The problem is that there is already a Duchy of Itau, but it has no regions. Once a duchy is reduced to no regions, it can never get more. That is because you need to either be adjacent to a duchy, or in one of its regions, to switch allegiance to it. Since the duchy has no regions, you can neither be in it, or next to it. It will be forever regionless. The ruler can keep it around if they want, to make it an honorary title, but it can never have any income, because it can't have any regions. Or the ruler can disband it.
Unlike the old system, capturing a new city under the new system will not automatically create a new duchy. It is the ruler's choice whether or not to make a new duchy. Lord's have no say in the matter. You can't just hop up and say "We're a duchy now".
If you want a Duchy of Itau with a duke and regions, then have the ruler of Asylon disband the current Duchy of Itau. It is useless as it stands. Once that is done, have the ruler create a new Duchy of Itau based on the city of Itau. That will make the lord of Itau the new Duke of Itau. Then other regions can, if they want, change allegiance to the new duchy.