The ITAT Delhi has clarified a critical jurisdictional boundary in income tax reassessment proceedings, holding that an Assistant Commissioner of Income Tax lacks the authority to initiate proceedings under Section 147 against a corporate assessee whose declared income falls below the CBDT-prescribed threshold of ₹30 lakh. This decision reinforces the principle that procedural jurisdiction is not a mere technicality but a substantive legal requirement.
Background & Facts
The Dispute
The dispute arose from the reopening of the assessment for Assessment Year 2013-14 based on an alleged accommodation entry of ₹1,55,00,000. The Assessing Officer (ACIT, Circle 24(1), New Delhi) issued a notice under Section 148 on 27.03.2019, leading to a reassessment order dated 05.12.2019, which added ₹1,55,00,000 to the assessee’s income under Section 69A. The assessee, Sperry International Pvt. Ltd., challenged this before the Commissioner of Income Tax (Appeals) (CIT(A)), who upheld the reassessment. The assessee then filed the present appeal before the ITAT Delhi.
Key Facts
- The assessee is a corporate entity headquartered in New Delhi, a metro city.
- For A.Y. 2013-14, the assessee filed its return declaring total income of ₹9,94,049.
- The CBDT issued Instruction No. 1/2011 dated 31.01.2011, which bifurcated jurisdiction for corporate assessees in metro cities based on returned income.
- Under this instruction, cases with returned income up to ₹30,00,000 fall under the jurisdiction of the Income Tax Officer (ITO); cases exceeding ₹30,00,000 fall under the Deputy Commissioner of Income Tax (DCIT) or Assistant Commissioner of Income Tax (ACIT).
- The notice under Section 148 was issued by the ACIT, who is not the designated officer for assessees with income below ₹30 lakh.
- The reassessment order was passed by the same officer (ACIT) without any transfer of jurisdiction.
Procedural History
- 27.03.2019: Notice under Section 148 issued by ACIT, Circle 24(1), New Delhi.
- 05.12.2019: Reassessment order passed under Section 147 r.w.s. 143(3) by ACIT, adding ₹1,55,00,000.
- 20.11.2025: CIT(A) dismissed the assessee’s appeal, upholding the reassessment.
- 11.05.2026: Hearing before ITAT Delhi.
- 27.05.2026: Judgment pronounced by ITAT Delhi.
Relief Sought
The assessee sought setting aside of the reassessment order dated 05.12.2019 on the ground that the initiating officer (ACIT) lacked inherent jurisdiction, and that the proceedings were void ab initio.
The Legal Issue
The central question was whether an Assistant Commissioner of Income Tax has jurisdiction to initiate reassessment proceedings under Section 147 against a corporate assessee whose declared income for the relevant assessment year is below ₹30,00,000, as per CBDT Instruction No. 1/2011.
Arguments Presented
For the Appellant
The Ld. Counsel for the assessee relied on CBDT Instruction No. 1/2011, which clearly demarcates jurisdictional limits for corporate assessees in metro cities. Since the returned income of ₹9,94,049 was below ₹30,00,000, jurisdiction vested exclusively with the ITO. The issuance of notice under Section 148 by the ACIT was ultra vires and rendered the entire reassessment void. The assessee cited PCIT v. M/s Shree Shoppers Ltd. (ITA 39/2023, Calcutta HC) and Ashok Devichand Jain v. Union of India ([2023] 151 taxmann.com 70, Bombay HC) to establish that jurisdictional defects cannot be cured by subsequent confirmation.
For the Respondent
The Ld. Departmental Representative contended that the reassessment was validly initiated and framed in accordance with law. The objection raised by the assessee was a hyper-technical plea, not a substantive defect, and should not be entertained at the appellate stage. The Revenue argued that the officer acted in good faith and the outcome was not prejudiced by the technical lapse.
The Court's Analysis
The Tribunal examined the nature of jurisdiction under the Income Tax Act and the binding effect of CBDT instructions. It held that jurisdictional limits prescribed by CBDT instructions are not directory but mandatory, as they are issued under the authority of Section 119 of the Act, which empowers the CBDT to issue directions for uniformity in administration.
"The jurisdictional allocation under CBDT Instruction No. 1/2011 is not a mere administrative convenience but a statutory mandate that defines the competence of the assessing officer."
The Tribunal distinguished the Revenue’s reliance on "hyper-technical" arguments by emphasizing that jurisdiction is a foundational element of any adjudicatory proceeding. A proceeding initiated by an officer without jurisdiction is a nullity, regardless of the correctness of the substantive outcome. The Tribunal further noted that the Calcutta and Bombay High Courts had consistently held that jurisdictional defects cannot be waived or cured by subsequent confirmation by higher authorities.
The Tribunal rejected the Revenue’s argument that the assessee had not raised the issue earlier, noting that jurisdictional defects can be raised at any stage, even for the first time in appeal, as they go to the root of the proceeding.
The Verdict
The appeal was allowed. The ITAT Delhi set aside the reassessment order dated 05.12.2019 and the order of the CIT(A) dated 20.11.2025. The reassessment proceedings initiated by the ACIT are declared void ab initio for lack of jurisdiction. The case is directed to be remanded to the file of the competent ITO for fresh consideration in accordance with law, subject to the limitation period under Section 147.
What This Means For Similar Cases
Jurisdictional Defects Are Fatal
- Practitioners must verify the jurisdictional allocation of the assessing officer before filing appeals or challenges under Section 147.
- Any reassessment initiated by DCIT/ACIT against a corporate assessee with returned income ≤ ₹30 lakh is void, regardless of the merits of the addition.
- The burden is on the Revenue to prove that the initiating officer had jurisdiction; failure to do so renders the entire proceeding invalid.
CBDT Instructions Are Binding
- CBDT instructions under Section 119 are not advisory but mandatory for officers.
- Courts and Tribunals will not overlook jurisdictional breaches even if the final tax demand appears justified.
- Practitioners should cite PCIT v. Shree Shoppers Ltd. and Ashok Devichand Jain as authoritative precedents in jurisdictional challenges.
Procedural Compliance Is Non-Negotiable
- Always cross-check the assessee’s declared income against CBDT jurisdictional thresholds before initiating or challenging reassessment.
- If jurisdiction is defective, file a writ petition or appeal on this ground alone - it is sufficient to quash the order.
- Do not rely on substantive correctness to defend procedural irregularities; the law treats jurisdiction as a threshold condition.
