ITO, TIRUNELVELI vs. UMIYA TIMBER DEPOT, TIRUNELVELI

All the appeals filed by the Revenue in respect of different assessees are directed against the respective orders of the Commissioner of Income Tax (Appeals)-2, Madurai. The assessees have also filed cross-objections. Therefore, we heard the appeals and cross-objections together and disposing of the same by this common order.

Ms. C. Yamuna, the Ld. Departmental Representative, submitted that the Assessing Officer on inspection, found that the assessees have not collected tax as required under Section 206C of the Income-tax Act, 1961 (in short 'the Act'). The Ld. D.R. pointed out that when the assessees debiting account of the buyer while selling forest produce or at the time of receipt of the amount, shall collect a sum equal to specified in the table in Section 206 of the Act. In case the buyer furnishes declaration as provided in Rule 37C of Income-tax Rules, 1962, then no tax shall be collected. In this case, the assessees have not collected any tax at the time of debiting the buyer’s account or on receipt of the money and no declaration in Form 27C as required under Rule 37C was also received. After the inspection, the assessees collected Form 27C declaration and filed the same only before the Assessing Officer.

The Ld. Departmental Representative further submitted that it is not a procedural lapse. Section 206C of the Act mandates that the assessee has to collect tax at the time of debiting or receipt of money in case Form 27C declaration is not filed. Therefore, the CIT(Appeals) is not justified in placing reliance on the judgment of Gujarat High Court in Siyaram Metal Udyog (P) Limited (supra). On a query from the Bench, when the object of the filing of Form 27C is achieved ultimately, after the inspection, whether is there any necessity to levy penalty? The Ld. Departmental Representative submitted that when the assessees failed to comply with mandatory provisions of Section 206C of the Act, the Assessing Officer has rightly levied interest under Section 206C of the Act.

On the contrary, Shri C. Edser Raj, the Ld.counsel for the assessees, submitted that no doubt, the assessees had not collected Form 27C at the time of debiting the account or receipt of money. However, after inspection, Form 27C was collected and the same was filed before the Assessing Officer. Placing reliance on the judgment of Gujarat High Court in Siyaram Metal Udyog Pvt. Ltd. (supra), the Ld.counsel submitted that the Gujarat High Court found that sub-section (2) of Section 206C of the Act does not provide any time limit for filing declaration under Rule 37C of Income-tax Rules, 1962. The main thrust of sub-section (1A) of Section 206C of the Act is to make declaration as prescribed, upon which, the liability to collect tax at source under sub-section (1) would not apply. According to the Ld. counsel, when there was no dispute about such a declaration being filed in a prescribed format and there is no dispute about the genuineness of declaration, mere delay in filing of declaration would not affect the very claim, therefore, the Gujarat High Court ultimately found that there was substantial compliance with the requirement of filing of declaration.

We have considered the rival submissions on either side and perused the relevant material available on record. Section 206C(1A) of the Act mandates for collection of tax on sale of forest produce at specified rate while receiving money or debiting the buyer’s account in case declaration in Form 27C as provided under Rule 37C of the Income-tax Rules is not filed. In the case on our hand, on inspection, it was found that the assessees have not collected tax as prescribed and also not collected Form 27C as provided in Section 206C(1A) of the Act. Therefore, the Assessing Officer directed the assessees to pay the tax as provided in sub- section (6) of Section 206C of the Act. The Assessing Officer has also levied interest as provided in Section 206C(7) of the Act.

However, after the inspection by the Assessing Officer, the assessees collected Form 27C and filed the same before the Assessing Officer instead of the Commissioner or Principal Commissioner as the case may be. The Assessing Officer, being a public authority, as soon as received the Form 27C, ought to have forwarded the same to the prescribed authority. The question arises for consideration is when the assessees collected Form 27C as prescribed for not collecting tax after the sale of timber, would it attract payment of tax and interest? This issue was examined by the Gujarat High Court in Siyaram Metal Udyog Pvt. Ltd. (supra).

In view of above, even though there was a delay in getting Form 27C from the respective purchasers of timber and the same was filed before the Assessing Officer instead of Commissioner or Principal Commissioner, the fact remains that the assessees complied with the requirement substantially, since the genuineness of such declaration was not in dispute. When the assessees have complied with the requirement substantially even though there was a little delay, this Tribunal is of the considered opinion that the object sought to be achieved by filing Form 27C is substantially achieved. Therefore, the CIT(Appeals) has rightly set aside the orders of the Assessing Officer. Hence, this Tribunal do not find any reason to interfere with the orders of the lower authority and accordingly the same are confirmed.

The cross-objections filed by the assessees are only to support the orders of the CIT(Appeals), therefore, all the cross- objections become infructuous.

In the result, all the appeals filed by Revenue and the cross- objections filed by the assessee are dismissed.