The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed the reassessment proceedings initiated holding that corporate returns with income exceeding ₹30 lakh in metro cities must be handled by an Assistant Commissioner of Income Tax (ACIT) or Deputy Commissioner of Income Tax (DCIT), and not by an Income Tax Officer (ITO).

The bench of Mahavir Singh (Vice President) and Manish Agarwal (Accountant Member) has observed that the notice issued under Section 148 of the Income Tax Act was without legal authority as it had been issued by an Income Tax Officer (ITO) who lacked jurisdiction under the applicable CBDT instructions.

The controversy arose from a reassessment notice issued under Section 148 of the Income Tax Act on March 27, 2024, by the Income Tax Officer, Ward 26(1), Delhi. The appellant/assessee challenged the validity of the notice, arguing that the officer lacked jurisdiction to initiate reassessment proceedings because, under CBDT Instruction No. 1/2011, cases involving corporate returns with income exceeding ₹30 lakh in metro cities must be handled by an Assistant Commissioner of Income Tax (ACIT) or Deputy Commissioner of Income Tax (DCIT), and not by an ITO.

Buy Now: INCOME TAX E-COMPILATION – JUNE 2026

The assessee contended that the reassessment proceedings violated binding CBDT instructions and were therefore void from the outset. The challenge focused on the legality of the notice itself rather than the merits of the tax additions proposed in the reassessment.

The Tribunal examined CBDT Instruction No. 1/2011 dated January 31, 2011, which revised the pecuniary limits governing the allocation of assessment jurisdiction among different income tax authorities. Under the instruction, corporate taxpayers in metro cities declaring income above ₹30 lakh fall within the jurisdiction of ACITs or DCITs.

The assessee argued that despite these clear jurisdictional limits, the reassessment notice had been issued by an ITO, rendering the entire reassessment process legally unsustainable. The Revenue was unable to effectively dispute the factual position regarding the jurisdictional limits prescribed by the CBDT instruction.

While deciding the matter, the ITAT relied heavily on its earlier decision in Orchids Diamond Tools (P.) Ltd. v. ITO, where it had held that notices issued by officers lacking pecuniary jurisdiction are invalid and cannot form the basis of lawful assessment proceedings. The Tribunal noted that the issue had already been extensively examined in earlier cases and that the legal position was well settled.

The bench also referred to decisions including Vipul Mittal v. DCIT, YKM Holdings Pvt. Ltd. v. ACIT, Monarch & Quershi Builders v. ACIT, and Sapna Rastogi v. ITO, all of which emphasized that jurisdictional defects in the issuance of statutory notices strike at the root of assessment proceedings.

According to the Tribunal, when the law specifically entrusts jurisdiction to a particular class of officers, any notice issued by an officer lacking such authority cannot be treated as a mere procedural irregularity. Instead, it constitutes a substantive illegality that invalidates subsequent proceedings.

The ITAT further relied upon the decision of the Bombay High Court in Ashok Devichand Jain v. Union of India, where the Court held that a notice issued under Section 148 by an officer who lacked jurisdiction was invalid in law. The High Court had observed that a jurisdictional notice forms the very foundation of reassessment proceedings and any inherent defect in such notice is not curable.

The Tribunal noted that the High Court had categorically ruled that notices issued by unauthorized officers are void and that all consequential proceedings flowing from such notices are liable to be quashed. This principle was found to be directly applicable to the facts of assessee’s case.

An important aspect of the ruling relates to the distinction between territorial jurisdiction and pecuniary jurisdiction. The Revenue had argued in similar cases that objections to jurisdiction should be raised within the time limits prescribed under Section 124(3) of the Income Tax Act.

However, the Tribunal reiterated the judicial view that Section 124(3) primarily concerns territorial jurisdiction disputes and cannot cure defects arising from the absence of pecuniary jurisdiction. Where a statutory notice itself is issued by an officer lacking legal authority, the defect goes to the root of the matter and cannot be rectified through procedural provisions.

After reviewing the factual matrix and the applicable precedents, the Tribunal concluded that the Section 148 notice issued to assessee was without jurisdiction. Since the reassessment proceedings originated from an invalid notice, the entire assessment was liable to be annulled.

The bench held that once the foundational notice is found to be invalid, all subsequent proceedings automatically collapse and become void ab initio. Consequently, the assessment order was quashed, and the appeal of assessee was allowed.

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: Appellate Authority Can’t Admit New Tax Evidence Without Following Rule 46A: J&K High Court