The ITAT Mumbai has delivered a significant ruling affirming that jurisdictional defects in income tax assessment proceedings are incurable when notices under Section 143(2) are issued by officers lacking statutory authority under CBDT guidelines. This decision reinforces the principle that procedural compliance with administrative instructions is not optional but foundational to the validity of tax assessments.
Background & Facts
The Dispute
The appellant, Shri Vikram Singh Yadav, filed his income tax return for Assessment Year 2013-2014 declaring a total income of Rs.34,09,725. The Income Tax Officer, Ward 10(3)(3), Mumbai, issued a notice under Section 143(2) of the Income Tax Act, 1961 on 13.09.2014, initiating scrutiny assessment proceedings. The assessment was completed on 22.02.2016 under Section 143(3). The appellant challenged the validity of the notice and consequent assessment, arguing that the ITO lacked jurisdiction under CBDT Instruction No.1/2011.
Key Facts
- The appellant filed his return on 22.02.2016 declaring income of Rs.34,09,725
- The return was filed from Mumbai, a metro city as defined under CBDT Instruction No.1/2011
- The monetary limit for non-corporate assessees in metro cities under Instruction No.1/2011 is Rs.20 lakhs
- The ITO who issued the notice was not empowered to handle cases exceeding Rs.20 lakhs
- The jurisdiction for such cases was vested in the Assistant Commissioner or Deputy Commissioner of Income Tax
- The appellant’s return exceeded the prescribed limit by over Rs.14 lakhs
Procedural History
- 22.02.2016: Assessment Order passed under Section 143(3) by ITO, Ward 10(3)(3), Mumbai
- 14.08.2025: CIT(A) dismissed the appellant’s appeal against the assessment order
- 16.03.2026: Appellant filed a letter raising an additional ground of appeal before the ITAT, challenging jurisdictional validity of the notice under Section 143(2)
- 18.03.2026: Hearing concluded before ITAT Mumbai
- 23.03.2026: Judgment pronounced by ITAT Mumbai
The Parties' Positions
For the Appellant
The appellant contended that the notice under Section 143(2) was issued by an officer without jurisdiction, rendering the entire assessment void ab initio. Reliance was placed on CBDT Instruction No.1/2011, which clearly vests jurisdiction for non-corporate assessees with declared income above Rs.20 lakhs in the Assistant Commissioner or Deputy Commissioner, not the ITO. The appellant cited Ashok Devichand Jain v. Union of India (452 ITR 43) and Monarch & Qureshi Builders v. ACIT [2024] 161 taxmann.com 356 to support the argument that jurisdictional defects are incurable.
For the Respondent
The Department opposed the admission of the additional ground, arguing it was raised belatedly and required factual inquiry. It submitted that the notice was issued in good faith and that administrative convenience should not override procedural regularity. No specific legal rebuttal was offered to counter the binding precedents cited.
Relief Sought
The appellant sought quashing of the assessment order dated 22.02.2016, on the ground that the notice under Section 143(2) was issued by an officer lacking jurisdiction under CBDT Instruction No.1/2011. He also sought restoration of his return as filed, with no further assessment.
The Legal Issue
The central question was whether a notice issued under Section 143(2) of the Income Tax Act by an Income Tax Officer is valid when the declared income of a non-corporate assessee exceeds Rs.20 lakhs in a metro city, in contravention of CBDT Instruction No.1/2011.
Arguments Presented
For the Appellant
The appellant’s counsel argued that Section 143(2) notice is a jurisdictional notice, and its issuance by an officer lacking statutory authority under CBDT Instruction No.1/2011 renders the entire assessment void. Reliance was placed on Ashok Devichand Jain v. Union of India (452 ITR 43), where the Bombay High Court held that notices issued by ITOs beyond monetary limits are bad in law and incurable. The appellant also cited Monarch & Qureshi Builders v. ACIT and Ketan Tokershi Shah v. Dy. CIT, both decided by coordinate benches of the ITAT Mumbai, which followed the same principle. The appellant emphasized that the Supreme Court in Hotel Blue Moon held that issuance of notice under Section 143(2) is mandatory and must be by a duly empowered officer.
For the Respondent
The Department did not dispute the applicability of CBDT Instruction No.1/2011 or the monetary limits. It only objected to the belated raising of the ground, without offering any legal argument to distinguish the precedents cited. No material was produced to show that the ITO had been duly delegated jurisdiction or that the case had been transferred.
The Court's Analysis
The Tribunal first admitted the additional ground, relying on Thermal Power Co. Ltd. v. CIT (229 ITR 383), holding that legal issues based on existing records may be adjudicated even if raised late. The Tribunal then examined CBDT Instruction No.1/2011, which clearly states that for non-corporate assessees in metro cities, jurisdiction for assessment lies with the Assistant Commissioner or Deputy Commissioner if income exceeds Rs.20 lakhs. The appellant’s declared income of Rs.34,09,725 clearly exceeded this threshold.
"The notice under section 143(2) of the Act is mandatory for making the assessment and therefore the same is required to be issued by the Assessing Officer, who has jurisdiction and is empowered to issue the notice under section 143(2) of the Act and to make the assessment."
The Tribunal noted that the Bombay High Court in Ashok Devichand Jain had held that jurisdictional defects in notices under Section 148 are incurable, and that the same logic applies to Section 143(2) notices, as both are statutory and jurisdictional in nature. The Tribunal further relied on multiple coordinate judgments of the ITAT Mumbai and Kolkata, all holding that assessments initiated by ITOs beyond monetary limits are void.
The Department failed to distinguish any of these precedents on facts or law. The Tribunal concluded that the notice issued by the ITO was without authority in law, and since jurisdictional defects are not curable, the entire assessment proceedings must be quashed.
The Verdict
The appellant succeeded. The ITAT Mumbai quashed the notice dated 13.09.2014 issued under Section 143(2) and consequently set aside the assessment order dated 22.02.2016. The appeal was partly allowed. No further assessment was directed, and the case was closed with the return as filed being deemed final. The Department was directed to take no further action in respect of the assessment for AY 2013-14.
What This Means For Similar Cases
Jurisdictional Notices Are Non-Curable
- Practitioners must immediately challenge any notice under Section 143(2) or Section 148 issued by an ITO where income exceeds Rs.20 lakhs (non-corporate) or Rs.30 lakhs (corporate) in metro cities
- Such challenges need not await completion of assessment - they can be raised at any stage, including before the Tribunal
- The doctrine of "inherent defect not curable" applies strictly - no waiver, estoppel, or acquiescence can validate such notices
CBDT Instructions Bind Assessing Officers
- CBDT Instructions under Section 119 are not advisory; they are mandatory for allocation of jurisdiction
- Failure to follow these instructions renders proceedings void, regardless of intent or administrative convenience
- Taxpayers should verify jurisdictional limits before filing appeals or responding to notices
Procedural Compliance Trumps Substantive Outcomes
- Even if the assessment outcome is correct, the process is invalid if jurisdiction is defective
- Practitioners should routinely check the PAN’s jurisdictional assignment and the officer’s authorized monetary limits
- This judgment empowers taxpayers to seek quashing of assessments without contesting the tax liability itself
