2011 (6) TMI 816

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.... 2. The CIT(A) ought to have upheld the penalty levied by the Assessing Officer as the assessee had understated the income by not deducting tax at source on certain payments made which attracts TDS and by not addition certain expenditure to total income on which TDS was made beyond due dates. 3. Brief facts of the case are that the assessee is engaged in the business of shipping intermediary services. As assessment u/s 143(3) had been made in the assessee's case for the assessment year 2005-06 by way of an order dated 24.12.2007 wherein the total income was assessed at Rs. 2,15,78,933, as against the return of income of Rs. 1,86,95,703/-. During the assessment proceedings, it was observed that the assessee had made the following paym....

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....31.3.2005 to M/s Shiv Shakti Lorry Transport was debited to various clients accounts'. It was pleaded that the assessee was under an impression that TDS was not applicable on 'to pay basis'. However, in view of the CBDT's Circular No.715 dated 8.8.1995 in F.No.133/101/95-TPL, the Assessing Officer concluded that there was an obligation to deduct tax at source out of payment of freight even when the goods are received on 'freight to pay basis', irrespective of the actual payment. Considering that the assessee had violated the provisions of section 200(1) by not deducting tax on such payments, the Assessing Officer made disallowance of Rs. 12,88,649/- u/s 40(a)(ia) of the Act. In view of the above disallowance, penalty....