ITO Lacked Pecuniary Jurisdiction: Mumbai ITAT Quashes Assessment in Svadeshi Enterprises Case

January 07, 2026 : The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that an assessment order passed by an Income Tax Officer (ITO) without the requisite pecuniary jurisdiction is void ab initio, leading to the quashing of the assessment and dismissal of the Revenue’s appeal as infructuous.

The ruling came in the case of ITO vs. Svadeshi Enterprises for Assessment Year 2014–15, decided by a Bench comprising Judicial Member Rahul Chaudhary and Accountant Member Prabhash Shankar. The Tribunal found that the foundational notice under Section 143(2) of the Income-tax Act, 1961, had been issued by an officer who lacked jurisdiction under the applicable CBDT instructions, rendering the entire assessment proceedings invalid.

Svadeshi Enterprises had filed its return declaring a total income of ₹2.56 crore. The case was selected for scrutiny, and the ITO completed the assessment under Section 143(3), disallowing ₹3 crore claimed as expenditure towards payments made to occupants or tenants for vacating premises, treating the amount as a contingent liability. On appeal, the Commissioner of Income Tax (Appeals) allowed the deduction, holding that the liability had crystallised during the relevant year.

The Revenue challenged this relief before the Tribunal. In response, the assessee filed a cross-objection contending that the assessment itself was without jurisdiction. The assessee relied on CBDT Instruction No. 1/2011 dated 31 January 2011, which provides that in metro cities, non-corporate cases with returned income exceeding ₹20 lakh fall within the jurisdiction of the Assistant Commissioner or Deputy Commissioner of Income Tax, not an ITO. Given that the returned income exceeded ₹2.56 crore, the assessee argued that the ITO had no authority to issue the statutory notice or complete the assessment.

Although the cross-objection was filed with a delay of 174 days, the Tribunal condoned the delay, accepting the explanation that it arose due to an inadvertent mistake by the assessee’s accountant. Relying on the Supreme Court’s ruling in Collector, Land Acquisition v. Mst. Katiji, the Tribunal observed that a litigant should not suffer for such bona fide errors.

On the core issue, the Tribunal noted that the Revenue could not dispute the fact that the notice under Section 143(2) and the assessment order were both issued by the ITO, despite the returned income being well above the prescribed pecuniary limits. The Bench reiterated that pecuniary jurisdiction flows from Section 120 of the Act read with CBDT instructions issued under Section 119, and that a notice issued by an officer lacking such jurisdiction is inherently invalid.

The Tribunal further clarified that Section 124(3), which deals with objections to territorial jurisdiction, does not apply to cases of pecuniary incompetence. Since the jurisdictional defect went to the root of the matter, it was held to be fatal and not curable.

Accordingly, the ITAT quashed the assessment order as void ab initio and allowed the assessee’s cross-objection. In light of this finding, the Revenue’s appeal against the deletion of the ₹3 crore disallowance was dismissed as infructuous without examination on merits.