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Facts
The assessee filed an Income Tax Return for AY 2017-18 with an income of Rs. 37.42 lakhs. Assessment proceedings were initiated by an ITO with a notice under Section 143(2) and subsequently completed by an ACIT under Section 143(3). The assessee argued that as per CBDT Instructions, the pecuniary jurisdiction for this income level (above Rs. 30 lakhs in metro cities) lay with the DCIT/ACIT, not the ITO. The Ld. DR could not controvert the fact that no transfer order under Section 127 was issued to transfer jurisdiction from the ITO to the ACIT.
Held
The Tribunal held that the initiation of assessment proceedings by the ITO and subsequent completion by the ACIT without a valid jurisdictional transfer order under Section 127 of the Income Tax Act was without proper jurisdiction. Consequently, the entire assessment proceedings were rendered illegal, unsustainable in law, and void ab initio. The tribunal relied on *M/s Boutique International Pvt Ltd vs ITO* and did not delve into the merits of the case.
Key Issues
Whether assessment proceedings initiated by an ITO and completed by an ACIT without a valid jurisdictional transfer order under Section 127 of the Income Tax Act are void ab initio due to lack of proper pecuniary jurisdiction.
Sections Cited
143(2), 143(3), 127
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,
Before: SHRI YOGESH KUMAR U.S., & SHRI NAVEEN CHANDRA
This appeal by the assessee is preferred against the order of the NFAC, Delhi dated 07.12.2023 for A.Y 2017-18
The assessee’s main legal argument is that the assumption of pecuniary jurisdiction is illegal and bad in law as the returned income Page 1 of 5 framed u/s 143(3) of the Act by the DCIT/ACIT which is not sustainable in the eyes of law.
At the very outset of the opening of the arguments, the ld. counsel for the assessee submitted that as per CBDT Instructions No. 1 of 2011 dated 31.01.2011, jurisdiction for assessment vested with the Income Tax Officer upto Rs. 20 lakhs and where income declared returned by a non-corporate assessee was above Rs. 20 lakhs, the pecuniary jurisdiction would be of DC/ACIT. Since the declared income in this case is above Rs. 37.42 lakhs, the pecuniary jurisdiction lies with DCIT/ACIT.
In the instant case, the ITO 50(1) issued the notice u/s 143(2) of the Act assuming the jurisdiction and subsequently, the assessment order u/s 143(3) was passed by the ACIT 50(1), Delhi. The correct AO has not initiated the assessment proceedings, hence the same is invalid and the whole proceedings becomes illegal and unsustainable in law. The ld. counsel for the assessee relied upon a catena of judgement in support of his contentions, including :
(i) M/s Boutique International Pvt Ltd vs ITO dated 18.12.2020 (ii) ITO Vs. NVS Builders Pvt Ltd dated 08.03.2018
Page 2 of 5 below.
We have heard the rival submissions and have perused the relevant material on record. We find that Income tax return for AY 2017-18 was filed on 05.11.2017 at Rs. 37,42,700/- which is more than Rs. 30 lakhs.
As per the Instruction no 1/2011, the correct pecuniary jurisdiction of cases of Return above 20 lakhs in Mofussail areas and Rs 30 lakh in Metro cities, lies with the ACIT. We find that the assessment proceedings have been initiated by the ITO 50(1) by issuing notice u/s 143(2) dated 21.08.2018 while the assessment u/s 143(3) was completed by the ACIT, Circle 50(1), New Delhi on 26.12.2019.
The ld DR however, could controvert that there does not exist any order u/s 127 for transferring the file from an ITO, with whom the pecuniary jurisdiction lies, to the ACIT, Circle 50(1).
We have been told about the subsequent Instruction no 6/2011 dated 8.4.2011 empowering the CIT to adjust the monetary limit for the ITO/DCITs. The ld AR, however submitted that the said Instruction does allow monetary adjustment but the same is limited to adjust the limits by an amount of 5 lakhs and since the assessee’s return was only of Rs 37.42 lakh, even after the said Instruction is applied, the pecuniary
Page 3 of 5 neither the Assessing Officer nor the ld DR could controvert the fact that no order u/s 127 was passed for transferring the jurisdiction from ITO to the DCIT. In the above factual matrix, we are of the considered opinion that the notice u/s 143(2) of the Act as well as the assessment u/s 143(3), which has been issued/completed by the DCIT, has been done without assuming proper jurisdiction by way of any order u/s 127 of the Act rendering the whole proceedings illegal, unsustainable in law and void ab initio. We are fortified in our view by the Hon’ble Bombay High Court in the case of M/s Boutique International Pvt Ltd vs ITO (supra) which dealt with identical facts. Ground on this count is allowed.
Since we have held the assessment proceedings to be void ab initio, we do not dwell into the merits of the case. is allowed.
The order is pronounced in the open court on 17.09.2025.