SHRI GIRISHKUMAR RAMNARAYAN SHAH,AHMEDABAD vs. THE ITO, TDS-2, AHMEDABAD

This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-8, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 06.02.2020 passed for A.Y. 2012- 13.

The assessee has taken the following grounds of appeal:-

The brief facts of the case are that the assessee is a partnership firm and is engaged in the business of trading in ferrous and nonferrous metal scrap. During the year under consideration, the assessee had sold scrap amounting to Rs.3,07,68,942/- to various parties. However, the assessee did not collect TCS on such amounts under Section 206C of the Act on such scrap sale @1% amounting to Rs.3,07,689/-. The Assessing Officer issued a show cause notice, in response to which the assessee did not furnish any reply/submissions. Accordingly, the Assessing Officer was of the view that the assessee had committed fault under Section 206C by neither collecting tax at source@1% and neither submitting declaration in Form-27 BA from the buyers of the scrap to the tune of Rs.3,07,68,942/-. Accordingly, the Tax Officer imposed tax demand of Rs.5,53,840/- under Section 206C of the Act.

In appeal, Ld. CIT(Appeals) observed that the assessee submitted Form 27C from 5 parties and the assessee submitted that in view of these Forms 27C, the assessee was not liable to collect TCS from these persons as per law. Further, with respect to 17 parties, the assessee furnished Form 27 BA and submitted that in view of proviso to Section 206C(6A), since the respective parties had filed return of income, the amount of demand with respect to these entities from whom Form 27BA has been obtained, is liable to be reduced. The Ld. CIT(Appeals) held that so far as furnishing of Form 27C from 5 parties is concerned, the transaction which is under Girishkumar Ramnarayan Shah vs.ITO Asst.Year –2012-13 - 3– consideration had taken place in Financial Year 2011-12, whereas the assessee had furnished Form 27C during the course of appellate proceedings in January 2017, which is almost after a period of 5 years after the sale had taken place, and therefore such late deposit of Form 27C is not acceptable. Further, CIT observed that out of the overall sale of metal scrap to various parties amounting to Rs.3,07,68,942/-, the assessee has furnished copies of Form 27C amounting to Rs.72,65,051/- only. Therefore, in respect of above 5 parties, the CIT(A) was of the view that AO has correctly come to the conclusion that the assessee was in default under Section 206C(6A) and the Ld. Assessing Officer has correctly charged TCS @1% on sale of scrap of relating to this sale. With respect to the balance 17 parties in respect of which the assessee submitted Form 27BA, in view of the order of Hindustan Coca-Cola beverages by the Supreme Court and the insertion of proviso to Section 206C (6A), the CIT(A) directed the AO to verify the claim of the assessee and reduce the amount of tax demand under Section 206C(6A) with respect to those entities for which Form 27BA has been filed by the assessee and the same is found to be in order/correct. Further, Ld. CIT(Appeals) held that the interest leviable under Section 206C(7) is consequential, compensatory and mandatory in nature. Accordingly, CIT partly allowed the appeal of the assessee.

The assessee is in appeal before us against the aforesaid order passed by CIT(A). Before us, the submissions of the Counsel for the assessee were two-fold. Firstly, it was submitted before us that the Assessing Officer has till date not given effect to the directions given by Ld. CIT(Appeals) with respect to the 17 parties and has not carried out the necessary verification to Girishkumar Ramnarayan Shah vs.ITO Asst.Year –2012-13 - 4– ascertain whether these parties have paid taxes in terms of Section 206C of the Act. Secondly, with respect to balance 5 parties in respect of which the assessee submitted Form 27C, it was submitted before us that Section 206C(1A)/(1B) of the Act does not specify any time limit within which the aforesaid Form 27C have to received from the concerned purchasers. Accordingly, since in the instant case the assessee submitted Form 27C as soon as it received the same from the purchasers of scrap and further, since the genuineness of these Forms have not been doubted by the Department, the CIT(A) erred in not admitting the same during the course of appellate proceedings. The Counsel for the assessee relied on judicial precedents in support of the contention that filing of Form 27C was a procedural requirement and therefore, the same could also be submitted at subsequent stage as well.

In response, Ld. D.R. placed reliance on the observations made by CIT(A) and Assessing Officer in their respective orders.

We have heard the rival contentions and perused the material on record. Before us, the first contention of the Counsel for the assessee is that since Section 206(1A)/(1B) of the Act read with Rule 37C(3) does not specify any timeline for submission of Form 27C, then the assessee should be permitted to furnish the aforesaid Form even at later stage, so long as the genuineness of the aforesaid Forms are not doubted by the Department. It would be useful to reproduce the relevant extracts of Section 206(1A) and 1(B) of the Act for ready reference:

A bare perusal of the contention of the Section shows that as per Section 206C(1B) of the Act, the person responsible for collecting tax shall deliver or not before the 7th day of the month next following the month in which the declaration is furnished to him. However, no specific timeline has been prescribed as to the precise date on which the purchaser is required to furnish the declaration in Form 27C to the seller, who is under legal obligation to collect TCS. The Section only provides that the person responsible for collecting TCS shall deliver before the 7th day of the next month the declaration in prescribed Format, in which such declaration is furnished to him by the purchaser of goods. Therefore, we observe that from plain language of the Statute, since no specific timeline has been prescribed on the date when such declaration is to be received by the person collecting TCS from the purchaser i.e. no specific time obligation has been cast upon

Further, we observe that the Ld. CIT(Appeals) has already referred the matter back to the file of Assessing Officer for carrying out the necessary verification with respect to 17 parties in respect of whom the assessee had submitted Form 27BA and we observe that till date the Assessing Officer has not carried out the necessary verification to ascertain whether these parties have date paid taxes in terms of Section 206C of the Act. Accordingly, looking into the instant facts, in the interest of justice, the entire matter is restored to the file of Assessing Officer to firstly, verify the veracity/genuineness of Form 27C submitted by the assessee with respect to the aforesaid parties, and if the same is found to be in order, to grant necessary relief, accordance with law. Secondly, the Assessing Officer is also directed to carry out the necessary verification in terms of the directions given by Ld. CIT(Appeals) with respect to the balance 17 parties,

In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 30/04/2024