February 27, 2026 :The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed the assessment proceedings against taxpayer Jagruti Kirti Shah after holding that the jurisdictional notice issued under Section 143(2) of the Income Tax Act was invalid because it had been issued by an officer lacking authority under the applicable Central Board of Direct Taxes (CBDT) instructions. The decision was delivered on 26 February 2026 by a bench comprising Judicial Member Rahul Chaudhary and Accountant Member Bijayananda Pruseth.
The dispute arose from cross-appeals filed by the assessee and the Revenue against an order passed by the National Faceless Appeal Centre (NFAC) relating to Assessment Year 2016–17. The assessee had challenged the assessment order dated 24 December 2018 passed under Section 143(3) of the Act, while the Revenue contested the relief granted by the appellate authority on merits.
During the hearing before the Tribunal, the assessee raised an additional legal ground contending that the scrutiny notice issued under Section 143(2) by the Income Tax Officer, Ward 18(1)(5), Mumbai, was without jurisdiction in light of CBDT Instruction No. 1 of 2011. The assessee argued that the officer issuing the notice did not have authority to assume jurisdiction because the returned income exceeded the monetary threshold prescribed for Income Tax Officers.
The Tribunal admitted the additional ground, observing that it involved a pure question of law which could be adjudicated on the basis of material already available on record. Relying on the Supreme Court’s ruling in Thermal Power Co. Ltd. v. CIT, the bench noted that legal grounds that do not require investigation of fresh facts may be raised for the first time before the Tribunal.
Examining CBDT Instruction No. 1 of 2011, the Tribunal noted that the instruction prescribes monetary limits for assigning jurisdiction among tax authorities. In metro cities such as Mumbai, cases of non-corporate assessees declaring income exceeding ₹20 lakh fall within the jurisdiction of Deputy Commissioners or Assistant Commissioners, while Income Tax Officers are empowered to deal only with cases below that threshold.
In the present case, the assessee had filed a return of income on 2 September 2016 declaring total income of ₹40,33,450, which exceeded the ₹20 lakh threshold. Despite this, the scrutiny notice under Section 143(2) dated 4 July 2017 had been issued by the Income Tax Officer. The Tribunal held that such jurisdictional notices must be issued by an officer who is legally empowered to undertake the assessment proceedings.
The bench also relied on the Bombay High Court’s decision in Ashok Devichand Jain v. Union of India, which held that a notice issued by an officer lacking jurisdiction is invalid and that such inherent defects cannot be cured at a later stage. The Tribunal observed that the notice under Section 143(2) is a mandatory jurisdictional requirement and any defect relating to the authority of the officer issuing it goes to the root of the assessment.
Applying these principles, the Tribunal concluded that the notice issued by the Income Tax Officer was contrary to CBDT Instruction No. 1 of 2011 and therefore invalid. Since the very initiation of scrutiny proceedings was defective, the entire assessment stood vitiated.
Accordingly, the Tribunal quashed the notice dated 4 July 2017 issued under Section 143(2) as well as the consequential assessment order dated 24 December 2018 passed under Section 143(3) for Assessment Year 2016–17. As a result, the assessee’s appeal was partly allowed. Since the assessment order itself was set aside, the Revenue’s appeal challenging the relief granted on merits was rendered infructuous and dismissed.
Case Title: Jagruti Kirti Shah v. Assistant Commissioner of Income Tax, Circle 23(1), Mumbai
Case Numbers: ITA Nos. 5844/Mum/2025 & 6125/Mum/2025
