The Income Tax Appellate Tribunal, Delhi, has held that an assessment initiated by an Assessing Officer lacking pecuniary jurisdiction under CBDT Instruction No. 1/2011 is void ab initio, regardless of subsequent procedural compliance. This ruling reinforces the foundational principle that jurisdictional defects in the initiation of scrutiny proceedings cannot be cured by later actions.
Background & Facts
The Dispute
The assessee, Inderpreet Singh Jhelumi, filed his return of income for Assessment Year 2015-16 on 30.08.2015 declaring a total income of Rs. 99,47,310. The case was selected for limited scrutiny under the Computer Assisted Selection System (CASS). A notice under Section 143(2) of the Income Tax Act, 1961, was issued on 19.09.2016 by the ITO, Ward-7(1), Kolkata. The assessment was ultimately completed on 26.12.2017 by the Assistant Commissioner of Income Tax, Circle-70(1), New Delhi, who made an addition of Rs. 3,92,00,000 as long-term capital gains. The assessee challenged this order before the Commissioner of Income Tax (Appeals)-28, New Delhi, which was dismissed on 18.03.2019. The assessee then filed the present appeal before the Income Tax Appellate Tribunal, Delhi.
Key Facts
- The assessee’s declared income for A.Y. 2015-16 was Rs. 99,47,310.
- The ITO, Ward-7(1), Kolkata, who issued the notice under Section 143(2) on 19.09.2016, had pecuniary jurisdiction only up to Rs. 30 lakhs for non-corporate assessees under CBDT Instruction No. 1/2011.
- The jurisdictional limit for non-corporate assessees with income exceeding Rs. 30 lakhs in metro cities like Delhi was assigned to the ACIT/DCIT.
- The notice was issued by an officer who lacked jurisdiction over an income of nearly Rs. 1 crore.
- No fresh notice under Section 143(2) was issued after the case was transferred to the ACIT, Circle-70(1), New Delhi.
- The assessee raised jurisdictional objections for the first time before the Tribunal through an application dated 10.01.2024.
- The Tribunal noted that the jurisdictional transfer from Kolkata to Delhi was not communicated to the assessee.
Procedural History
- 30.08.2015: Assessee filed return of income declaring Rs. 99,47,310.
- 19.09.2016: Notice under Section 143(2) issued by ITO, Ward-7(1), Kolkata.
- 08.08.2017: Notice under Section 142(1) issued with questionnaire.
- 26.12.2017: Assessment order passed by ACIT, Circle-70(1), New Delhi, making addition of Rs. 3,92,00,000.
- 18.03.2019: CIT(A) dismissed the appeal.
- 27.01.2026: Hearing before ITAT Delhi.
- 30.03.2026: Judgment pronounced.
The Parties' Positions
For the Appellant
The assessee contended that the notice under Section 143(2) issued by the ITO, Ward-7(1), Kolkata, was invalid because the ITO lacked pecuniary jurisdiction over an income exceeding Rs. 30 lakhs. The assessee relied on CBDT Instruction No. 1/2011, which clearly assigned cases with income above Rs. 30 lakhs in metro cities to ACIT/DCIT. The assessee further argued that no fresh notice was issued after the transfer of jurisdiction to Delhi, and that the assessment was void ab initio.
For the Respondent
The Department contended that the notice under Section 143(2) was validly issued within the statutory time limit and that no provision in the Income Tax Act requires a fresh notice upon transfer of jurisdiction. The Department relied on Section 129 and the Madras High Court judgment in Advantage Strategic Consulting (P.) Ltd. v. Pr. CIT to argue that the initial notice sufficed. It further argued that the assessee failed to challenge jurisdiction before the CIT(A), thereby waiving the objection.
Relief Sought
The assessee sought quashing of the assessment order dated 26.12.2017, annulment of the addition of Rs. 3,92,00,000, and restoration of the return as filed.
The Legal Issue
The central question was whether an assessment initiated under Section 143(3) based on a notice under Section 143(2) issued by an officer lacking pecuniary jurisdiction under CBDT Instruction No. 1/2011 is void ab initio, even if the jurisdiction was later transferred and no fresh notice was issued.
Arguments Presented
For the Appellant
The appellant relied on the Supreme Court’s decision in NTPC Ltd. v. CIT and the Delhi High Court’s judgment in Ashok Devichand Jain v. UOI to argue that jurisdictional defects in the issuance of a notice under Section 143(2) are fatal and cannot be cured. The notice issued by the ITO, Ward-7(1), Kolkata, was issued by an officer who had no authority to assess income exceeding Rs. 30 lakhs. The Tribunal had previously held in YKM Holdings Pvt. Ltd. v. ACIT that such defects render the assessment void ab initio. The appellant emphasized that Section 124(3) applies only to territorial jurisdiction, not pecuniary jurisdiction, and that the Department cannot invoke it to validate an invalid notice.
For the Respondent
The Department argued that Section 143(2) notice remains valid even after transfer of jurisdiction, citing Section 129 and the Madras High Court’s decision in Advantage Strategic Consulting. It contended that the assessee’s failure to raise jurisdictional objections before the CIT(A) amounted to acquiescence. The Department further argued that the transfer of the case file from Kolkata to Delhi was administrative and did not require a fresh notice.
The Court's Analysis
The Tribunal examined the applicability of CBDT Instruction No. 1/2011, which clearly delineates jurisdictional limits for non-corporate assessees. The instruction mandates that for income exceeding Rs. 30 lakhs in metro cities, including Delhi, the case must be assigned to ACIT/DCIT, not ITO. The notice under Section 143(2) dated 19.09.2016 was issued by an ITO who had jurisdiction only up to Rs. 30 lakhs. The Tribunal held that such a notice is not merely procedurally defective but jurisdictionally invalid.
"The notice under section 143(2) of the Act is jurisdictional notice and any inherent defect therein is not curable."
The Tribunal relied on the Delhi High Court’s decision in Ashok Devichand Jain v. UOI, which held that a notice issued by an officer lacking pecuniary jurisdiction is void ab initio and cannot be validated by subsequent actions. The Department’s reliance on Section 124(3) was rejected, as that provision pertains only to territorial jurisdiction, not pecuniary jurisdiction. The Tribunal emphasized that the absence of a fresh notice after transfer did not cure the initial jurisdictional defect.
The Tribunal further noted that the assessee’s delay in raising the objection before the CIT(A) did not waive the fundamental right to challenge jurisdiction, as jurisdictional defects go to the root of the proceeding and cannot be waived by acquiescence.
The Verdict
The appeal was allowed. The assessment order dated 26.12.2017 is quashed as void ab initio. The addition of Rs. 3,92,00,000 is set aside. The case is remanded to the Assessing Officer for fresh assessment in accordance with law, with jurisdiction assigned to the appropriate ACIT/DCIT having pecuniary jurisdiction over income exceeding Rs. 30 lakhs. The Department is directed to issue a fresh notice under Section 143(2) if it intends to reopen the assessment.
What This Means For Similar Cases
Jurisdictional Notices Cannot Be Curated
- Practitioners must immediately challenge notices issued by ITOs in cases where declared income exceeds Rs. 30 lakhs in metro cities.
- A notice issued by an officer lacking pecuniary jurisdiction under CBDT Instruction No. 1/2011 renders the entire assessment void ab initio, regardless of subsequent compliance.
Transfer of Jurisdiction Does Not Validate Defective Notices
- Merely transferring a case file from one AO to another does not cure a jurisdictional defect in the original notice.
- A fresh notice under Section 143(2) must be issued by the competent officer after transfer.
No Waiver of Jurisdictional Objections
- Failure to raise jurisdictional objections before the CIT(A) does not constitute waiver, as jurisdictional defects are fundamental and go to the root of the proceeding.
- Taxpayers may raise such objections for the first time before the Tribunal without prejudice.
