Income Tax Department Cannot Wait For Certified Copy When Digitally Signed Order Is Available: Bombay High Court

The Bombay High Court has ruled that the Income Tax Department cannot wait for a certified copy of a court order to compute the limitation period for completing an assessment when a digitally signed copy has already been received by the relevant tax authorities.

“In this era of electronic filing and electronic uploading, and in order to alleviate difficulties of the litigants before us, this is a practice which this Court has adopted. Instead of asking a litigant to apply for a certified copy of the order on payment of fees, a digitally signed copy of the order can be produced before a party, and such order has to be acted upon,” a Division Bench of Justices B.P. Colabawalla and Farhan P. Dubash observed.

The court made the observation while quashing a second special audit ordered by the Income Tax Department after the statutory deadline for completing the assessment had expired.

The case concerned Sanjay Nathalal Shah, whose earlier special audit was quashed by the High Court on January 8, 2026, because it was based on invalid prior approval. The Department subsequently ordered another special audit on March 25, 2026. Shah challenged the fresh order, arguing that the time limit for completing his assessment had already expired.

The dispute centred on the date from which the Department had to calculate the limitation period after the earlier special audit order was quashed. Shah argued that the period should be calculated from January 9, 2026, when the earlier order was uploaded on the High Court's website. The Department, however, maintained that the relevant date was February 4, 2026, when the Principal Commissioner received the certified copy.

Rejecting the Department's argument, the court examined clause (iv) of Explanation 1 to Section 153 of the Income-tax Act, 1961, which provides for the exclusion of time when a special audit direction is challenged before a court. The provision refers to the date on which the order setting aside the audit direction is received by the Principal Commissioner or Commissioner. Unlike the provision dealing with the vacation of a stay on assessment proceedings, it does not specifically require receipt of a certified copy.

“Thus, there was no need for the Department to wait for a certified copy of the order to be presented to the Principal Commissioner for the computation of the period of limitation to commence,” the court observed.

The court noted that Shah's counsel had shared the digitally signed order with the Deputy Commissioner of Income Tax through WhatsApp on January 10, 2026. The ITO (Judicial) had also emailed the digitally signed order to the Principal Commissioner on January 12, 2026.

The court relied on CBDT Instruction No. 2/2022, which requires the Department to promptly circulate High Court orders and download them as soon as they are uploaded. It ruled that February 4, 2026, could not be treated as the date of receipt since the digitally signed order had reached the authorities in January.

The assessment became time-barred by March 13 at the latest. The court quashed the March 25 special audit order and the consequential report. Citing CIT v. Shelly Products (2003), it held that the returned income was deemed accepted..

For Petitioner: Advocate Dharan V. Gandhi, along with Advocate Vinita Nara.

For Respondents (Income Tax Department): Advocate Swapna Gokhale.