified that employees of public sector undertakings and nationalised banks are to be treated as government employees for the purpose of Section 10(10AA).
Having found that the appellant’s claim is meritorious and that the delay does not warrant dismissal, the Tribunal applied the liberal approach, condoned the delay, and directed the Assessing Officer to allow the full exemption of Rs 9,95,670.
The Verdict
The Tribunal condoned the 1038-day filing delay, held that the appellant is entitled to the full exemption of Rs 9,95,670 on leave encashment under Section 10(10AA), and directed the Assessing Officer to allow the claim in accordance with the revised limit of Rs 25 lakhs. No costs were awarded, and the order is effective immediately.
What This Means For Similar Cases
Liberal Condonation of Delay
- Practitioners must demonstrate that the delay was not deliberate and was caused by bona-fide reliance on professional advice or health issues.
- Courts will apply a pragmatic, justice-oriented test rather than a rigid technical approach.
Revised Exemption Limits Apply Retrospectively
- The revised ceiling of Rs 25 lakhs under Notification No. 31/2023 is binding on assessments for prior years, provided the appellant’s claim is otherwise meritorious.
- Employees of nationalised banks and PSUs can be treated as government employees for Section 10(10AA) purposes.
Evidence of Professional Advice
- Affidavits and sworn statements detailing the advice received are critical in establishing “sufficient cause”.
- Counsel should preserve all communications with tax consultants to substantiate the claim.
Take-away for practitioners:
- File condonation applications promptly with detailed affidavits.
- Cite the latest statutory notifications and relevant ITAT precedents.
- Argue the employee’s status under the definition of “government employee” when seeking full exemption.
