J. RAMA Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This appeal is by the assessee challenging the orders passed by the authorities upholding the additions made by the Assessing Officer.

(2.) The facts of the case are that the assessee is an individual deriving income from hiring of vehicles. For the assessment year 2005-06, return of income was filed on 30-10-2005 declaring an income of Rs. 8,27,740. The return was processed under Section 143(1) on 23-3-2006 and a refund of Rs. 34,619 was issued to the assessee. Thereafter, the case was selected for scrutiny under CASS. Notice under Section 143(2) was served on the assessee on 2-9-2006. In reply to the same, the assessee appeared, produced books of account and other details. It is seen from the said books and from the income and expenditure statement, the assessee had debited a sum of Rs. 88,12,432 as vehicle running expenses. When she was called upon to explain the said expenses, she had given elaborate accounts of vehicle running expenses. The said accounts disclosed that the assessee had not deducted the tax deducted at source (TDS) as per the provisions of Section 194C of the Income-tax Act, 1961 ('the Act'). In spite of sufficient opportunity granted the assessee did not produce the particulars of the TDS, if any. However, the assessee contended in writing that the assessee is not liable to deduct TDS as there is no written or oral contract and that the assessee is not liable under Section 194C as individual charges for private service vehicle will not exceed Rs. 20,000. She also referred to Circular No. 93 dated 26-9-2002 stating that the liability to TDS would not arise. The said circular was superceded by a clarification issued by the Board which made it obligatory to deduct tax. The Assessing Officer held the contract entered into between the assessee and the persons who supplied the vehicle is a transport contract and not hiring of machinery and therefore, she was legally bound to deduct TDS. As the said deduction was not made, Section 40(i)(a) is attracted. Accordingly, deduction on the amount paid to a sub-contractor on which tax has not been deducted at source was disallowed. Therefore, a sum of Rs. 79,45,225 representing the said payment was brought to tax. There was a discrepancy in the accounts relating to amount covered under TDS certificates and therefore, a sum of Rs. 6,82,968 was also added. Thus, a sum of Rs. 94,55,933 was held to be taxable. Aggrieved by the said assessment order, the assessee preferred an appeal to the Commissioner of Income-tax.

(3.) After referring to the aforesaid facts and the case law on the point, the appellate authority held that the assessee is the owner of the hired vehicle. It was a transport contract. Section 194C mandates TDS and therefore, he held that disallowance by the Assessing Officer is proper and accordingly, he confirmed the same. Insofar as the discrepancy in the TDS Certificate is concerned, it was noticed that the balance amount was received in subsequent year which was duly reflected in the accounts and when the assessee was maintaining the books of account on mercantile basis therefore, the accounting and reflecting on receipt basis was not in order and therefore, even the addition made by the Assessing Officer in respect of TDS was also confirmed.