2023 (8) TMI 448 - AT - Income Tax

Determining tax liability liable for making TCS - assessee failed to make either TCS or to file Form no. 27C to concerned CIT within prescribed time limit - interest u/s. 206C(7) levied on tax liability determined u/s. 206C(6) - assessee is engaged in the business of sale of scrap - HELD THAT - In the instant case, the assessee has submitted that the scrap was sold to manufacturers and the sale was not for trading purposes but was made to manufacturers , from whom Form 27C / Form 27BA was duly obtained, though, there was delay in obtaining the same. In the case of Chandmal Sancheti v ITO 2016 (8) TMI 952 - ITAT JAIPUR ITAT has held that no time limit has been prescribed for furnishing Form No.27C by the buyer to the seller, hence, delay in filing declaration shall not be a ground to deny benefit of declaration to assessee. In the case of K.P.G. Enterprise v. ITO 2014 (8) TMI 716 - ITAT AHMEDABAD ITAT held that Assessee company could not be treated as assessee in default for not collecting TCS from its buyers from whom assessee had received declaration as per section 206C(1A) - where buyers had paid tax on their income and such income had been assessed after taking into consideration purchases made from assessee, tax could not be again collected from assessee on non-collection or short-collection of TCS. Thus in the instant facts it is noted that the Department has not analysed / verified the requisite forms/evidence to support the contention of the assessee that the sale was made to manufacturing concerns and there was no requirement to collect tax at source in respect of such sales, which constituted almost 95% of such sales. Accordingly, in the interest of justice, the matter is being restored to the file of the assessing officer to verify the request documents / Forms to see if the assessee has obtained the request Forms 27C and 27BA etc. and to allow credit for the same in case the same were available with assessee before the assessment got concluded. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Determination of tax liability under Section 206C for failure to collect Tax Collected at Source (TCS) and file Form 27C.
2. Charging of interest under Section 206C(7) for non-compliance with TCS provisions.

Summary:

Issue 1: Determination of Tax Liability under Section 206C

The assessee was engaged in the business of selling "scrap" and was required to collect TCS and file a statement in Form 27EQ within the prescribed time. The Assessing Officer (AO) observed that the assessee failed to collect TCS amounting to Rs. 2,45,595/- on the sale of scrap worth Rs. 2,45,59,583/- for the financial year 2012-13 (Assessment Year 2013-14). The assessee also did not file Form 27EQ for the year under consideration. In appeal, the assessee argued that the goods were sold to manufacturers, which exempts them under Section 206C(1A), and that Form 27C was collected but not filed timely. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal, stating that the assessee did not comply with the requirements of Section 206C, including the timely filing of Form 27C. The CIT(A) held that the delay in filing Form 27C could not be considered a mere procedural lapse.

Issue 2: Charging of Interest under Section 206C(7)

The AO also charged interest under Section 206C(7) for the non-collection of TCS. The CIT(A) upheld this decision, noting that the assessee failed to comply with the statutory requirements, including the timely submission of Form 27C. The assessee contended that the procedural lapse should not attract such tax liability and cited various judicial precedents to support this view.

Tribunal's Decision:

The Tribunal noted that the assessee had sold scrap to manufacturers and obtained Form 27C, albeit with a delay. Citing various judicial precedents, the Tribunal held that a liberal view should be taken when the sale of scrap is made to manufacturing concerns, provided the requisite forms are eventually furnished. The Tribunal referred to cases like Chandmal Sancheti v. ITO and CIT v. Adisankara Spinning Mills, which held that minor delays in filing Form 27C should not invalidate the exemption from TCS.

The Tribunal restored the matter to the AO for verification of the requisite forms and evidence to support the assessee's contention that the sales were made to manufacturing concerns. The AO was directed to allow credit for the forms if they were available with the assessee before the assessment was concluded.

Conclusion:

The appeals for the assessment years 2013-14 to 2016-17 were allowed for statistical purposes, with the matter being remanded to the AO for necessary verification.

This Order pronounced in Open Court on 04/08/2023.