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2014 (8) TMI 716 - AT - Income TaxAssessee in default u/s 201(1) Short collection of TCS amount - Submission of Form No. 27C mandatory requirement or not Applicability of section 206C Consignment dispatches results in stock transfer or not Held that - The assessee is not legally obliged to collect the TCS from a buyer who furnishes a declaration to the assessee to the effect that the purchases made by such buyer are to be utilized for the purposes of manufacturing, processing or producing articles or things or for purposes or generation of power and not for trading purposes - in a case where such a declaration is furnished by the buyer to the seller, the seller is not obliged to collect TCS from such buyer and consequently the seller assessee cannot be treated as an assessee in default in respect of not collecting TCS from such buyer CIT(A) upheld the treatment of assessee as assessee in default in respect of those parties from whom the assessee already received declaration in Form 27C on the ground that such declaration was not furnished by the assessee to the Chief Commissioner or Commissioner as required by the provisions of section 206C(1B) of the Act. Once the declaration referred to in section 206C(1A) was received by the assessee, then thereafter the assessee could not legally collect the TCS from such buyers and consequently the assessee cannot be treated as an assessee in default for not collecting TCS from such buyers Relying upon CIT Vs. Valibhai Khanbhai Mankad 2012 (12) TMI 413 - GUJARAT HIGH COURT - the assessee cannot be treated as assessee in default for not collecting TCS from such buyers from whom the assessee received declaration as per provisions of section 206C(1A) of the Act - The assessee has not filed copy of declaration received by it u/s. 206C (1A) of the Act before the AO for his verification thus, the matter is to be remitted back to the AO for proper verification - the auditor s certificate which has been furnished was not furnished before the lower authorities and it could not be verified by them Decided in favour of Assessee.
Issues Involved:
1. Applicability of liability under Section 201(1) & 201(1A) for failure to collect tax under Section 206C. 2. Definition of "scrap" and "buyers" under Section 206C. 3. Mandatory requirement of submitting Form No. 27C to CCIT/CIT. 4. Applicability of Section 206C to consignment dispatches. 5. Status of the appellant as an "assessee in default" for non/low collection of tax at source under Section 206C. Issue-wise Detailed Analysis: 1. Applicability of liability under Section 201(1) & 201(1A) for failure to collect tax under Section 206C: The appellant argued that the liability under Section 201(1) & 201(1A) is not applicable for failure to collect tax under Section 206C. The Tribunal noted that the Assessing Officer treated the appellant as "assessee in default" for short-collection of Tax Collected at Source (TCS) amounting to Rs. 8,41,060 and levied interest of Rs. 2,25,020 under Section 201(1A). The Tribunal found that the appellant received declarations in Form No. 27C from 31 out of 33 parties, indicating that the scrap purchased was for manufacturing and not for trading, thus exempting the appellant from collecting TCS as per Section 206C(1A). The Tribunal cited the Gujarat High Court decision in CIT vs. Valibhai Khanbhai Mankad, supporting that the failure to submit the declaration to the Commissioner does not reinstate the obligation to collect TCS. 2. Definition of "scrap" and "buyers" under Section 206C: The appellant did not press this ground during the hearing, leading to its dismissal. 3. Mandatory requirement of submitting Form No. 27C to CCIT/CIT: The Tribunal observed that the appellant cannot be treated as an "assessee in default" for not collecting TCS if declarations under Section 206C(1A) are received, even if not submitted to the Commissioner. The Tribunal referenced decisions from the Gujarat High Court, Mumbai Bench of the Tribunal, and Supreme Court, affirming that non-submission of Form No. 27C does not invalidate the exemption from collecting TCS if declarations are received. 4. Applicability of Section 206C to consignment dispatches: This issue was not separately adjudicated as it was inherently linked to the primary issue of TCS collection and the status of the appellant as an "assessee in default." 5. Status of the appellant as an "assessee in default" for non/low collection of tax at source under Section 206C: The Tribunal found that for the remaining two parties, the appellant provided auditor's certificates in Form No. 27BA, confirming that these parties filed their returns and paid due taxes. The Tribunal cited the Rajkot Special Bench decision in Bharti Auto Products vs. CIT and the Supreme Court decision in Hindustan Coca Cola Beverage (P.) Ltd. vs. CIT, which support that no further TCS is required if the recipient has paid taxes. The Tribunal remanded the matter back to the Assessing Officer for verification of declarations and certificates and re-adjudication as per law, ensuring no revenue loss. Interest under Section 201(1A): Given the remand on the primary issue, the Tribunal also remanded the issue of interest under Section 201(1A) back to the Assessing Officer for fresh adjudication based on the findings. Conclusion: The appeal was partly allowed, with directions for the Assessing Officer to verify declarations and certificates and re-adjudicate the issues as per law, ensuring proper opportunity for the appellant to present their case. The judgment underscores the importance of procedural compliance and the substantive relief available when the ultimate tax liability is discharged by the recipient.
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