The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has allowed a taxpayer’s appeal after holding that a reassessment notice issued by an officer lacking pecuniary jurisdiction suffered from an incurable jurisdictional defect.

The proceedings concerned additions relating to alleged misuse of the Client Code Modification (CCM) facility in futures and options trading. However, the bench of  Justice (Retd.) C.V. Bhadang (President) and Prabhash Shankar (Accountant Member) decided the appeal on the preliminary issue of jurisdiction and expressly left the merits of the additions open.

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The appellant/assessee carried on trading in shares and securities, including futures and options, and was also a regular investor.

For the relevant assessment year, the company filed its income tax return declaring total income of ₹51,520. The return was processed under Section 143(1) of the Income Tax Act, 1961, on April 18, 2011.

The assessment was subsequently reopened by issuing a notice under Section 148. In response, the company requested that its original return be treated as the return filed pursuant to the notice.

According to the Assessing Officer, certain brokers had misused the CCM facility in the National Stock Exchange’s F&O segment during March 2010 to create fictitious profits and losses. These were allegedly transferred to different clients according to their requirements.

The department alleged that the company was a beneficiary of transactions undertaken through Para Anugrah Stock and Broking Pvt. Ltd.

Two show-cause notices dated March 22, 2016, referred to alleged fictitious losses of ₹36,20,999 and ₹85,94,697, based on information received from departmental units in Ahmedabad and Mumbai, respectively.

The company disputed the allegations. Nevertheless, the Assessing Officer passed an assessment order on March 29, 2016. The opening paragraph of the Tribunal’s ruling records an addition of ₹1,22,15,690 under Section 68.

The National Faceless Appeal Centre, acting as the Commissioner of Income Tax (Appeals), partly allowed the company’s appeal through an order dated March 22, 2024.

The appellate authority noticed that the last six transactions in a table reproduced in the assessment order showed the company itself as the counterparty. It directed the Assessing Officer to verify the position and exclude transactions where the counterparty was the appellant itself rather than a third party.

It also directed deletion of the addition of ₹36,20,999.

The appellate authority found that this addition had been made independently without connecting it to the basis of the other addition. The information relied upon did not establish whether the transactions underlying this amount were already included in, or formed a subset of, the information supporting the other addition.

Further, the Assessing Officer had not specified the relevant transaction details.

The Tribunal’s narrative records that the addition of ₹85,94,697 was sustained at that stage. However, the grounds of appeal reproduced in the order refer to a disputed CCM addition of ₹82,70,239.

Before considering the jurisdictional challenge, the ITAT examined a 580-day delay in filing the appeal.

The company submitted that the appellate order had been uploaded on the ITBA portal on March 22, 2024, but it became aware of the order only on December 15, 2025.

It explained that Form 35 contained the email address of a former director who had ceased to be associated with the company in June 2017. The company also stated that it had opted out of service through email and had not received a physical copy of the order.

The application for condonation was supported by an affidavit from the former director.

Considering the overall circumstances, the Tribunal held that the company had established sufficient cause for the delay. It accordingly condoned the delay and admitted the appeal for consideration.

The company challenged the reassessment on the ground that the notice had been issued by the Deputy Commissioner of Income Tax, Circle 13(1)(1), Mumbai, although jurisdiction over its case lay with the Income Tax Officer.

It relied on CBDT Instruction No. 1/2011 dated January 31, 2011, issued under Section 119, prescribing monetary limits for allocating cases between ITOs and Assistant or Deputy Commissioners.

The instruction reproduced in the ruling assigns corporate returns in metro cities declaring income up to ₹30 lakh to ITOs. Corporate returns exceeding that amount are assigned to ACs/DCs.

For non-corporate returns in metro cities, the corresponding threshold is ₹20 lakh. Mumbai is expressly included among the metro charges.

The company’s declared income was only ₹51,520.

The Revenue opposed the objection, arguing that it had not been raised earlier, that the company had participated in the assessment proceedings, and that no prejudice had been demonstrated.

The Tribunal had called for a factual report because of a dispute concerning the consequential notice under Section 143(2), while the assessment order itself had been passed by the ITO.

A departmental report dated June 24, 2026, stated that the assessment records for 2010–11 could not be traced despite efforts. Consequently, the factual assertions could not be verified.

The Tribunal nevertheless recorded that there was no dispute that the Section 148 notice had been issued by the DCIT.

The Bench relied on the Bombay High Court’s decision in Ashok Devichand Jain, 452 ITR 43.

In that case, the jurisdictional error operated in the opposite direction: an ITO had issued a notice to a non-corporate taxpayer whose declared income exceeded the applicable ₹20 lakh threshold.

The ITAT held that the governing principle remained applicable. A notice under Section 148 is jurisdictional, and an inherent defect arising from its issuance by an officer without jurisdiction is not curable.

The Bench also referred to Ketan Tokershi Shah v. DCIT, ITA No. 1107/Mum/2023, decided on July 26, 2023, involving a similar pecuniary-jurisdiction issue.

The Tribunal permitted the company to raise the jurisdictional objection even though it had not been advanced before the lower authorities.

Relying on the Supreme Court’s decision in National Thermal Power Co. Ltd., 229 ITR 383, the Bench treated the objection as a pure legal issue for which the relevant factual background was already available.

The undisputed fact that the DCIT had issued the Section 148 notice enabled the Tribunal to decide the objection.

It held that this ground alone was sufficient for the appeal to succeed.

The ITAT allowed the appeal on the jurisdictional ground and expressly left the merits of the disputed additions open.

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