2012 (8) TMI 334 - AT - Income Tax

Dis-allowance u/s 40(a)(ia) - non-deduction of tax at source u/s 194C on the trucks provided - assessee engaged in the business of transport arranging vehicles for transportation of goods and earning commission thereof - Held that - It is observed that assessee has filed P/L A/c showing lorry freight receipts at Rs 79.71 lacs and lorry cartage paid at Rs 74.22 lacs showing net revenue of Rs 5.49 lacs. However, it claimed TDS on a larger amount and total freights as per the register aggregates to Rs.1.72 crores. Books of accounts stand rejected by AO. There is no reconciliation with reference to the total receipts as per the freight register and what was shown in the P/L A/c. There is also no finding either by AO or by the CIT (A) about the exact nature of assessee s business. Further whether mere arrangement of trucks resulted in any contract is to be examined as AO has not invoked the provisions of section 194C nor disallowed amounts u/s 40(a)(ia). Since these aspects are not examined by AO in its correct perspective, we set aside the assessment to the file of AO to examine the above issues and complete the assessment accordingly

Summary

Issues:
Disallowance under section 40(a)(ia) for failure to deduct tax on trucks provided.

Analysis:

1. The appeal before the ITAT, Mumbai concerned the disallowance under section 40(a)(ia) due to the failure of the assessee to deduct tax on trucks provided, violating section 194C(1).

2. The assessee, a transport business arranging vehicles for goods transportation, showed lorry freight received at Rs. 79,71,542 and claimed lorry cartage paid at Rs. 74,22,592, resulting in a net revenue of Rs. 5,48,950. The AO assessed gross receipts at Rs. 1,72,39,660 but disallowed any payment due to lack of evidence on the genuineness of the amounts. The CIT (A) upheld a disallowance of Rs. 1,16,38,870 as the assessee was considered a sub-contractor required to deduct tax on payments to truck drivers.

3. The assessee argued that it merely arranges trucks and earns commission, not acting as a contractor with control over truck owners. The CIT (A) upheld the disallowance due to payments exceeding Rs. 50,000 to a truck owner, leading to a partial relief of Rs. 56,00,790.

4. The ITAT found discrepancies in the nature of the assessee's business and the lack of evidence establishing contractual relationships with truck owners. The tribunal noted conflicting figures in the Profit & Loss A/c and receipts, emphasizing the need to verify the exact business nature and applicability of tax provisions.

5. The ITAT set aside the assessment for the AO to reexamine the issues, including the nature of the business, contractual obligations, and compliance with tax provisions. The assessee was directed to provide necessary evidence, and the appeal was allowed for statistical purposes.

6. The judgment emphasized the importance of factual examination alongside legal principles, highlighting the need for a thorough assessment based on evidence and proper verification of business operations and tax compliance.