2011 (8) TMI 232 - AT - Income Tax

Addition - Provision u/s 40(ia) - The assessee acted as intermediary between the client and Delhi Assam Roadways Corporation Ltd - The company carried the goods and the advance received from the customer was handed over to the driver of the company. In the final bill, the advance and the commission of the assessee were deducted from the bill amount of Rs.70,000/- and the assessee had to receive commission of Rs.2,100/- from the company. According to us, it cannot be said that assessee really entered into the contract of transportation of goods He merely acted as an intermediary - it is held that the assessee was not liable to deduct tax at source - In view thereof, no addition could have been made u/s 40(ia) -Decided in favour of assessee. Cash payment in excess of Rs. 20000/- Disallowance of Rs.2,82,913/- u/s 40A(3) of the Act.- Such payments should find place in the tax audit report, which is incomplete in this respect as column 17(b)(B) has not been filled up. Column 17(b)(A) only mentions that a certificate has been obtained - The ld. counsel has not been able to show in any manner that there is any mistake in quantification made by the AO - Decided against the assessee.

Issues Involved:
1. Addition of Rs. 8,51,43,744/- under Section 40(ia) of the Income-tax Act, 1961.
2. Addition of Rs. 2,82,913/- under Section 40A(3) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition of Rs. 8,51,43,744/- under Section 40(ia):

The assessee, a proprietor of M/s Satguru Cargo Movers, filed a return declaring a total income of Rs. 8,57,684/-. The return was processed, and later picked up for scrutiny. The dispute centers on the assessee's business of arranging transportation through other transport companies. The Assessing Officer (AO) found that the assessee did not deduct tax at source from payments made to other transporters, invoking Section 40(ia) to disallow the expenditure of Rs. 8,51,43,744/-.

The CIT(A) upheld this addition, noting the absence of basic information on payments and reconciliations. The appellant's inability to provide evidence to substantiate claims that the truck owners were regular income tax assessees and had paid taxes on the transportation receipts further weakened the case. The CIT(A) concluded that the assessee's role was not merely as a facilitator but involved a contractual relationship requiring tax deduction at source under Section 194C.

In appeal, the assessee contended that he acted only as an intermediary, earning commission without undertaking the actual transportation business. The reliance was placed on similar cases, such as CIT vs. Cargo Linkers and CIT vs. Grewal Brothers, where intermediaries were not deemed responsible for tax deduction at source. The Tribunal found that the assessee acted as an intermediary, similar to the cited cases, and thus was not liable to deduct tax at source. Consequently, the addition under Section 40(ia) was not justified, and ground no. 1 was allowed.

2. Addition of Rs. 2,82,913/- under Section 40A(3):

The AO disallowed Rs. 2,82,913/- by invoking Section 40A(3) due to cash payments exceeding Rs. 20,000/-, which aggregated to Rs. 14,14,564/-. The CIT(A) upheld this disallowance, noting the absence of any compelling circumstances or explanations for such cash payments.

Before the Tribunal, the assessee's counsel requested a remand for further verification, but this was denied due to lack of proper evidence or grounds. The Tribunal emphasized that the case was being heard at the counsel's insistence, implying full preparedness to argue all grounds. The Tribunal upheld the quantification made by the AO, as the assessee failed to show any mistake in the assessment. Consequently, the disallowance under Section 40A(3) was sustained, and ground no. 2 was dismissed.

Conclusion:

The appeal was partly allowed, with the addition under Section 40(ia) being overturned, while the disallowance under Section 40A(3) was upheld. The order was pronounced in open court on 26.8.2011.

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