ITAT Quashes Rs 37.71 Lakh Tax Assessment After ITO Issues Section 143(2) Notice Despite CBDT Jurisdictional Limits
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed an income-tax assessment against Deepak Jain, proprietor of Vardhman Jewellers, holding that the assessment was invalid because the mandatory notice under Section 143(2) of the Income Tax Act was issued by an Income Tax Officer (ITO) instead of an Assistant Commissioner or Deputy Commissioner of Income Tax.
Jain had filed his income-tax return for Assessment Year 2017-18 declaring taxable income of about Rs 37.71 lakh. During the assessment proceedings, the ITO, Ward-35(2), Delhi issued notices under Section 143(2). Another notice was subsequently issued by ITO, Ward-35(3).
The assessee challenged the validity of the assessment before the ITAT on the ground that the cases of non-corporate tax payers having return income of Rs.20 lakh or more were to be dealt with by an officer of the rank of ACIT or DCIT and not by an Income Tax Officer (ITO) under CBDT Instruction No. 1/2011 dated 31st January, 2011.
ITAT ruled in favor of assessee. It was held that notice under Section 143(2) is a jurisdictional notice i.e. necessary for lawful assumption of assessment jurisdiction. The Tribunal further found a fundamental defect in the assessment proceedings in the sense that the notice was issued by an ITO when the returned income of the assessee was more than Rs. 20 lakh.
The department stated that the assessee did not challenge the jurisdiction within the time prescribed under Section 124(3) of the Act. The Tribunal did not accept this argument, noting that section 124(3) dealt with territorial jurisdiction, while the present dispute concerned pecuniary jurisdiction or the monetary limits on which rank of officer could exercise jurisdiction.
The Tribunal also referred to the decision of the Bombay High Court in Ashok Devichand Jain Vs. Union of India, wherein a notice issued by an ITO which was contrary to the jurisdictional instructions of the CBDT was held to be invalid. The High Court had observed that such a defect in a jurisdictional notice cannot be brushed aside as a mere procedural irregularity.
Following that ruling, the Delhi ITAT held that the notice issued by the ITO suffered from a jurisdictional illegality and that the defect could not be cured under Section 292BB of the Income Tax Act.
As a result, the Tribunal declared the assessment order void ab initio, effectively quashing the entire assessment. Since the assessment itself was set aside, the Tribunal did not examine the assessee’s other grounds, leaving them academic.
The appeal was therefore partly allowed in favour of the assessee.
Case citation: Deepak Jain Prop. Vardhman Jewellers Vs ITO (ITAT Delhi); ITA No.6996/Del/2025; 19/08/2026; 2017-18.
