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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER BENCH:- This assessee’s appeal for A.Y. 2014-15, arises from order of National Faceless Appeal Centre (NFAC), Delhi, in DIN & Order No. ITBA/NFAC/S/250/2021-22/1035852547(1) dated 24-09-2021, in proceedings under section 206C of the Income Tax Act, 1961; in short “the Act”.
The assessee has raised the following grounds of appeal:-
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“1. The Commissioner of lncome-tax (Appeals)-NFAC has erred in law and on facts in conforming the order of the ITO-TDS-I, Rajkot holding that the appellant-assessee was in default u/s 206C(1) read with sub-sections (6) and (6A) and of the Act for not collecting tax at source of Rs. 19,44,877 on sale of scrap and consequently also erred in confirming the levy of interest of Rs. Rs, 13,07,620/- u/s 206C (7) of the Act.
The Commissioner of lncome-tax (Appeals)-NFAC has erred in confirming the order of the ITO-TDS-I, Rajkot holding that the appellant-assessee was in default, merely for the reason that the Form 27C prescribed in Rules was not submitted by the appellant- assessee to the office of CCIT/CIT within the prescribed time limit by failing to appreciate that submission of Form 27C was held the jurisdictional high court to be a procedural requirement.
The Commissioner of lncome-tax (Appeals)-NFAC has erred in law and on facts in confirming the order of the ITO-TDS-1, Rajkot holding that the appellant-assessee was in default for not collecting tax collected at source on scrap although it had submitted the prescribed Form No. 27BA to the prescribed authority.
The appellant craves leave to add/alter/amend/substitutes any or all grounds of appeal.”
The facts of this case are that during the course of assessment, the Ld. Assessing Officer came to know assessee has sold scrap of ₹ 19,71,49,790/- to various parties without collecting tax at source (TCS). Further, as per the provisions of section 206C(3) of the Act, assessee was required to prepare and submit a statement in Form 27EQ to the prescribed income tax authority within the time prescribed in Rule 31AA of the Income Tax Rules 1962, which the assessee did not submit for the year under consideration. Accordingly, the assessing officer held that the assessee was under
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obligation to collect TCS as per the provisions of section 206C(1) of the Act, but he failed to do so, therefore assessee is treated as “assessee in default”. Accordingly, the assessing officer determined the amount of such TCS to be ₹ 19,44,877/- at the rate of 1% on scrap sale of ₹ 19,44,87,795/-. Accordingly, the AO raised the demand of ₹ 32,52,497/- vide order dated 25-04-2019. The assessee filed appeal before Ld. CIT(Appeals), wherein it contended that merely because the assessee could not submit form 27C within stipulated time cannot lead to the inference that he is an “assessee-in - default”. Further, the assessee had submitted Form 27BA (issued by chartered accountant) which evidences that these buyers have filed return of income and in such a return of income they have reflected the purchases from the assessee and further paid income tax due on the returned income. Further, he submitted that AO has erred in holding that non-submission of Form Number 27C in prescribed time was a mandatory requirement of law, by ignoring the jurisdictional judicial precedents on the subject. The Ld. CIT(Appeals) dismissed the appeal of the assessee with the following observations: “1.5.2] Legal position as on date: I have carefully perused the order passed u/s 206C(6), 206C(6A) & 206C(7) of the Act dated 25/04/2019 for FY 2013-14. I have also duly considered assessee's submission. In support of its contention appellant has placed reliance on the decision of Hon'ble Gujarat in the case of CIT Vs. Valibhai KhanBhai Mankad (dt of order 15/12/2014 ). Most respectfully, I have duly taken a note of aforementioned decisions, on which appellant has placed reliance which is on the issue pertaining to Sec 37 & Sec 40(a)(ia) of the Act. The decision is not applicable in this case. Most respectfully, I have also carefully gone through the case laws relied upon by the ITO TDS-1 Rajkot.
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In this case, there is no dispute regarding assessee being scrap dealers , who sold scrap worth Rs. Rs. 19,71,49,790/- to various parties without collecting TCS and also did not submit Form-27C (Duly collected from parties) with the competent authority within stipulated deadline. On plain perusal of the order, it is also seen that there are noticeable instances of non-compliance on the part of assessee in providing complete details, even complete Form-27C required to be submitted within stipulated deadline. Appellant is compulsorily mandated by the provisions of Sec 206C of the Act to collect TCS on scrap sale to various buyers and even complete Form- 27C in appropriate cases also. Even during appellate proceeding stage, appellant has failed to prove its contention and did not provide any materials to contradict AO's contention. Now, appellant cannot claim that adequate opportunity of being heard has not been accorded to it as it failed to prove its contention at 3 stages namely during (i) during TDS spot Survey stage, (ii) Post TDS Survey enquiry stage and (iii) finally during appellate stage.
Accordingly after duly considering assessee's submission and taking a note of factual matrix of the case, AO's action in treating it as assessee in default of TCS and raising following demand is hereby sustained.”
Before us, the counsel for the assessee submitted that the assessee company did not collect TCS under the bona-fide belief that assessee purchasing parties were manufacturers and hence, it was not under an obligation to collect TCS. He further submitted that filing of form 27C is a procedural requirement and therefore this procedural requirement can be complied at subsequent stages proceedings as well. The assessee can be permitted to file Form 27C at subsequent stage of appellate proceedings as well. He further submitted that if the buyer of scrap has paid taxes on the scrap purchased by it and furnishes a CA certificate to this effect, the seller is not an assessee in default for non-collection of tax at source under section 206C of the Act. The assessee submitted that after rejection of first appeal
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by Ld. CIT(Appeals), the assessee approached tax counsel and was able to obtain fresh Form 27BA certification in respect of all cases where TCS was not collected. The Ld. DR in response relied on the observations made by the Ld. CIT(Appeals) and the Ld. Assessing Officer in the respective their orders.
We have heard the rival contentions and perused the material on record. In the case of CIT (TDS) v. Siyaram Metal Udyog (P.) Ltd. [2016] 71 taxmann.com 204/240 Taxman 578 (Gujarat High Court), the AO made addition on the ground that the assessee had breached section 206C of the Income-tax Act, 1961 in case of sale of scrap and that the assessee had not submitted Form 27C comprising of the buyer's declaration to the Commissioner of Income-tax in time. The Tribunal held that there is no dispute about the fact that the assessee has belatedly submitted relevant Form No. 27C collected from its buyers. The same were placed on record before the Assessing Officer itself who declined to accept the same in view of delay in submission thereof. There is no issue qua genuineness of these Forms. The co-ordinate Bench decision of Tribunal in case of Bharti Metals already holds that such a belated submission of relevant Form is a procedural lapse only. The Revenue is unable to point any distinction on facts or law therein. Thus, the Gujarat High Court held that addition with the aid of section 206C could not be made. In the case of CIT vs. Chhaganbhai K Sanghani, [2018] 94 taxmann.com 459 (Gujarat High Court) held that where in case of assessee, a dealer in scrap, AO levied interest and tax in terms of section 206C(7) on account of non-collection of tax source, in view of fact that asssessee had submitted certificates provided
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by buyers under sub-section (1A) if section 206C before appellate authorities, impugned order passed by A.O. was to be set aside. Further, Jaipur ITAT in the case of Chandmal Sancheti [2016] 72 taxmann.com 237 (Jaipur - Trib.) held that no time limit is provided in section 206C(1A) to make a declaration in Form 27 collected from buyers; hence delay in filing declaration shall not be ground to deny benefit of declaration to assessee. In light of the above judicial precedents on the subject, in the interests of justice, we are restoring the matter to the file of the Ld. Assessing Officer to decide the issue de novo after giving due opportunity of hearing to the assessee to present his case on merits.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 06-07-2022
Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Rajkot : Dated 06/07/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order,
Assistant Registrar, Income Tax Appellate Tribunal, Rajkot