The ITAT Kolkata has held that an assessment order framed by an Assessing Officer exceeding prescribed pecuniary limits under CBDT Instruction 1/2011 is void ab initio, regardless of substantive correctness. This ruling reinforces the mandatory nature of jurisdictional compliance in income tax proceedings and sets a clear precedent for challenging assessments based on procedural ultra vires.
Background & Facts
The Dispute
The appellant, Balaka Cold Storage Pvt. Ltd., filed its return of income for Assessment Year 2017-18 on 23.10.2017, declaring a total income of ₹6,79,259. The return was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) system. A notice under Section 143(2) and Section 142(1) of the Income Tax Act, 1961 was issued, and the assessee responded. The assessment was ultimately framed by the Assistant Commissioner of Income Tax (ACIT), Circle 23(1), Hooghly, on 15.10.2019 under Section 143(3).
Key Facts
- The assessee’s declared income: ₹6,79,259
- The ACIT, Circle 23(1), Hooghly, framed the assessment order on 15.10.2019
- Hooghly is classified as a Mofussil area under CBDT guidelines
- CBDT Instruction No. 1/2011 (F. No. 187/12/2010-IT(A-1), dated 31.01.2011) prescribes pecuniary jurisdiction limits: ITOs handle cases up to ₹15 lakhs in Mofussil areas; ACITs handle cases above ₹15 lakhs
- The income declared (₹6,79,259) falls well below the ₹15 lakh threshold for ACIT jurisdiction in Mofussil areas
- The assessment was therefore framed by an officer lacking pecuniary jurisdiction
Procedural History
- 23.10.2017: Assessee filed return declaring income of ₹6,79,259
- 15.10.2019: ACIT, Circle 23(1), Hooghly, framed assessment under Section 143(3)
- 29.11.2023: National Faceless Appeal Centre (CIT(A)) upheld the assessment
- 09.06.2026: Hearing before ITAT Kolkata
- 16.06.2026: Judgment pronounced
The Parties' Positions
For the Appellant: Argued that the ACIT had no jurisdiction to frame the assessment since the income was below ₹15 lakhs, making the order void ab initio under CBDT Instruction 1/2011. Relied on PCIT v. Shree Shoppers Ltd. (ITAT 39/2023) and PCIT v. Mintu Das (ITA/167/2025) to establish that jurisdictional defects invalidate assessments even if substantive additions are correct.
For the Respondent: Did not contest the jurisdictional issue. The Department’s representative did not file a written submission challenging the applicability of CBDT Instruction 1/2011 or the precedents cited.
Relief Sought
The appellant sought quashing of the assessment order dated 15.10.2019 on the ground that it was framed by a non-jurisdictional officer, rendering it null and void in law.
The Legal Issue
Can an assessment order under Section 143(3) be sustained if framed by an Assessing Officer who lacks pecuniary jurisdiction under CBDT Instruction No. 1/2011, even if the substantive additions are correct?
Arguments Presented
For the Appellant
The appellant relied on CBDT Instruction No. 1/2011, which clearly demarcates jurisdictional limits: ITOs handle cases up to ₹15 lakhs in Mofussil areas, while ACITs handle cases above that threshold. Since the assessee’s income was ₹6,79,259, the ACIT had no authority to act. The appellant cited PCIT v. Shree Shoppers Ltd. (ITAT 39/2023) and PCIT v. Mintu Das (ITA/167/2025), where the Calcutta High Court held that jurisdictional violations under CBDT Instruction 1/2011 render assessments void ab initio. The appellant further argued that jurisdictional defects are fatal to the validity of proceedings, irrespective of the correctness of the outcome.
For the Respondent
The Respondent did not file any counter-submissions challenging the appellant’s legal position. The Department’s representative did not dispute the applicability of the CBDT instruction or the precedents cited. The absence of a rebuttal effectively conceded the jurisdictional flaw.
The Court's Analysis
The ITAT acknowledged that the jurisdictional issue raised by the appellant was not raised before the CIT(A), but held that legal issues concerning jurisdiction may be raised for the first time before the Tribunal, citing Jute Corporation of India Ltd. v. CIT (187 ITR 688), National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383, and PCIT v. Britannia Industries Ltd. (2017) 396 ITR 677 (Cal). The Tribunal emphasized that jurisdictional defects are not mere procedural irregularities but go to the root of the authority to act.
"We note that the return of income of the assessee was of Rs.16,50,920/ which falls under the jurisdiction of the ITO, Ward- 28(2), Kolkata but notice u/s 143(2) of the Act was issued by ACIT, Circle-28, Kolkata and also the assessment order was duly framed by ACIT, Circle-28. Kolkata, which is clearly a violation of the jurisdictional mandate under CBDT Circular No. 1/2011 dated 31.01.2011. We note that this procedural irregularity rendered the assessment proceedings invalid and bad in law."
The Tribunal applied this reasoning to the present case, where the income of ₹6,79,259 was squarely within the ITO’s jurisdiction and outside the ACIT’s. The Tribunal held that the assessment order was framed by a non-jurisdictional officer and therefore could not be sustained. The Court observed that the jurisdictional mandate under CBDT Instruction 1/2011 is not directory but mandatory, and its violation renders the assessment ultra vires and void ab initio.
The Verdict
The appeal of the assessee is allowed. The assessment order dated 15.10.2019 framed by the ACIT, Circle 23(1), Hooghly, is quashed as void ab initio for being issued by a non-jurisdictional officer in violation of CBDT Instruction No. 1/2011. The case is remanded to the jurisdictional ITO for fresh assessment in accordance with law. No costs are awarded.
What This Means For Similar Cases
Jurisdictional Defects Render Assessments Void Ab Initio
- Practitioners must verify the pecuniary jurisdiction of the AO before challenging substantive additions
- Any assessment framed by an ACIT where income is below ₹15 lakhs in Mofussil areas (or ₹20 lakhs in metros) is legally invalid, regardless of the correctness of the additions
- Such defects cannot be cured by subsequent confirmation or appeal
CBDT Instructions Are Binding Legal Mandates
- CBDT Instructions under Section 119 of the Income Tax Act are not advisory but mandatory for AO conduct
- Violation of jurisdictional instructions under Instruction 1/2011 attracts the same legal consequences as violation of statutory provisions
- Taxpayers may raise jurisdictional challenges at any stage, including before the Tribunal, even if not raised earlier
Strategic Implications for Appeals
- When an assessment is framed by a higher-ranked officer (e.g., ACIT) for low-income cases, the first line of defense should be jurisdictional invalidity
- This provides a clean, unassailable ground for appeal without needing to dispute complex factual or valuation issues
- Practitioners should routinely check the AO’s jurisdictional limits against the declared income before filing appeals
