2015 (10) TMI 2554 - AT - Income Tax

TDS u/s 194C - non deduction of tds on payment to truck drivers - Held that - The assessee is a transporter but did not own any truck but arrange the truck from the market. The customer is generally made contract to transporter for arranging the trucks for transportation of goods. In the present case the assessee is an intermediary and conduit to make available the trucks from the market and issue GR in his own name but only charged commission for making builty. It is a fact that the customers deduct tax in the name of appellant but the truck owners was to be paid the amount of TDS by the assessee. The assessee got the refund and adjust the refund against the payment made by him to the truck drivers. The assessee has not debited any expenses on account of freight charges in the P&L account. Therefore Section 40(a)(ia) is not applicable and is also not liable to be deducted TDS U/s 149C of the Act. The assessee also had filed Form No. 15J before the Addl.CIT and at the time of assessment proceedings before the Assessing Officer which has not been controverted by the DR. if the assessee has produced the evidence regarding submission of Form No. 15-J before the lower authority in which some fault had been found on the ground that no signature number of receipts has been provided by the Range office is not any fault on part of the assessee. The assessee has furnished the Form No. 15-J in the office of the Commissioner. Various Courts also even considered and held justified Form No. 15-J before the Assessing Officer at the time of assessment proceedings. Therefore we reverse the order of the ld CIT(A). Accordingly this appeal is allowed in favour of assessee

Issues Involved:
1. Addition of Rs. 87,97,747/- under Section 40(a)(ia) of the Income Tax Act, 1961.
2. Disallowance of expenses and addition of Rs. 87,97,747/- in the income declared by the appellant.
3. Orders based on assumptions and presumptions.
4. Violation of principles of natural justice.

Detailed Analysis:

1. Addition of Rs. 87,97,747/- under Section 40(a)(ia) of the Income Tax Act, 1961:

The assessee, a transport contractor, filed its return declaring an income of Rs. 3,68,633/-. During scrutiny, the Assessing Officer (AO) found that the assessee showed gross receipts of Rs. 7,35,550/- but claimed TDS on Rs. 1,01,08,222/-. The AO concluded that the assessee sublet work to other truck owners and failed to deduct TDS on payments exceeding Rs. 50,000/- under Section 194C(2). This led to an addition of Rs. 87,97,747/- under Section 40(a)(ia). The CIT(A) upheld this, noting the failure to submit Form 15-J on time.

2. Disallowance of expenses and addition of Rs. 87,97,747/- in the income declared by the appellant:

The AO disallowed expenses and added Rs. 87,97,747/- to the income, citing the assessee's failure to deduct TDS on payments to truck owners. The CIT(A) confirmed this, emphasizing the non-submission of Form 15-J and the repeated engagement of the same trucks, indicating a continuous contract. The CIT(A) rejected the Form 15-J submitted during appellate proceedings as it lacked a receipt number and appeared fabricated.

3. Orders based on assumptions and presumptions:

The AO and CIT(A) based their decisions on the assumption that the assessee had a continuous contract with truck owners, requiring TDS deduction. The CIT(A) also assumed the Form 15-J submitted was fabricated due to missing receipt details. The assessee argued that it acted as an intermediary, arranging trucks and issuing GRs, and that payments were made directly by customers to truck owners, not by the assessee.

4. Violation of principles of natural justice:

The assessee contended that the lower authorities violated natural justice principles by not confronting it with the material used against it and not providing an opportunity for rebuttal. The assessee argued that it had not claimed any expenses in the P&L account, hence Section 40(a)(ia) was not applicable. It also submitted Form 15-I from truck owners, arguing no TDS was required.

Judgment:

The tribunal found that the assessee acted as an intermediary, arranging trucks and issuing GRs, and received commission for this service. Payments were made directly by customers to truck owners, and the assessee only paid the TDS shortfall, recorded as a liability. The tribunal noted that the assessee did not debit any freight expenses in the P&L account, making Section 40(a)(ia) inapplicable. The tribunal also accepted the submission of Form 15-J, reversing the CIT(A)'s order and allowing the appeal.

Conclusion:

The appeal was allowed, with the tribunal reversing the CIT(A)'s order and accepting the assessee's arguments regarding the nature of its business and the non-applicability of Section 40(a)(ia). The tribunal emphasized that the assessee acted as an intermediary and did not claim freight expenses, thus no TDS was required.

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