2011 (4) TMI 1539 - AT - Income Tax

Summary

Issues involved: Disallowance under section 40(a)(ia) of the Act for failure to deduct tax at source on freight charges paid to a transport company.

Summary:
The appeal was against the order confirming the disallowance of Rs.3,58,789/- under section 40(a)(ia) of the Act for the assessment year 2005-06. The Assessing Officer contended that payments made to a transport company were liable for TDS deduction under section 194C of the Act. The assessee argued that there was no direct contract with the transport agency as the suppliers engaged the trucks. The Assessing Officer disallowed the claim, upheld by the CIT (A), leading to the appeal.

The Tribunal noted that the Assessing Officer's order under section 154 aimed to rectify a mistake apparent from the record. However, the issue was not a clear mistake as there were differing opinions on whether TDS was applicable to the freight payments. The assessee's explanation indicated a lack of direct contract with the transport agency, suggesting a need for detailed verification. As there were conceivably two opinions on the matter, the Tribunal concluded that the disallowance did not qualify as an obvious and patent mistake. Consequently, the orders of the CIT (A) and under section 154 were set aside, and the appeal of the assessee was allowed.