AO’s Knowledge of ITAT Order Triggers Limitation u/s 153(2A): Supreme Court Declines to Interfere With Delhi HC Ruling Against Revenue [Read Judgement]

In a recent case, the Supreme Court declined to interfere and dismissed the Revenue’s SLP and upheld the ruling of the Delhi High Court that “knowledge” of an appellate order triggers statutory limitation. It was held that the AO’s awareness of the Income Tax Appellate Tribunal (ITAT’s) decision is sufficient to commence the limitation period under Section 153(2A) of the Income Tax Act, 1961.

The ruling came in appeals filed by the Commissioner of Income Tax (International Taxation) challenging the ITAT’s conclusion that both the draft and final assessment orders issued in 2016 and 2017 were barred by limitation.

The dispute arose from assessments framed for AYs 2005–06 and 2006–07, where the ITAT, by its order dated 20 February 2015, had partly allowed Qualcomm Incorporated’s appeal and remanded certain issues to the AO for fresh consideration.

On 12 March 2015, the AO passed an appeal‑effect order expressly acknowledging the ITAT’s findings, recalculating income, and granting partial relief. This document became the fulcrum of the limitation dispute.

Under Section 153(2A), a fresh assessment pursuant to an appellate or revisional order must be completed within the prescribed period from the end of the financial year in which the order is “received” by the Commissioner. The Revenue argued that the limitation period could begin only when the jurisdictional Commissioner formally received a certified copy of the ITAT order.

The assessee contended that the AO’s appeal‑effect order demonstrated actual knowledge of the ITAT decision, and therefore, the limitation period had already commenced in March 2015.

The ITAT accepted the assessee’s position, holding that the AO’s knowledge, evidenced through the appeal‑effect order, triggered the limitation clock. The Delhi High Court agreed, grounding its reasoning in the Full Bench decision in CIT v. Odeon Builders Pvt. Ltd., which held that the limitation under Section 260A begins when the Department becomes aware of the ITAT’s order, not when the jurisdictional Commissioner formally receives it.

The Court highlighted that the statutory expression “received” cannot be interpreted in a manner that allows internal administrative delays to indefinitely postpone the commencement of limitation.

The High Court also relied on its earlier ruling in GE Energy Parts Inc. v. DCIT, where it held that issuance of an appeal‑effect order is conclusive proof that the Department knew the ITAT’s decision.

In that case, the Court rejected the Revenue’s attempt to rely on a later date of formal receipt, noting that such an interpretation would defeat the purpose of limitation provisions.

Applying these principles, the Court held that once the AO issued the order on 12 March 2015, the Department must be deemed to have received the ITAT order for Section 153(2A).

Consequently, the draft assessment order dated 27 December 2016 and the final assessment order dated 31 October 2017 were both issued well beyond the permissible period and were therefore invalid.

The Supreme Court, when approached through an SLP, noted that an identical matter had already been dismissed earlier.

Following the same course, the Division Bench of Justice K Vinod Chandran and Justice Ahsannudin Amanullah declined to interfere and dismissed the Revenue’s petition, effectively affirming the Delhi High Court’s interpretation.

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