2010 (11) TMI 985 - AT - Income Tax

Summary

Issues involved:
The judgment involves issues related to the applicability of provisions of section 194C (3) of the Act and the disallowance of unaccounted outstanding liability towards payments to truck/lorry owners for the assessment year 2005-06.

Issue 1: Applicability of section 194C (3) of the Act

The assessing officer disallowed an amount under section 40(a)(ia) of the Act and as unexplained liability. The CIT (A) held that the payment made to lorry owners does not fall under the category of sub contract payment as per section 194C(2) of the Act. The CIT (A) found that the lorry owners were simple hirers of the vehicles and not sub contractors. The Tribunal upheld the CIT (A)'s decision, stating that the assessing officer's reasoning was not based on relevant considerations. The Tribunal concluded that the assessee was not liable to deduct tax at source under section 194C (2) and hence deleted the addition made under section 40(a)(ia) of the Act.

Issue 2: Disallowance of unaccounted outstanding liability

The assessing officer disallowed an estimated amount as unexplained liability towards payments to truck/lorry owners. The CIT (A) held that the assessing officer failed to prove that the outstanding liability was not genuine and deleted the addition. The Tribunal upheld the CIT (A)'s decision, noting that the department did not provide evidence to show the liabilities were not genuine. The Tribunal found that the assessee paid the outstanding liability in the subsequent year and upheld the deletion of the addition made by the assessing officer.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the decisions of the CIT (A) regarding both issues. The penalty appeal under section 271(1)© of the Act was also dismissed as infructuous due to the dismissal of the quantum appeal.