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TMI Blog2015 (5) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... s had taken into account the purchases made from the assessee for computing income in their respective returns filed u/s 139 after paying tax due thereon. The assertion so made cannot be inferred in the absence of any positive material to prove it. There can be no presumption about the buyers having paid tax on the income by including the transactions of purchases covered u/s 206C. This position needs to be specifically demonstrated by the assessee. Under such circumstances, we are of the considered opinion that the ends of justice would meet adequately if the impugned order is set aside and the matter is restored to the file of ITO (TDS) for considering the details, which the assessee seeks to file for divulging that the buyers had included the income from the instant purchase transactions in their total income and filed returns u/s 139 of the Act after paying tax due thereon. We want to make it clear that if the assessee fails to specifically prove this position, then, the Officer would be fully entitled to treat it as assessee in default in terms of section 206C. Further, the liability of interest u/s 206C(7) would be fastened on the assessee from the date on which the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act without collecting tax at source. Sub-section (1) of section 206C provides that : ` Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax.. . Going by the mandate of sub-section (1), any seller of the forest produce is required to collect tax at source from the buyers at the time of debiting the amount payable to their accounts or at the time of receipt of such amount, whichever is earlier. Then there is sub-section (1A) of section 206C which provides that : ` Notwithstanding anything contained in sub-section (1), no collection of tax shall be made in the case of a buyer, who is resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the prescribed form and ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be fulfilled in letter and spirit without any sort of distortion or dilution or their substitution with other alike conditions as per the convenience of the parties. 5. Adverting to the facts of the extant case, we find that the buyers did not submit Form no. 27Cs at the time of debit to their accounts by the assessee or on their making payment to the assessee, whichever is earlier. The simple fact of non-receipt of Form no. 27Cs by the assessee before the above time frame made it liable for default in not collecting tax at source. The contention of the ld. AR that all the buyers were registered as manufacturers of the resin products under the relevant Act and their furnishing of such Registration certificates to the assessee at the time of purchase of the goods should be construed as fulfillment of the requirement of submission of Form no. 27Cs, is devoid of merit. When the Act clearly stipulates for furnishing of Form no. 27C, there can be no question of substituting such requirement with the furnishing of any other document or Registration certificate issued under any other Act. The obligation of law can be said to have been properly complied with only on a buyer tenderi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e buyer at the time when collection of tax at source is contemplated under the Act, can be construed as anything other than mandatory. The argument of the ld. AR to interpret the requirement of submission of such declaration at the aforesaid time as declaratory, so as to avoid collection of tax at source on its late furnishing, evidently does not hold water. The same is, therefore, repelled. 7. One needs to appreciate the vital difference between submitting the declaration in Form No. 27C before or at the time of the arising of the liability to collect tax at source on one hand and not submitting at all or late submitting such declaration after the liability has already arisen. When we read sub-section (1) in juxtaposition to sub-section (1A) of section 206C, it follows that the liability to collect tax at source gets crystallized at the time of debiting the account of buyer or the receipt of payment, whichever is earlier, save and except where the buyer furnishes a declaration in Form no. 27C to the seller at that point of time. Receipt of such declaration at the material time immunes the seller from collecting tax at source. What is relevant is the stage of the crystallization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llected under this provision is allowed credit against the tax liability of the person on whose behalf such tax at source was collected. In other words, the amount of tax collected at source has to be adjusted against the tax liability of the buyer. Sub-section (4) of section 206C recognizes this position, inasmuch as it states that : ` Any amount collected in accordance with the provisions of this section and paid to the credit of the Central Government shall be deemed to be a payment of tax on behalf of the person from whom the amount has been collected and credit shall be given to such person for the amount so collected in a particular assessment year in accordance with the rules as may be prescribed by the Board from time to time. If due to one reason or the other, the buyer has no liability to pay tax or his tax liability is less than the amount so collected, then such amount of tax collected at source or the excess, as the case may be, is refunded to the buyer after his assessment. If however, the buyer has paid the tax on his total income including the income from the transaction which necessitated the collection of tax at source and the seller failed to collect tax at sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered by various Hon ble High Courts uniformly in not treating the person responsible as assessee in default when the other person has paid due tax on his total income by including income from such transactions, the legislature has stepped in by inserting first proviso to section 206C (6A) by the Finance Act, 2012 w.e.f. 1.7.2012, reading as under :- `(6A) If any person responsible for collecting tax in accordance with the provisions of this section does not collect the whole or any part of the tax or after collecting, fails to pay the tax as required by or under this Act, he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax: Provided that any person, other than a person referred to in sub-section (1D), responsible for collecting tax in accordance with the provisions of this section, who fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licensee or lessee shall not be deemed to be an assessee in default in respect of such tax if such buyer or licensee or lessee- (i) has furnished ..... 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