Yashavanth Nayak Vs ITO (ITAT Bangalore)
Retired Before 2023? Bangalore ITAT Allows ₹25 Lakh Leave Encashment Limit for AY 2020–21
Can a person who retired in 2019 claim the enhanced ₹25 lakh exemption for leave encashment, although the notification raising the limit was issued only in 2023? The Bangalore Bench of the Income Tax Appellate Tribunal has answered this question in favour of a retired bank employee in Yashavanth Nayak v. ITO, ITA No. 37/Bang/2026, order dated 28 September 2026.
The assessee, a former employee of the State Bank of India, retired on 31 July 2019. He received ₹9,22,762 towards leave encashment and claimed the entire amount as exempt under section 10(10AA)(ii) in his return for AY 2020–21. The CPC, however, restricted the exemption to ₹3 lakh, the limit applicable under the earlier government notification. The CIT(A) upheld the CPC’s adjustment. Thus, the dispute before the Tribunal concerned exemption for the balance ₹6,22,762.
Before reaching that question, the Tribunal had to consider a substantial procedural hurdle: the appeal was filed 1,102 days late. CA Akashdeep Pai, on behalf of the assessee, explained that, after the CIT(A)’s order, Assessee had relied on a tax consultant recommended through a pensioners’ association but had not received clear advice about pursuing an appeal. Assessee subsequently learned that the government had increased the leave encashment exemption limit and believed that the Department might reprocess the returns on its own. When the pensioners’ association later circulated guidance about remedies available to retired bank employees, Assessee consulted a new adviserCA Akashdeep Pai and filed the appeal.
