Tribunal nullifies assessment, orders new income calculation based on return and books.

The Tribunal quashed the assessment under section 143(3) as void ab initio and directed income computation based on the return and maintained books. In a separate judgment, the Tribunal set aside an estimated addition, ordering a de novo assessment with the assessee's cooperation in producing documents.

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Issues Involved:
1. Jurisdiction over the assessee's case.
2. Validity of the return filed.
3. Issuance of notice under section 143(2).
4. Rejection of books of account.
5. Computation of income from commission.

Issue-wise Detailed Analysis:

1. Jurisdiction over the Assessee's Case:
It was admitted by both parties that the jurisdiction over the assessee's case for assessment year 2001-02 was with the Assistant Commissioner of Income Tax (ACIT), Central Circle, Agra, following the order of the Commissioner of Income Tax (CIT), Agra, under section 127 of the Income Tax Act on 10th May, 2001.

2. Validity of the Return Filed:
The return filed by the assessee with the Income Tax Officer (ITO), Aligarh on 27th March, 2002, was deemed non est (invalid) because the ITO, Aligarh, had no jurisdiction over the assessee's case for that assessment year. This conclusion was supported by the Supreme Court decision in Industrial Trust Ltd. vs. CIT, where returns filed before an officer without jurisdiction were held to be non est.

3. Issuance of Notice under Section 143(2):
Since the return filed at Aligarh was non est, the ACIT, Agra, could not consider it valid. Consequently, the notice under section 143(2) issued by the ACIT, Agra, on 9th February, 2004, was beyond the prescribed time limit and was invalid. The assessment framed under section 143(3) based on this notice was therefore illegal and bad in law.

4. Rejection of Books of Account:
The rejection of the assessee's books of account by the Assessing Officer (AO) was not justified. The assessee had requested the AO to summon the parties who had discounted their drafts through the assessee under section 131 of the Act, but the AO instead collected information under section 133(6), which was not sufficient grounds for rejecting the books of account. The Tribunal quashed this action, directing the AO to complete the assessment based on the books of account and the return filed by the assessee.

5. Computation of Income from Commission:
The Tribunal held that after quashing the rejection of the books of account, there was no basis for estimating the assessee's income by applying a particular rate of commission. The AO was directed to compute the income based on the return and the books maintained by the assessee.

Separate Judgment for ITA No. 96/Agra/2004:

1. Addition of Rs. 12,60,000 by Estimate:
The assessee objected to the addition of Rs. 12,60,000 upheld by the CIT(A) on an estimated basis. The CIT(A) had reduced the rate of commission from 1.5% to 0.4%, referencing Tribunal decisions in similar cases.

2. Appeal for De Novo Assessment:
The Tribunal, in the interest of substantial justice, decided to set aside the order of the CIT(A) and the assessment order, directing the AO to make a de novo assessment after allowing the assessee an opportunity of being heard. The assessee was required to produce books of account and extend full cooperation. If the assessee failed to cooperate, the AO was free to make a proper assessment as the circumstances required.

Conclusion:
The Tribunal quashed the assessment framed under section 143(3) for being void ab initio and directed the AO to compute the assessee's income based on the return and books maintained. For ITA No. 96/Agra/2004, the Tribunal set aside the order for a de novo assessment, ensuring the assessee's cooperation in producing necessary documents.

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