ITO, NEW DELHI vs. SMT. SHOBHA RANI VERMA, NEW DELHI

The brief facts of the case are that assessee filed her return of income on 30.9.2008 declaring income of Rs.2,95,960/-. The return of the assessee was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred as the Act) and the case was selected for compulsory scrutiny. Accordingly, statutory notices were issued to the assessee and served upon the assessee. In response to notices, the A.R. of the assessee attended the proceedings from time to time and filed the necessary details. Books of accounts were not produced for examination, on test check basis. The assessee is engaged in the business of freight services. During the year under consideration the assessee has declared Net Profit of Rs. 295963/ on total receipts of Rs. 8410141/- thereby giving a net profit rate of 3.51% whereas in the immediate prceeeding year on total receipts of Rs. 1,51,66,317/- GP rate of 2.69% was declared. Although there is a fall in receipts in comparison to last year the NP ratio during the year is better in comparison to last year. Since nothing adverse has been noticed, the trading results as declared were accepted. AO noted during the course of assessment proceedings that the assessee incurred freight and services charges amounting to Rs. 64,21,315/- and airport expenses amounting to Rs. 1,72,815/-, without deducting TDS on these expenses. AO asked the assessee vide order sheet entry dated 15.12.2010 as to why provision of section 40a(ia) are not attracted. AO vide questionnaire dated 20.12.2010, asked to give partwise detail of expenses incurred, the assessee did not file the copy of account of the said parties or produce books of account for verification. However, the Assessee has stated that she was not required to deduct TDS, as she is only a sub agent and the liability to deduct TDS falls on the principles for whom she works and not hers. AO observed that provisions of Explanation III to Section 194C(2) are extremely clear in this regard. By virtue of this provision, at the time of payment or credit to the account of the said parties the assessee was required to deduct TDS. Since the assessee ahs failed to comply with this provision, provision of section 40a(ia) are attracted in this case and accordingly the assessee was liable to deduct TDS. Accordingly, the AO assessed the income of the assessee at Rs. 69,18,660/- vide his assessment order dated 28.12.1010 passed u/s. 143(3) of the Act.

Ld. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal.

We have heard both the parties and perused the relevant records, especially the impugned order. We find that payments of Rs. 38,11,727/- and Rs. 13,78,819/- made to Skyways Air Services Pvt. Ltd. and Indair Carriers Pvt. Ltd. respectively, aggregating to Rs. 50,90,546/- that since the assessee was acting as their sub- agent, which fact is supported by the confirmations/TDS certificates of these two parties being lATA agents, and there being no contract between the assessee and the above lATA agents, and on the contrary, the lATA agents treating the assessee as their sub-agent, she was not required to deduct TDS u/s 194C of the Income-tax Act and consequently no disallowance u/s. 40(a)(ia) could be made. We further find that writing the books in a form which does not reflect mere commission but enters the receipts from the exporters on one side and the payments to the lATA agents on the other side in the profit & loss account also do not come in a way to adjudicate the applicability of section 194C between the assessee and the lATA agents. What is important to be seen is whether the assessee has appointed the lATA agents as their contractors, which in this case is missing. On the contrary it is the lATA agents who have appointed the assessee as their sub agent. On the similar ground the remarks of the auditor that no tax has been deducted cannot come in a way to hold that the TDS has not been deducted on the payments made to lATA agents. That could be only partly true in the case of other payments, barring the payments to two lATA agents as the details for the same have not been furnished on the grounds of the assessee having gone out of the business and bed ridden due to acute illness. Therefore, in our considered opinion, the Ld. CIT(A) has rightly gave the relief of Rs. 50,90,546/- out of total disallowance/addition of Rs. 65,94,130/- and thus, the balance disallowance of Rs. 15,03,584/- was confirmed, which does not need any interference on our part, hence, we uphold the same and reject the ground raised by the Revenue.