2020 (5) TMI 455 - AT - Income Tax

Non collection of Tax at Source (TCS) - Order u/s 206C(6) r/w 206C(7) - requisite jurisdiction with ITO Jaipur - order as barred by limitation - HELD THAT - Ground relating to challenging the order passed by the Assessing officer for want of jurisdiction was taken before the ld CIT(A), however, it appears that the ld CIT(A) has wrongly read the ground relating to jurisdiction and limitation together and has dismissed both these grounds as not pressed. Given that this ground was taken by the assessee before the ld CIT(A) and not adjudicated upon, the matter deserve to be set-aside to the file of the ld CIT(A) to adjudicate the said ground of appeal after providing reasonable opportunity to the assessee. In the result, the ground no. 1 is allowed for statistical purposes. Demand towards TCS - sale of Tendu leaves - HELD THAT - We find merit in the contention of the Id AR that the amount of ₹ 1,77,360 represents the sale amount on which the TCS is to be determined and it doesn't represent the amount of TCS and therefore, the liability of the assessee is only to the extent of TCS on such sales and not on the whole sale amount. The matter is accordingly set-aside to the file of AO to verify the same and determine the quantum of TCS and consequent interest thereon which is payable by the assessee in relation to the impugned transaction. The ground of appeal is thus allowed for statistical purposes. Charging of interest under section 206C(7) - Short / Non Collection of tax at source under section 206C(6) alleging that assessee has committed a clear default of non-collection of TCS - HELD THAT - Assessee firm shall be liable to pay interest from the date on which such tax was collectible to the date of furnishing of return of income by the respective buyers excluding the period prior to 1.07.2012 in respect of which no interest shall be leviable. The decision of the Coordinate Bench in case of Chandmal Sancheti 2016 (8) TMI 952 - ITAT JAIPUR the decision of the Hon'ble Karnataka Court in case of Bharat Hotels 2015 (12) TMI 1469 - KARNATAKA HIGH COURT and Solar Automobiles 2011 (9) TMI 637 - KARNATAKA HIGH COURT were rendered for the period prior to the amendment brought in by the Finance Act, 2012 whereby proviso to section 206C(7) has been inserted with effect from 1.7.2012, have not considered the said provisions as amended and are therefore, distinguishable and doesn't support the case of the assessee firm - findings of the ld CIT(A) which are in consonance with the proviso to section 206C(7) are hereby confirmed subject to the modification that no interest shall be leviable for the period prior to 1.07.2012 and to that extent, the assessee shall be eligible for relief. The ground of appeal is thus partly allowed. CIT(A) not considering that the case fall under under section 206C(1A) r/w Rule 37C in as much as the entire subjected sales of Tendu leaves was made to the ultimate consumers for use in manufacturing, processing or producing of Beedies and hence the provision of section 206C was not applicable and have been wrongly invoked by the AO - whether there is a reasonable cause for such delay in furnishing such certificates and the delay can be condoned and such certificates can be taken on record and admitted under Rule 29? - HELD THAT - there is no culpable negligence or malafide on the part of the assessee in not obtaining these declarations and the assessee cannot be penalized where all along it acted diligently based on advice of his Counsel and subsequently, when the Revenue made it aware of its obligation to obtain such declarations, it made necessary efforts and finally got these declarations. As held by the Courts, where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. The delay in filing such declarations being a technical breach is thus condoned and the same are being admitted as there is substantial compliance with the requirement of filing the declarations. The matter is set-aside to the file of the Assessing officer for verification of declarations so filed by the assessee in Form 27C and examination of claim of the assessee under section 206C(IA) afresh in accordance with law. The ground of appeal is thus allowed for statistical purposes. CIT(A) not allowing relief to the assessee firm on the basis of additional evidence without calling for remand report under Rule 46A and enquiry under Sec 250(4) of the Income Tax Act, 1961 - HELD THAT - It can't be denied that the assessee submitted the certificates and declarations in Form 27BA exactly in the same manner but the department did not feel aggrieved in that year. Therefore, now filing the appeal on the same issue when the legal and factual position is admittedly the same and without bringing out any material change in the facts of the legal position, the department cannot be permitted to agitate the same issue in later year. This contention is fully supported by the various decisions of the Hon'ble Supreme Court and particularly in the case of Berger Paints India Ltd. v. CIT 2004 (2) TMI 4 - SUPREME COURT As observed by the Assessing Officer that he has gone through the documentation so submitted by the assessee firm and on perusal thereof, he noticed that complete information in the Form/certificate have not been given by the accountant/party as required by the legislature and most of the columns are either not filled up as required or simply mentioned as per details/enclosure - accountant has signed the forms with conditional remarks As certified by the buyer whereas the forms should have been filled up and certified by the accountant itself on the basis of records. Further, some of the parties have not filed return on or before due dates prescribed under section 139 of the I.T. Act, 1961. Further, on appeal, we find that these certificates in Form 27BA from the Chartered accountant and related declarations from the buyers have again been considered and examined by the ld CIT(A) and the observations of the AO regarding these certificates were not found tenable by the ld CIT(A) and basis his independent review and examination, the relief has been provided to the assessee firm as per his findings in para 5.3 of his order which we have reproduced supra. The Revenue has not pointed out what further evidence by way of additional evidence has been filed by the assessee during the appellate proceedings before the ld CIT(A). Therefore, the ground so taken by the Revenue is hereby dismissed. Assessee deductor failure to make payment of interest under section 206C(7) - whether at the time of submitting the certificates in Form 27BA as required under proviso to section 206C(6A), the assessee is required to deposit interest and give details of such interest deposit in such certificates? - HELD THAT - All it requires is that the accountant should certify as to whether the buyer has furnished his return of income, has taken into account such amount for computing income in such return of income and has paid taxes due on the income declared by him in such return of income or not. Further, on perusal of Form 27BA, we find that besides such certification, it contains a statement whether the assessee has to specify whether it has paid any interest under section 206C(7) or not for non-collection or short collection of taxes. Thus, there is no mandatory requirement to pay any interest under section 206C(7) as part of certification in Form 27BA and where the assessee has already paid, he has to specify that he has paid and where he has not paid, he has to specify accordingly. It is only an information seeking requirement and not a requirement in absence thereof which will makes the certification in Form 27BA invalid where there is substantial compliance as to the mandatory requirements of certification. In the result, the ground so taken by the Revenue is dismissed. Difference between the provisions of the TDS and TCS - HELD THAT - Provisions of section 206C are analogous and a measure for compliance of collection of tax at source as a similar measure for compliance of deduction of tax at source is provided under section 201 of the Act. Regarding decision of the Hon'ble Supreme Court in the case of M/s Hindustan Coca Cola (P) Ltd. 2007 (8) TMI 12 - SUPREME COURT we find that the ratio so laid down therein has been subsequently brought on the statue books by way of proviso to sub-section (6A) to section 206C of the Act. Therefore, where the specific amendment has been brought in by the legislature accepting the ratio so laid down by the Hon'ble Supreme Court, we see no infirmity in the findings of the Id CIT(A) where he has held that the ratio so laid down continues to apply in context of collection of taxes at source. In the result, the ground so taken by the Revenue is hereby dismissed.

Summary

Issues Involved:
1. Jurisdictional validity of the order passed under Section 206C(6) read with 206C(7) of the Income Tax Act.
2. Whether the order passed by the ITO is barred by limitation.
3. Legality of the demand raised due to alleged non-collection of Tax at Source (TCS).
4. Validity of interest demand under Section 206C(7).
5. Applicability of Section 206C(1A) read with Rule 37C.
6. Admissibility of additional evidence and remand report under Rule 46A.
7. Whether the provisions of TDS under Chapter-XVIIB and TCS under Chapter-XVIIBB are analogous.

Detailed Analysis:

Jurisdictional Validity:
The assessee challenged the jurisdiction of the ITO TDS-3, Jaipur, stating that the jurisdiction rested with ITO (TDS), Kota. The CIT(A) dismissed this ground as not pressed. However, the Tribunal found that the jurisdictional challenge was not adjudicated and remanded it back to the CIT(A) for proper adjudication. The Tribunal noted that the CIT(A) misunderstood the grounds related to jurisdiction and limitation, leading to the remand for a fresh decision.

Limitation:
The assessee argued that the order passed by the ITO was barred by limitation. However, this ground was not pressed during the hearing and was subsequently dismissed by the Tribunal as not pressed.

Demand Due to Non-Collection of TCS:
The CIT(A) upheld the demand of ?1,77,360/- for non-collection of TCS on sales amounting to ?1,77,360/-. The Tribunal found that the CIT(A) might have misunderstood the sales amount as the TCS amount. It remanded the matter to the AO for verification and determination of the correct TCS amount and consequent interest, emphasizing that the liability should be on the TCS amount and not the entire sales amount.

Interest Demand under Section 206C(7):
The CIT(A) directed the AO to calculate interest from the due date of TCS deposit to the date of filing of the return by the respective buyers. The Tribunal upheld this, noting that the proviso to Section 206C(7) mandates interest from the collectible date to the return filing date. It clarified that interest is not chargeable for the period before 1.07.2012, aligning with the amendment brought by the Finance Act, 2012.

Applicability of Section 206C(1A) Read with Rule 37C:
The assessee claimed that sales were made to ultimate consumers for manufacturing, processing, or producing Beedies, thus falling under Section 206C(1A). The Tribunal admitted additional evidence (Form 27C declarations) under Rule 29, noting that the delay in obtaining these declarations was due to reasonable causes. It remanded the matter to the AO for verification of these declarations and to grant relief under Section 206C(1A) if found genuine.

Admissibility of Additional Evidence and Remand Report:
The Revenue contended that the CIT(A) allowed relief based on additional evidence without a remand report under Rule 46A. The Tribunal found that the CIT(A) considered the same documents submitted to the AO and made independent inquiries, thus no additional evidence was admitted. The Tribunal dismissed this ground, noting the CIT(A)'s corrigendum order correcting the typographical error regarding the remand report.

Analogous Provisions of TDS and TCS:
The CIT(A) held that there is no material difference between TDS and TCS provisions, applying the ratio of the Hindustan Coca Cola case. The Tribunal upheld this, noting that the Supreme Court's decision and subsequent legislative amendments align TDS and TCS provisions, making the CIT(A)'s application of the Hindustan Coca Cola ratio appropriate.

Conclusion:
The Tribunal remanded several issues for further verification and adjudication while upholding others. It emphasized the need for proper jurisdictional adjudication, accurate determination of TCS and interest, and verification of declarations under Section 206C(1A). The Tribunal also upheld the analogous treatment of TDS and TCS provisions, aligning with judicial precedents and legislative amendments.