2016 (5) TMI 1260 - AT - Income Tax

TDS u/s 194H - Held that - AO found under examination of the details submitted by the under remand proceedings that all the payments were paid to various persons , particularly in cash between ₹ 1000/- to ₹ 2300/- and CIT-A having examined the paper book filed before him by the assessee observed that the assessee has paid commission of ₹ 4,60,152/- to a number of parties for securing orders from twelve companies located at various places. Further noted that the assessee failed to produce any kind of evidence in respect of appointment of such commission agents either before AO or CIT-A. Mere stating that the assessee has appointed persons as commission agents for each company to follow-up its affairs in support of which no sufficient evidence, whatsoever, filed in this regard. In our opinion, as per the procedure established the assessee shall produce all the details before the authorities, after due verification of the material available on record which are filed by the assessee without any supporting evidence both the authorities below arrived to a conclusion that the said payments made to various persons are self made and non-verifiable. Therefore, we hold that the assessee had clearly failed to prove genuineness of expenditure, consequently, the addition made on this issue stands confirmed - Decided against assessee TDS u/s 194H - Non TDS on Disallowance made on account of bill discounting and Invoice charges - Held that - In the present case at page no-23 the discounting charges said to have received by the Bank of Baroda also, though the addition was not on account of interest, in this case also, but, however, incidentally includes interest. Therefore, no tax can be charged on any such payments. It is pertinent to note as discussed above the assessee did not pay any amounts to bank so as to deduct the tax at source. Thus, the section 194H is not applicable to the case on hand and addition made thereon by the AO is not maintainable. - Decided in favour of assessee Non deducting TDS on account of payments made towards consulting charges - Held that - It is observed from the remand report that the AO verified the paper book as produced by the assessee containing details of payments made to various parties, which are admittedly less than ₹ 20,000/- and the ld. CIT(A) also confirmed the same. The same has been noticed at page 34 of the paper book, wherein it shows that the name of persons, their complete addresses and respective amounts mentioned therein paid to them. The AO further observed that the assessee did not produce any one of such parties before him for confirmation of the genuineness of the transaction. As submitted by the ld.AR above, in our opinion, the AO could have resorted to the proceedings u/s. 133 of the Act to secure the presence of such 15 persons for examination. But the AO failed to do so. That it is open to the AO to consider the relevant factors for determining as to whether the said consultancy charges were paid to the parties mentioned at page 34 of the paper book or not. In the present case, the AO totally failed to consider the same. The AO did not bring anything contrary to the claim of the assessee. Therefore, we hold that in view of the proviso (B) (i) to subsection (1) of Section 194J of the Act the addition does not stand, therefore, it is deleted - Decided in favour of assessee

Issues Involved:
1. Addition of ?16,33,578.00 under Section 40(a)(ia) for non-deduction of TDS on labor charges.
2. Addition of ?4,60,152.00 under Section 40(a)(ia) for non-deduction of TDS on commission payments.
3. Addition of ?1,45,655.00 under Section 40(a)(ia) for non-deduction of TDS on bill discounting and service charges.
4. Addition of ?2,52,000.00 under Section 40(a)(ia) for non-deduction of TDS on consultancy charges.
5. Charging of interest under Sections 234B and 234D.
6. Alleged insufficient opportunity of being heard.

Detailed Analysis:

1. Addition of ?16,33,578.00 under Section 40(a)(ia) for non-deduction of TDS on labor charges:
The assessee contended that the payment made to M/s. B.P. Projects Pvt. Ltd. was for galvanizing process charges, which should be categorized under job charges and not labor charges. The CIT(A) and AO treated these payments as labor charges, applying Section 194C, leading to disallowance under Section 40(a)(ia). The Tribunal, referencing the Delhi High Court's judgment in CIT-1 Vs. Ansal Land Mark Township(P) Ltd, held that the second proviso to Section 40(a)(ia) is curative and retrospective. The Tribunal remanded the case to the AO for verification of whether the payee had paid the tax on the income received, thereby potentially nullifying the assessee's default status.

2. Addition of ?4,60,152.00 under Section 40(a)(ia) for non-deduction of TDS on commission payments:
The AO disallowed the commission payments, considering them bogus due to lack of substantial evidence and the fact that all payments were made in cash. The CIT(A) upheld the AO's decision, noting that the assessee failed to prove the genuineness of these payments. The Tribunal confirmed the addition, stating that the assessee did not provide sufficient evidence to substantiate the commission payments.

3. Addition of ?1,45,655.00 under Section 40(a)(ia) for non-deduction of TDS on bill discounting and service charges:
The AO and CIT(A) disallowed these payments, treating them as subject to TDS under Section 194H. The Tribunal, however, agreed with the assessee's contention that Section 194H was not applicable and referenced the case of CIT vs Cargill Global Trading (P) Ltd, where it was held that discounting charges are not in the nature of interest. The Tribunal allowed the assessee's claim, noting that the assessee did not make any direct payments to the banks, which deducted their charges before crediting the balance.

4. Addition of ?2,52,000.00 under Section 40(a)(ia) for non-deduction of TDS on consultancy charges:
The AO and CIT(A) disallowed these payments, questioning their genuineness despite the amounts being below ?20,000 each. The Tribunal noted that the AO could have used Section 133 to verify the parties but failed to do so. The Tribunal held that the addition was not justified as the payments were below the threshold for TDS under Section 194J and deleted the disallowance.

5. Charging of interest under Sections 234B and 234D:
This issue was consequential to the main grounds of appeal. The Tribunal did not provide a separate detailed analysis for this ground.

6. Alleged insufficient opportunity of being heard:
The assessee claimed that they were not given sufficient opportunity to present their case. The Tribunal's decision to remand certain issues back to the AO for further verification implicitly addresses this concern, ensuring the assessee gets another opportunity to substantiate their claims.

Conclusion:
The Tribunal partly allowed the appeal, remanding the issue of labor charges back to the AO for verification, confirming the disallowance of commission payments, allowing the claim for bill discounting and service charges, and deleting the disallowance for consultancy charges. The consequential issues were dismissed.

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