1. Court’s decision
The Bombay High Court has held that a rectification application under Section 254(2) of the Income Tax Act cannot be dismissed as time-barred when the assessee has filed it within six months from the date of actual communication of the ITAT order. The Court ruled that limitation begins when the party receives or gains knowledge of the order, as the statutory scheme requires communication of orders and furnishing copies before filing rectification. The ITAT’s refusal to entertain the assessee’s rectification plea was declared a clear misdirection. However, since the assessee had already challenged the original ITAT order in a statutory appeal, the Court decided not to remand the rectification application. Instead, all grounds on merits were left open to be urged in the pending appeal.
2. Facts
The assessee sought rectification of an ITAT order dated 10 December 2024. Although the order was passed in December 2024, it was communicated to the assessee only on 24 March 2025. Upon receiving it, the assessee filed a miscellaneous rectification application under Section 254(2) on 16 July 2025. The ITAT Registry issued a notice indicating the application was 15 days late since, in its view, limitation ran from the date of order, not the date of receipt. The assessee responded, stating that an application could not be filed without receiving the order, as two copies (including one certified copy) are mandatory under Rule 34A read with Rule 9 of the ITAT Rules. Nonetheless, on 13 October 2025, the ITAT rejected the rectification request as time-barred. The assessee approached the High Court seeking to quash this refusal.
3. Issues
The central issue before the Court was whether a rectification application under Section 254(2) must be filed within six months from the end of the month in which ITAT passes the order, or whether the limitation period begins from the date of communication or knowledge of that order. A subsidiary issue was whether the writ petition should be entertained when an appeal against the original order was already pending.
4. Petitioner’s arguments
The petitioner argued that limitation could not begin until the assessee actually received the ITAT order. They emphasized that the statutory rules require furnishing certified copies along with the rectification application, making it impossible to file such an application before receiving the order. The petitioner asserted that computing limitation strictly from the date of the order, despite delayed communication, would render the statutory remedy illusory and unjust. Reliance was placed on Rule 34A and Rule 9 of the ITAT Rules, as well as Delhi High Court judgments holding that limitation begins only upon communication. The ITAT’s approach, they argued, violated the principles of fair procedure and denied the assessee meaningful access to the statutory remedy.
5. Respondent’s arguments
The Revenue supported the ITAT’s view, contending that the statutory language expressly fixes limitation from the end of the month in which the ITAT passes the order. It argued that the petitioner’s application was undeniably filed beyond that period. The Revenue submitted that the Tribunal acted correctly in applying the literal meaning of Section 254(2) and that no interference under writ jurisdiction was warranted. Further, the Revenue asserted that the petitioner already had alternative remedies available, including a pending appeal, which made the writ petition unnecessary.
6. Analysis of the law
The Court analyzed Section 254(2) alongside Section 254(3) and the Tribunal Rules. It noted that while Section 254(2) mentions six months from the end of the month in which the order is passed, both statute and procedure mandate that ITAT orders be communicated to the parties. Rule 34A requires that rectification applications comply with appeal-filing procedures, which include mandatory submission of certified copies of orders. Thus, communication is an indispensable precondition to invoking Section 254(2). The Court highlighted the conceptual distinction between suo motu rectification by the ITAT and rectification initiated by the assessee. When the latter seeks rectification, the remedy must remain meaningful; otherwise, an assessee could lose the right without even knowing an order exists. The statutory scheme therefore compels an interpretation aligned with fairness, justice, and due process.
7. Precedent analysis
The Court relied heavily on the Delhi High Court’s rulings in Golden Times Services (P) Ltd. and Pacific Projects Ltd., both of which held that limitation for rectification begins when the party receives or gains knowledge of the order. These judgments emphasized the need to avoid an interpretation that makes the remedy illusory. The ITAT had relied on Leena Power Tech Engineers (P) Ltd., but the Bombay High Court clarified that the issue in that case concerned exclusion of COVID-related limitation periods, not the commencement of limitation from communication. Therefore, ITAT’s reliance was wholly misplaced. The Court found the Delhi precedents persuasive and more aligned with justice and statutory purpose.
8. Court’s reasoning
The Court held that since Rule 34A requires two copies of the order—one certified copy—the assessee must necessarily receive the order before filing a rectification application. Section 254(3) reinforces this by mandating communication of orders. Reading these provisions together, the Court concluded that the limitation period begins from the date of communication. The ITAT mechanically applied the phrase “six months from the end of the month in which the order is passed” without considering statutory context, resulting in injustice. The Court declared that the rectification application was filed well within six months of the assessee receiving the order on 24 March 2025. However, since the assessee already filed a statutory appeal against the original order, the Court deemed remanding the rectification application unnecessary, permitting the assessee to raise all grounds in the appeal.
9. Conclusion
The High Court held that the limitation period for an assessee-initiated rectification under Section 254(2) begins from the date of communication or knowledge of the order, not the date the order is signed. The ITAT’s contrary view was a clear misdirection. Nonetheless, instead of reopening rectification proceedings, the Court allowed the petitioner to advance all contentions in the already pending appeal against the original ITAT order. The writ petition was accordingly disposed of with no order as to costs.
10. Implications
This decision reinforces a crucial procedural safeguard: communication of ITAT orders is not a formality but a substantive trigger for limitation. It protects litigants from losing statutory remedies due to administrative delays in service of orders. The ruling aligns Bombay High Court jurisprudence with the Delhi High Court’s progressive approach, ensuring that rectification proceedings remain accessible and meaningful. It will influence future disputes where tribunals dismiss applications purely on mechanical readings of statutory timelines. Importantly, the judgment confirms that procedural fairness overrides literal interpretation when necessary to preserve substantive justice.
CASE LAW REFERENCES
1. Golden Times Services (P) Ltd (Delhi HC)
Held that limitation under Section 254(2) commences from communication or knowledge of the order. This case was relied upon as the central authority supporting the principle of meaningful access to rectification remedies. The present Court applied its reasoning directly.
2. Pacific Projects Ltd (Delhi HC)
Reaffirmed that limitation cannot begin from the date the order is passed if the assessee had no notice of it. The Bombay High Court cited this to reinforce the principle that knowledge triggers limitation.
3. Leena Power Tech Engineers (Bombay HC)
Concerned only with exclusion of COVID-related periods. The ITAT wrongly applied this case to limitation computation. The Court distinguished it entirely.
FAQs
1. When does limitation begin for filing a rectification application under Section 254(2)?
Limitation begins from the date of communication or knowledge of the ITAT order, not the date the order is passed. This ensures the assessee can meaningfully exercise the rectification remedy.
2. Can ITAT dismiss a rectification application as time-barred if the order was received late?
No. If the assessee filed the application within six months of receiving the order, the application is within limitation. Mechanical reliance on the order’s date is impermissible.
3. What happens if an appeal against the original ITAT order is already pending?
The High Court may choose not to remand the rectification matter. Instead, all grounds may be permitted to be urged in the pending appeal, as seen in this case.