There is a particular kind of bureaucratic injustice that makes even a layperson shake their head. The government sends you notices to an email address you no longer have access to because it was hacked. You miss the notices. You find out through the portal, respond immediately, explain everything thoroughly — and the tax officer accepts every word of your explanation, completing the assessment in your favour with zero additions. And then, in the same breath, penalises you Rs 20,000 for not responding to those very notices on time.
That is precisely what happened to Tarla Jagdish Chauhan, a resident of Kandivali West, Mumbai. And it took the Income Tax Appellate Tribunal (ITAT) in Mumbai — in an order dated April 16, 2026, pronounced by a bench of Shri Sandeep Gosain (Judicial Member) and Shri Girish Agrawal (Accountant Member) — to set things right.
The Transactions That Caught the Taxman’s Eye
Tarla had not filed an income tax return for Assessment Year 2017-18. That by itself was not unusual for someone whose income fell below the taxable threshold. However, the CBDT’s Risk Management System — a data analytics tool used by the department to flag high-value transactions — picked up two significant entries in her name:
- A purchase of immovable property worth Rs 1,01,50,000 — over Rs 1 crore
- A purchase of debentures worth Rs 40 lakhs
Together, these were transactions worth nearly Rs 1.42 crores for someone who had filed no return. The department invoked Section 148 of the Income Tax Act to reopen her case, issuing a notice asking her to file a return.
Tarla complied. She filed a return in response to the Section 148 notice, declaring total income of just Rs 2,620. A number that must have raised eyebrows at the assessment unit — a woman buying a Rs 1 crore property and Rs 40 lakh in debentures, reporting income of Rs 2,620. The assessment proceedings that followed would require her to explain these transactions in considerable detail.
The Hacked Email: Where It All Went Wrong
During the course of assessment proceedings, the department issued statutory notices under Section 142(1) of the Income Tax Act — a provision that requires taxpayers to furnish information, documents, and accounts as directed. Two such notices were issued: one on August 30, 2024 and another on September 18, 2024.
Tarla did not respond to either on time.
Not because she was being evasive. Not because she had something to hide. But because her email ID had been hacked, and the notices were being delivered to an inbox she could not access.
She had updated her email ID on the Income Tax portal as far back as March 22, 2024 — months before the notices were even issued. But the department, apparently working from an older record, continued sending notices to the old, compromised, inaccessible email address. The notices went out. They arrived at an inbox nobody could open. And Tarla, sitting in her home in Kandivali West, remained completely unaware that any notices had been issued at all.
It was only when she reviewed the Income Tax portal directly that she discovered the pending notices. She acted immediately — furnishing all required documents and submissions without further delay.
The Tax Officer Accepts Everything — Then Penalises Her Anyway
What happened next defies easy explanation.
The Assessing Officer reviewed Tarla’s submissions and found them entirely satisfactory. In his own assessment order, he recorded the following in black and white:
- Tarla had submitted a detailed reply along with the sale deed, purchase agreement, income computation statement, schedules, and capital gains computation statement.
- Her replies and details were “verified and found to be in order.”
- Her submissions were “examined and found to be acceptable.”
- The income reported in her return — Rs 2,620 — was accepted as her total income for the year.
No additions were made. No adverse inference was drawn. The Rs 1 crore property purchase and the Rs 40 lakh debenture investment were explained to the officer’s complete satisfaction. The assessment was closed in her favour.
And yet — simultaneously — he initiated penalty proceedings under Section 272A(1)(d) of the Income Tax Act for her failure to respond to the two Section 142(1) notices on time. A penalty order was passed on May 22, 2025, imposing a penalty of Rs 20,000 on Tarla.
The right hand had accepted her explanation in full. The left hand had penalised her for being late in giving it.
The First Appeal: Penalty Confirmed
Tarla challenged the penalty before the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre in Delhi. She explained the hacked email, the portal update done months before the notices were issued, and the undeniable fact that the assessment itself had been completed in her favour with no additions whatsoever.
The CIT(A) was unmoved. The penalty of Rs 20,000 was confirmed. Tarla appealed to the ITAT.
A Procedural Hurdle First: 167 Days of Delay
Before the ITAT could even hear the case on merits, there was a procedural obstacle. Tarla’s appeal before the Tribunal was filed 167 days after the prescribed time limit — a significant delay. She filed a petition for condonation of delay along with a detailed affidavit explaining the reasons for it.
The ITAT, after hearing both sides, found sufficient cause for the delay and condoned it, admitting the appeal for adjudication on merits. Without this condonation, the appeal would have been dismissed at the threshold without being heard at all. It was the first of two hurdles she had to clear — and she cleared it.
At the ITAT: Two Arguments That Demolished the Penalty
Before the ITAT, Tarla was represented by Chartered Accountant Ms. Shweta Dave, who built her case around two arguments that the bench found impossible to dismiss.
The First: A Hacked Email Is a Reasonable Cause
Section 272A(1)(d) imposes a penalty for non-compliance with statutory notices — but like most penalty provisions under the Income Tax Act, it is not absolute. Where a taxpayer demonstrates reasonable cause for the delay or non-compliance, the penalty cannot be sustained.
Tarla’s cause could not have been more reasonable or more verifiable. Her email ID had been hacked and was completely inaccessible. She had updated her email ID on the IT portal on March 22, 2024 — before either of the two notices was even issued. The department had continued sending notices to the old, hacked address despite the update being on record. She had no means of knowing the notices existed until she independently checked the portal. The moment she discovered them, she responded fully and completely.
The ITAT accepted this. A hacked email address — particularly where the taxpayer had already updated her contact details on the portal before the notices were issued — constitutes sufficient and reasonable cause for delay in compliance.
The Second: The Assessment Order Told Its Own Story
The more devastating argument came from the Assessing Officer’s own words. Ms. Dave directed the Tribunal to paragraphs 3 and 4 of the very assessment order under which the penalty had been initiated. Those paragraphs recorded explicitly that Tarla’s submissions had been verified and found in order, that her replies had been examined and found acceptable, and that her declared income had been accepted without modification.
The ITAT made a further observation that cut to the heart of the matter — the assessment had not been completed ex parte. It was not a case where the officer had given up waiting for a response and decided the matter in Tarla’s absence. It was a full, regular assessment, completed with her participation, in which her explanations were heard, considered, verified, and accepted without a single addition being made.
When a taxpayer’s explanation is accepted wholesale, when the substantive assessment is completed in their favour, when not a rupee is added to their income — the argument that they should be penalised for the technical delay in furnishing that very explanation becomes very difficult to sustain. The ITAT found the penalty entirely unjustified and deleted it in full.
The Final Outcome
The ITAT allowed Tarla’s appeal completely. The Rs 20,000 penalty was deleted. To appreciate the full arc of what she went through:
- The CBDT’s data systems flagged her for Rs 1.42 crore in transactions despite having filed no return
- Her case was reopened under Section 148 and she filed a return declaring Rs 2,620 in income
- Statutory notices were sent to her hacked, inaccessible email address — despite her having updated her email ID on the portal months earlier
- She missed the notices, discovered them independently through the portal, and responded immediately with complete documentation
- The Assessing Officer accepted every submission, verified every document, and closed the assessment in her favour with zero additions
- She was then penalised Rs 20,000 for responding late to the very notices whose contents were accepted without question
- The CIT(A) confirmed the penalty
- The ITAT deleted it entirely
The Practical Warning This Case Carries
For the millions of taxpayers registered on the Income Tax portal, this case carries two warnings that are worth taking seriously.
The first is about email security. Your registered email ID on the IT portal is the primary channel through which the Income Tax Department communicates with you — notices, orders, intimations, and demands all flow through it. If that email ID is hacked, compromised, or simply becomes inaccessible for any reason, update it on the portal immediately and preserve documentary evidence of when you did so. Tarla did this — and that record of her March 22, 2024 update was ultimately a key part of her defence.
The second is about portal vigilance. Waiting for an email to arrive is no longer a sufficient approach to staying on top of your tax matters. The IT portal is the authoritative source of all notices and proceedings in your case. Periodic checks of the portal — regardless of whether you have received any email communication — are now essential. Tarla discovered her pending notices only because she checked the portal directly. Had she not done so, the consequences could have been far worse than a Rs 20,000 penalty.
For Tarla Jagdish Chauhan, a hacked email account turned what should have been a routine tax inquiry into years of penalty proceedings across three levels of the income tax hierarchy. The ITAT corrected the injustice — but it took a condonation petition, a full hearing, and a two-member bench to get there. The system eventually worked. It just took far longer than it should have.
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