2016 (4) TMI 244 - AT - Income Tax

Default u/s 206C(6A) - Tax Collection at Source (TCS) - whether ld. CIT(A) was correct in denying the benefit referred in section 206C(1C) for the sales of ₹ 1,57,60,687/- even when assessee has submitted form no.27C from respective buyers - Held that - Assessee has duly obtained form 27C for the sales of ₹ 1,57,60,687/- and there is a list of 24 parties shown in the order of ld. CIT(A) at para 5.3 and out of 24 parties in 19 cases column of date shown in part-I is not filled and in the remaining six cases either there is a minor overwriting in the form or wrong date is mentioned. But the fact remains that all the declarations are duly signed, all the necessary details of purchase made by the buyers are correctly entered, details mentioned by the buyers have been duly verified by the assessee and most importantly the figures shown by the buyers in the declaration are duly reflected in the sales account of the assessee which is part and parcel of the audited financial statements and not a single mistake in the above facts have been noticed by the lower authorities. Accordingly, in view of the above discussion and relying on the decision of the co-ordinate bench in the case of Karnataka Forest Dev. Corpn. Ltd. vs. ITO (2015 (7) TMI 908 - ITAT BANGALORE ), we are of the view that the moment assessee has received form no.27C from the buyers his liability to collect TCS @ 1% gets away and the assessee should not be deemed to be in default for any minor clerical mistakes in the forms submitted by the buyers in the given circumstances when there is no variation in the purchase figures shown by the buyers with the sales figure shown by the assessee in its books of account. - Decided in favour of assessee

Summary

Issues:
Appeal against order of CIT(A) for not accepting form No.27C for scrap sale and treating assessee in default u/s 206C(6A) by not applying provisions of section 206(1A) of the Act.

Analysis:
The appeal was directed against the order of CIT(A)-4, Ahmedabad, concerning the action taken by the ITO (TDS)-1, Ahmedabad under section 206C(7) of the Income Tax Act, 1961. The primary issue revolved around the rejection of form No.27C for the sale of scrap amounting to Rs. 1,57,60,687/- and the subsequent default treatment of the assessee under section 206C(6A) for not collecting tax at source. The Assessing Officer observed discrepancies in the forms submitted by the assessee, leading to the imposition of TCS on the uncollected tax amount, along with surcharge and education cess, resulting in a total demand of Rs. 6,90,489.

Upon appeal, the CIT(A) allowed the claim for 0% TCS on a portion of the sales based on form No.27C submitted by the assessee but upheld the addition for the remaining sales due to deficiencies in the forms. The assessee contended that the forms were prepared by buyers, and despite minor clerical errors, the authenticity and genuineness of the buyers were not in question. The assessee relied on a decision of ITAT, Bangalore Bench, to support the argument that once form No.27C is received, the liability to collect TCS diminishes.

After considering the arguments and the precedent cited, the Tribunal examined the provisions of section 206C(1A) and the requirements for obtaining declarations from buyers to avoid TCS collection. The Tribunal noted that the forms submitted by the assessee contained minor errors but maintained that the essential details were accurate and matched the sales figures in the financial statements. Relying on the decision of the co-ordinate bench, the Tribunal concluded that the assessee should not be deemed in default for minor clerical mistakes in the forms when the purchase figures aligned with the sales records.

In light of the above analysis and the precedent cited, the Tribunal allowed the appeal of the assessee, emphasizing that the receipt of form No.27C from buyers absolved the assessee of TCS collection liability, despite minor errors in the forms. The Tribunal set aside the orders of the lower authorities and ruled in favor of the assessee.

The judgment was pronounced on 1st March 2016 by the Appellate Tribunal ITAT Ahmedabad, with detailed reasoning and legal interpretations provided by the Accountant Member, Manish Borad.