The Income Tax Appellate Tribunal, Delhi, has held that an assessment order passed under Section 143(3) is invalid if the notice under Section 143(2) was issued by an Assessing Officer lacking pecuniary jurisdiction as per CBDT Instruction No. 1/2011. This ruling reinforces that jurisdictional defects are not curable by consent or subsequent transfer and go to the root of the proceedings.
Background & Facts
The Dispute
The dispute arises from the assessment of income for Assessment Year 2017-18. The assessee, Ms. Seema Sehgal, filed her return of income on 09.11.2017 declaring a total income of Rs. 20,03,060. Under CBDT Instruction No. 1/2011 dated 31.01.2011, cases involving income exceeding Rs. 20,00,000 in metro cities like Delhi fall under the jurisdiction of Assistant Commissioners of Income Tax (ACIT) or Deputy Commissioners of Income Tax (DCIT). Despite this, the notice under Section 143(2) was issued on 22.09.2018 by the ITO, Ward-41(4), Delhi, who lacked pecuniary jurisdiction. The assessment order under Section 143(3) was subsequently passed on 30.12.2019 by the ITO, Ward-45(3), Delhi, after the case was transferred.
Key Facts
- The assessee filed her income tax return on 09.11.2017 declaring total income of Rs. 20,03,060
- CBDT Instruction No. 1/2011 mandates that for income above Rs. 20,00,000 in Delhi, jurisdiction lies with ACIT/DCIT
- Notice under Section 143(2) was issued by ITO, Ward-41(4), Delhi on 22.09.2018
- The ITO, Ward-41(4), had no pecuniary jurisdiction over cases exceeding Rs. 20,00,000
- The assessment order under Section 143(3) was passed on 30.12.2019 by ITO, Ward-45(3), Delhi
- The case was transferred to Ward-45(3) after issuance of the notice
- The assessee filed a Cross Objection on 20.01.2026 challenging the jurisdictional validity of the notice and assessment
Procedural History
- 09.11.2017: Assessee filed return declaring income of Rs. 20,03,060
- 22.09.2018: Notice under Section 143(2) issued by ITO, Ward-41(4), Delhi
- 30.12.2019: Assessment order passed by ITO, Ward-45(3), Delhi
- 21.08.2025: Ld. Commissioner of Income Tax (Appeals) upheld the validity of the assessment
- 16.12.2025: Appeal memo filed by Revenue was served on the assessee
- 19.01.2026: Hearing fixed before ITAT; adjourned to 21.01.2026
- 20.01.2026: Cross Objection filed by assessee, delayed by 5 days
- 23.02.2026: Hearing held before ITAT, Delhi
- 14.05.2026: Judgment pronounced by ITAT, Delhi
Relief Sought
The assessee sought quashing of the assessment order dated 30.12.2019 on the ground that the notice under Section 143(2) was issued by an officer lacking jurisdiction. The Revenue appealed against the CIT(A)’s order, while the assessee filed a cross objection challenging the jurisdictional validity of the entire proceeding.
The Legal Issue
The central question was whether an assessment order under Section 143(3) remains valid when the notice under Section 143(2) is issued by an Assessing Officer who lacks pecuniary jurisdiction as mandated by CBDT Instruction No. 1/2011, and whether such a defect can be cured by subsequent transfer or consent.
Arguments Presented
For the Petitioner
The assessee’s counsel argued that the notice under Section 143(2) issued by ITO, Ward-41(4), was void ab initio because the officer lacked pecuniary jurisdiction under CBDT Instruction No. 1/2011. The jurisdictional defect, they submitted, is not procedural but jurisdictional, and cannot be waived under Section 292BB. They relied on PCIT v. Vimal Gupta (Delhi HC), Ashok Devichand Jain v. UOI (Bombay HC), Shree Shoppers Ltd. (Calcutta HC), and Sapna Rastogi v. ITO (ITAT Delhi), all holding that jurisdictional non-compliance vitiates the entire assessment. They emphasized that Section 292BB does not apply to jurisdictional defects, only to procedural irregularities.
For the Respondent
The Revenue argued that the ITO had concurrent jurisdiction and that the transfer of the case to Ward-45(3) cured any defect. They contended that the assessment was passed by a competent authority and that the notice, though issued by a lower officer, was merely a procedural step. They relied on cases involving territorial jurisdiction and non-disposal of objections, arguing that the defect was curable and did not affect the substantive rights of the assessee.
The Court's Analysis
The Tribunal examined the nature of jurisdictional defects under the Income Tax Act and the binding force of CBDT Instructions. It noted that CBDT Instruction No. 1/2011 is issued under Section 119 of the Act and is mandatory. The Tribunal held that pecuniary jurisdiction is not a mere procedural formality but a condition precedent to the initiation of scrutiny assessment.
"The exercise of jurisdiction of a Revenue Officer who does not have the jurisdiction given by the CBDT Instructions cannot be sustained and the assessment order is vitiated."
The Tribunal distinguished cases cited by the Revenue, which dealt with territorial jurisdiction or procedural lapses, from the present case, which involved a clear violation of pecuniary limits. It affirmed the principle laid down in Vimal Gupta and Sapna Rastogi that jurisdiction cannot be conferred by consent or subsequent transfer. The Tribunal emphasized that Section 292BB, which cures procedural defects, does not extend to jurisdictional defects, as held by the Allahabad High Court in PCIT-II v. Mohd. Rizwan.
The Tribunal further held that the delay in filing the cross objection by five days was bona fide, as the assessee only became aware of the jurisdictional defect upon receipt of the Revenue’s appeal memo on 16.12.2025. The delay was condoned in the interest of justice.
The Verdict
The cross objection filed by the assessee was allowed. The assessment order dated 30.12.2019 was quashed as it was passed on the basis of a notice issued by an officer lacking pecuniary jurisdiction under CBDT Instruction No. 1/2011. The Revenue’s appeal was dismissed as infructuous. The case was remanded to the jurisdictional ACIT/DCIT for fresh assessment in accordance with law.
What This Means For Similar Cases
Jurisdictional Defects Are Incurable
- Practitioners must verify the jurisdictional competence of the AO at the time of notice issuance under Section 143(2)
- Any notice issued by an ITO for income exceeding Rs. 20,00,000 in metro cities is void, regardless of subsequent transfer
- Section 292BB cannot cure jurisdictional defects; only procedural irregularities are covered
CBDT Instructions Are Binding
- CBDT Instructions issued under Section 119 are mandatory and have the force of law
- AO’s jurisdiction is determined by the income declared in the return, not by administrative convenience
- Assessing Officers must strictly adhere to monetary thresholds for assignment of cases
Timing of Objections Matters
- Delay in filing objections may be condoned if the defect is discovered only after service of appeal
- Courts prioritize substantive justice over technical delays when the defect goes to the root of jurisdiction
- Practitioners should file cross objections immediately upon discovering jurisdictional flaws to avoid procedural complications
