2019 (10) TMI 252 - AT - Income Tax

Non collection of TCS from the mining companies - ignorance of statutory provisions requiring TCS collection - HELD THAT - Our attention has been invited to the assessee s categorical explanation in the lower proceedings that the state government had not issued any instructions regarding TCS collection in case of receipts coming from mining companies. We find merit in learned departmental representative s argument in principle. There is hardly any dispute that legislature has prescribed TCS collection u/s. 206(1C) @ 2% regarding mining and quarry lincence or lease etc., at the time of receipt of the specified sums. We therefore observe that the mere fact that the state government had not issued any instructions to the field authorities regarding compliance of the impugned statutory provision does not carry any merit since ignorance of law by either the government or its agency is exercising various statutory functions cannot be accepted as a justifiable reason. We therefore concur with the Revenue s argument supporting the Assessing Officer as well as CIT(A) s action raising the impugned demands in assessee s case since he had not collected TCS from the mining companies. Benefit of sec. 206C(6A) first proviso inserted by the Finance Act, 2012 with effect from 01.07.2012 - The legislature had instituted the aforesaid proviso in the Act vide Finance Act, 2012 with effect from 01.07.2012 in sec. 201(1) of the Act to be applicable in case of TDS deductor at the time of his assessment u/s. 40(a)(ia) vide second proviso inserted by the Finance Act, 2012 with effect from 01.04.2013. And also that various recent judicial precedents in Ansal Landmark Township 2015 (9) TMI 79 - DELHI HIGH COURT and PCIT vs. Perfect Circle India Pvt. Ltd. 2019 (1) TMI 1532 - BOMBAY HIGH COURT and tribunal s coordinate bench s orders hold that the aforesaid proviso carries retrospective effect being curative in nature. We observe that the very line of reasoning also deserves to be adopted qua application of sec. 206A (first proviso) as well inserted by the Finance Act, 2012 with effect from 01.07.2012 to this effect as applicable in case of TCS collection than TDS deduction. We therefore decline the Revenue s instant technical argument that the foregoing proviso to sec. 206C(6A) does not carry any retrospective operation and leave it open for the Assessing Officer to verify all necessary facts about the assessee s payers to have been assessed qua the very income under the provision of the Act. The assessee is directed to place on record all necessary documents in consequential proceedings within three effective opportunities of hearing to assessee. Assessee's appeal allowed for statistical purposes.

Summary

Issues Involved:
1. Delay in filing appeals.
2. Tax Collection at Source (TCS) demands.
3. Ignorance of TCS provisions.
4. Applicability of Section 206C(6A) proviso.

Detailed Analysis:

1. Delay in Filing Appeals:
The assessee's appeals for assessment years 2010-11 to 2014-15 were delayed by 341 days. The delay was attributed to various administrative and financial approvals, the West Bengal Assembly Election schedule, necessary administrative follow-up, amendments in West Bengal Mines concession rules, online tender processes, administrative transfers, and puja vacation. The Revenue did not rebut these reasons. Citing the Supreme Court's decision in *COLLECTOR, LAND ACQUISITION VS. Mst. KATIJI (1987) 167 ITR 471 (SC)*, which emphasizes that substantial justice should prevail over technicalities, the tribunal condoned the delay and proceeded to adjudicate the appeals on merits.

2. Tax Collection at Source (TCS) Demands:
The appeals challenged the correctness of the lower authorities' action in raising TCS demands for the respective assessment years. The assessee, a District Land & Land Reforms Office, functioning as the administrative District Magistrate, collected royalties and cess from mining companies but failed to collect TCS as required under Section 206C(1C) of the Income Tax Act. The Assessing Officer (AO) noted that the assessee did not file any return in Form 27EQ and calculated the revenue loss due to non-collection of TCS.

3. Ignorance of TCS Provisions:
The assessee claimed ignorance of the TCS provisions and argued that there were no instructions from the state government regarding TCS collection. The AO rejected this explanation, stating that ignorance of the law is not justifiable, especially for a government entity. The Commissioner of Income Tax (Appeals) [CIT(A)] affirmed the AO's decision, emphasizing that the appellant, being a high-ranking government official, had a greater responsibility to be aware of relevant laws. The CIT(A) found no merit in the appellant's assertion of ignorance and upheld the AO's action.

4. Applicability of Section 206C(6A) Proviso:
The tribunal considered whether the assessee could benefit from the first proviso to Section 206C(6A), inserted by the Finance Act, 2012, effective from 01.07.2012. This proviso states that a person who fails to collect TCS shall not be deemed an assessee in default if the payer has furnished their return of income, included the amount in their income, and paid the tax due. The tribunal found that neither the AO nor the CIT(A) examined the effect of this proviso. The tribunal observed that similar provisions in Section 201(1) regarding TDS have been held to have retrospective effect by various judicial precedents. Therefore, the tribunal declined the Revenue's argument against the retrospective application of the proviso to Section 206C(6A) and directed the AO to verify the necessary facts about the assessee's payers in consequential proceedings.

Conclusion:
The tribunal partly allowed the assessee's appeals for statistical purposes, directing the AO to verify the facts regarding the application of the first proviso to Section 206C(6A) and provide the assessee with three effective opportunities to present necessary documents. The order was pronounced in open court on 04/10/2019.