No ITR, no reply to tax notices: Why ITAT Chennai still reduced a doctor’s taxable income by half

A doctor’s failure to file his income tax return (ITR) and respond to subsequent tax notices led the income tax department to treat his entire ₹35.01 lakh professional receipts as taxable income. But the Income Tax Appellate Tribunal (ITAT), Chennai, took a different view and and cut his taxable income by half.

The ruling concerning the doctor’s tax assessment for AY 2018-19, was pronounced by the ITAT Chennai on August 19, 2026. The bench held that the doctor’s entire gross professional receipts could not automatically be treated as net taxable income merely because he had failed to file an ITR.

How did the dispute start?

The doctor, Selvakumar Arumugam, had professional receipts of ₹35.01 lakh, which were also reflected in his Form 26AS.

Since he failed to file ITR and did not respond to notices issued during the reassessment proceedings, the Assessing Officer (AO) treated the entire amount ( ₹35.01 lakh) as his professional income and completed the assessment under Section 147 read with Section 144 of the Income-tax Act.

The taxpayer then filed an appeal against the order passed by the commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) on December 13, 2025, for Assessment Year (AY) 2018-19.

Arumugam argued that, as a professional covered under Section 44ADA, only 50% of his gross receipts should be treated as taxable income. Since his professional receipts were below the applicable ₹50 lakh threshold, he said he was eligible for the presumptive taxation scheme.

He also pointed out that in subsequent years he had filed returns declaring 50% of his professional receipts as income under Section 44ADA, which were accepted by the tax department during processing under Section 143(1).

ITAT gives relief to the doctor

The tribunal made a clear distinction between claiming the statutory benefit under Section 44ADA and estimating taxable income. It did not, however, rule on whether a taxpayer who had failed to file ITR could formally claim the presumptive taxation benefit.

ITAT Chennai also considered the tax treatment of the doctor’s income in subsequent years, wherein the income tax department had accepted income declared at 50% of professional receipts under Section 44ADA.

While this did not, by itself, grant him the statutory benefit of Section 44ADA for the year under dispute, the tribunal said it was relevant in determining a reasonable estimate of his taxable income.

Ultimately, the ITAT Chennai bench directed the AO to consider ₹17,50,750, or 50% of the ₹35,01,500 professional receipts, as the doctor’s professional income and calculate taxes accordingly.

What does the ruling mean for taxpayers?

The ruling does not mean that professionals can skip filing their returns and automatically claim the 50% presumptive taxation benefit under Section 44ADA. One must meet the eligibility conditions to opt for this scheme.

Taxpayers should also remember that failing to file an ITR can have financial consequences. A belated return may attract a penalty of up to ₹5,000, while interest can continue to accrue on any unpaid tax liability.

The case more or less provides relief to non-filers facing reassessment, particularly where their profession, past tax filings and other available evidence support a reasonable estimate of income rather than treating their entire gross receipts as taxable income.