Assessment Invalid if Notice Issued by Wrong Officer: ITAT Mumbai Quashes Order for Lack of Jurisdiction
In an important ruling on jurisdictional validity of assessment proceedings, the Mumbai Bench of the Income Tax Appellate Tribunal has held that an assessment becomes void if the statutory notice under Section 143(2) is issued by an officer who does not possess proper jurisdiction.
In Svadeshi Enterprises (ITA No. 5865/Mum/2024 & CO No. 168/Mum/2025, AY 2014-15), the Tribunal quashed the entire assessment as void ab initio because the notice initiating scrutiny was issued by an Income Tax Officer, even though the case legally fell within the jurisdiction of an ACIT/DCIT as per CBDT instructions.
The ruling reiterates that jurisdictional defects strike at the root of assessment proceedings and cannot be cured later.
Facts of the Case
The assessee had filed its return declaring income of approximately Rs. 2.56 crore.
Under CBDT Instruction No. 1/2011 dated 31.01.2011, corporate cases in metro cities are to be handled by ACIT/DCIT where returned income exceeds Rs. 30 Lakh.
Despite this, the scrutiny notice under Section 143(2) was issued by an Income Tax Officer. The same officer proceeded to complete the assessment under Section 143(3).
The assessee challenged the assessment on the ground that the officer lacked pecuniary jurisdiction and therefore the proceedings were invalid from inception.
Issue Before the Tribunal
The central question was:
Can an assessment survive where the statutory notice initiating scrutiny is issued by an officer who lacks pecuniary jurisdiction over the case?
The Tribunal answered this firmly in favour of the assessee.
Tribunal’s Observations
The ITAT held that jurisdiction must exist at the stage of issuing the foundational notice itself.
The Bench noted:
• CBDT instructions clearly allocated jurisdiction to ACIT/DCIT
• The returned income exceeded the prescribed threshold
• The ITO therefore lacked authority to issue the notice
• Since Section 143(2) notice forms the foundation of scrutiny assessment, any defect in its issuance is fatal
The Tribunal emphasised that an invalid notice cannot give rise to a valid assessment. Consequently, the entire assessment was quashed as void ab initio.
Distinction Between Territorial and Pecuniary Jurisdiction
A significant aspect of the ruling is the Tribunal’s clarification regarding the difference between types of jurisdiction.
The department had argued that the assessee had not raised the objection at the initial stage and therefore Section 124(3) should apply.
The Tribunal rejected this argument, explaining that:
• Section 124(3) deals only with territorial jurisdiction disputes
• The present case involved pecuniary jurisdiction, governed by Section 120
• Lack of pecuniary jurisdiction goes to the root of authority and cannot be cured by delay or acquiescence
Thus, the “late objection” argument could not validate a notice issued by an incompetent authority.
Legal Principle Emerging from the Ruling
This decision reinforces a core rule of assessment law:
If the officer issuing the Section 143(2) notice lacks jurisdiction, the entire assessment collapses.
Participation in proceedings does not cure the defect.
Subsequent transfer of the file does not validate the original notice.
Merits of additions become irrelevant once jurisdiction fails.
In tax litigation, this is often one of the strongest preliminary grounds available.
Practical Lessons for Taxpayers and Professionals
This Ruling Highlights the importance of checking jurisdiction at the very beginning of scrutiny cases.
Professionals should verify:
• Whether the correct officer issued the Section 143(2) notice
• Applicable CBDT jurisdiction instructions for the year
• Income thresholds determining officer rank
• PAN jurisdiction records in the income-tax system
• Whether the notice matches the officer’s legal authority
A simple jurisdictional check can sometimes end litigation before it begins.
Conclusion
The ITAT Mumbai decision in Svadeshi Enterprises underscores that jurisdiction is not a procedural formality but a legal prerequisite.
Where the scrutiny notice is issued by an officer lacking pecuniary jurisdiction, the assessment has no legal foundation and must be struck down.
In tax proceedings, correctness of additions matters only after the authority to assess is established. If the foundation is defective, the entire structure cannot stand.
The copy of the order is as under:
