If at the time of the assessment AO need any further document than should be mentioned in clear language in the notice otherwise asseessee is not responsible

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The facts in brief are that the assessee company was engaged in the business of undertaking contracts for providing various liaison activities in telecommunication strategy had entered into contract dated 5.1.2005 with M/s. ZTE Corporation, a Chinese Company. In terms of the said contract, the assessee was to aid the client by performing technical services in the capacity of an independent contractor in relation to various telecom operators such as Tata, Hutch, Essar and Idea who were customers of the Chinese Company. Soon after entering into said contract, the assessee company had entered into identical sub contracts on 1.4.2005 with each of the two directors i.e., Shri Gautam Balakrishnan and Smt. Kalpana Madan to execute all or portions of the work received from the clients. The AO noted that the assessee during the year had received contract charges of Rs.41,18,669/- from M/s. ZTE Corporation and in turn had paid sub contract charges of Rs.40,20,822/- to its directors. The assessee submitted before the AO that since directors in individual capacity were not in a position to enter into a contract with a Chinese Company, they had incorporated the company Optsoe Consultants Pvt. Ltd. for entering into the said contract. The assessee also submitted that it had deducted tax at source @ 2% on the payments made to the directors under section 194C of the Act. AO however noted that in the contract with the Chinese Company, the assessee had been referred to as a consultant and the Chinese company as client. The agreement also provided for technical services of consultancy by the assessee to assist the Chinese company. The AO, therefore, held that the directors were providing professional services as consultant to the assessee company in India and, therefore, provisions of section 194J as per which tax was required to be deducted @5% in respect of professional services or technical services were applicale. But since the assessee had deducted tax only @ 2%, there was shortfall of tax by 3%. He, therefore, disallowed the claim of expenditure proportionately i.e. @ 60% which came to Rs.24,12,413/- which was disallowed under section 40(a)(ia) of the Act.

Citation :
M/s. Optsoe Consultant Private Limited; 107-8-9, A-Wing Samarth Aangan II, Off K.L.Wawalkar Marg, Oshiwara Andheri West, Mumbai Pin-400 053.P.A. No.(AAACO 7298 R)(Appellant)Vs.Income Tax Officer-9(2)(4);Room No.255 Aayakar Bhavan,M.K. Road, Mumbai-(Respondent)