2014 (12) TMI 101 - AT - Income Tax

Addition u/s 40(a)(ia) TDS not deduction on payment u/s 194C - Held that - The assesse has made the payments to the various transporters towards transportation charges for the purpose of his business of transportation of goods - These transporters are kind of subcontractors who are engaged by the assessee on random basis for transportation of the goods - the assessee has not deducted the TDS u/s 194C - Even though the assessee has not furnished Form 15-J, intimating to the income authorities after receiving Form 15-I from the parties, it cannot be held that for the purpose of u/s 194C, assesse was in default. Also in CIT Vs. Vali Bhai, Khan Bhai, Mankad 2012 (12) TMI 413 - GUJARAT HIGH COURT it has been held that once the conditions of further proviso of S. 194C(3) are satisfied, the liability of the payer to deduct tax at source would cease - The requirement of such payer to furnish details to the IT authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable u/s 194C(2) - the assessee was not at default for deduction of tax at source - It cannot be held that, despite receiving Form 15-I from the parties, assessee should have ignored these forms and deducted tax - no disallowance u/s 40(a)(ia) can be made Decided against revenue. Bogus purchases in contravention of section 102 of Evidence Act or not Held that - Neither the purchases could be confirmed nor the assessee could file any confirmation or details from such a party - This itself was a good ground for rejecting the book result as the purchase was not verifiable the AO has rightly made the addition after applying GP rate of 5% - as the assessee has failed to discharge his primary onus of filing the confirmation, the order of the CIT(A) is upheld Decided in favour of revenue.

Summary

Issues Involved:
1. Deletion of additions made by AO under Section 40(a)(ia) of the Income Tax Act, 1961 for default in TDS on payments specified under Section 194C.
2. Deletion of additions made by AO towards bogus purchases in contravention of Section 102 of the Evidence Act.

Issue-wise Detailed Analysis:

1. Deletion of Additions under Section 40(a)(ia) for Default in TDS:

The Revenue appealed against the deletion of additions amounting to Rs. 23,00,354/- made by the AO under Section 40(a)(ia) due to the assessee's failure to deduct TDS on transportation charges as required under Section 194C. The AO noted that the assessee had debited transportation charges to various parties but did not deduct TDS, arguing that the assessee was required to furnish Form 15-J to the prescribed authority after receiving Form 15-I from the subcontractors, which was not done.

The CIT(A) deleted the disallowance on the grounds that there was no finding of a contract between the assessee and the subcontractors, relying on the decision in CIT Vs. United Rice Land Ltd. The Tribunal upheld the CIT(A)'s decision, further supporting it with the Gujarat High Court's ruling in CIT Vs. Valibhai Khan Bhai Mankad, which stated that once the subcontractors provide Form 15-I, the assessee is not required to deduct TDS, even if Form 15-J is not furnished. Thus, the Tribunal held that no disallowance under Section 40(a)(ia) could be made.

2. Deletion of Additions towards Bogus Purchases:

The AO made an addition of Rs. 1,11,559/- (5% of Rs. 22,31,182/-) as bogus purchases from M/s Gallant Traders Pvt. Ltd., based on the failure to serve notice and verify the existence of the supplier. The assessee suggested applying an appropriate GP rate for the purchases. The CIT(A) deleted the addition, stating that the AO should have conducted further inquiries with the bankers of both the assessee and the creditor.

The Tribunal reversed the CIT(A)'s decision, noting that the AO had made detailed inquiries, including sending notices and deputing an ITI to verify the transaction. The failure to confirm the purchases and the assessee's inability to provide confirmation justified the AO's rejection of the book results and the application of a 5% GP rate. The Tribunal sustained the addition of Rs. 1,11,559/- made by the AO.

Conclusion:

The Tribunal dismissed the Revenue's appeal regarding the deletion of additions under Section 40(a)(ia) but allowed the appeal concerning the bogus purchases, thereby partly allowing the Revenue's appeal. The order was pronounced in the open court on November 28, 2014.