Income Tax Appellate Tribunal - Nagpur
I.T.O.((Tds) Ward -1(1),, Nagpur vs Hukumchand Lalchand Munot, Nagpur on 2 November, 2016
1 ITA No. 368/Nag/2016. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A.No.368/Nag/2016 Assessment Year : 2014-15. The Income-tax Officer, Shri Hukumchand Lalchand Munot, (TDS), Ward-1(1), Nagpur. Vs. Nagpur. PAN ABKPJ2917N. Appellant. Respondent. Appellant by : Smt. Agnes P. Thomas. Respondent by : Shri Sandeep Jain. Date of Hearing : 26-10-2016 Date of Pronouncement : 2nd Nov.., 2016 O R D E R.
This appeal by the Revenue is directed against the order of learned CIT(Appeals) dated 07-03-2016 and pertains to assessment year 2014-15. The grounds raised by the Revenue read as under :
1. Whether on the facts and circumstances of the case the Ld. CIT(A) is justified in deleting the demand of Rs.34,40,281/- including interest raised u/s 206(6A)/206(7) of the I.T. Act, 1961 eventhough Form No. 27C were submitted well beyond statutory limit?
2. Whether on the facts and circumstances of the case the Ld. CIT(A) is justified in not appreciating that the said Form No. 27C ought to have been furnished to the assessee at the time of debiting the account of the buyer or at the time of receipt of sale proceeds from the buyer, which ever is earlier, as per the provisions of sec. 206C of the Act?2 ITA No. 368/Nag/2016.
2. Brief facts of the case are as under :
The appellant is engaged in the business of purchase and sale of Iron and Scrap obtained from rolling mills and sell the same to various other concerns. A spot verification was carried out by the TDS Wing in the case of the appellant and it was noted that the appellant had failed to collect tax on sale of scrap though it was liable to make TCS u/s 206C of the I.T. Act. The AO therefore required the appellant to explain as to why the appellant should not be deemed to be in default for non collection of TCS. It was explained by the appellant that it was not a manufacturer and that section 206C is restricted to scrap generated from the manufacturing process. The appellant placed its reliance on the case of Navine Fluorine International Ltd. vs. ACIT (ITAT Ahmedabad) wherein it was held that the scrap traders are not required to collect TCS on sale. The AO considered the submissions of the appellant in this regard but came to the conclusion that in view of the facts of the case and also after considering the CBDT's Circular dated 18th / 21st May 2012 that there is no requirement that the scrap should be produced / manufactured by the seller itself and that the buyer is not restricted to a person who buys the specified goods in an auction or tender. The AO therefore came to the conclusion that the appellant being seller of scrap was liable to collect the TCS @ 1%.
3. The appellant further submitted before the AO that it had obtained Form No. 27BA as per the proviso to section 206C(7) and after considering the ITAT Rajkot Bench Order in the case of Bharat Auto Products Vs. CIT Rajkot 37 Taxman.com 37 (2013) and the 1st proviso to section 206C(6A) introduced by the Finance Act 2012 w.e.f. 01-07-2012, the appellant should not be held to be in default for not making TCS. The AO took cognizance of the above submissions of the appellant and stated that the above contentions of the appellant are acceptable and has reproduced the list of cases in respect of which Form No. 27BA has been submitted by the appellant.
3 ITA No. 368/Nag/2016.4. In view of the above facts the AO came to the conclusion that the appellant was liable to collect TCS in respect of sale of scrap and since it had failed to do so he was to be treated as assessee in default. The AO, however, gave credit in respect of the parties for which Form No. 27BA was submitted. The AO accordingly determined the amount of demand payable u/s 206C(6A) u/s 206C(7) and u/s 206C(7)(1D).
6. Upon assessee's appeal, learned CIT(Appeals) elaborately considered the issue. He observed as under :
"8. I have considered the facts of the case and submissions of the appellant. It is evident that the appellant has submitted Form No. 27C in respect of the parties before the Ld. AO. During the course of proceedings before the Ld. AO, the only reason that the Ld. AO has refused to take cognizance of the said Form No. 27C is the assumption of the Ld. AO that the relevant Forms were not obtained at the time of the sale by the appellant and that therefore there is no question of submission of the said forms in time before the relevant authorities in the Income Tax Department. He has come to the conclusion that the appellant obtained the said forms on a later date to get rid of TCS liability which was arising in the case of the appellant on account of spot verification. The Ld. AO therefore has rejected the said form No. 27C submitted by the appellant after the spot verification.
8.1 The above reasoning of the Ld. AO is flawed. There is no basis to come to the conclusion that the appellant was not in possession of the said Form No. 27C at the time of making sales to the various parties. Even during the course of spot verification wherein the statement of the appellant was recorded, in answer to question No. 3 & 4 it was submitted by the appellant that it was in possession of some Forms No. 27C and that the remaining forms had been collected by them but were presently ( at the time of spot verification) with their Auditor Shri Pratik Parekh who was out of town and that therefore they were unable to submit the same. Thus the inability of the appellant to produce the said Form No. 27C during the course of spot verification does not in any way establish that the appellant was not in possession of the said Forms at the time of Survey. The Ld. AO therefore had no basis to come to the conclusion that the appellant did not have Form No. 27C while making sales to the various manufacturers.
8.2 Even assuming that the appellant was not in possession of the said Forms at the time of sales to the various manufacturers, there are several judicial pronouncements wherein it has been held that where the assessee receives Form No. 27C belatedly and if the same also consequently submitted belatedly before the appropriate authority, such a breach is technical in nature and the appellant cannot be penalised for the same.
8.3 In such facts it has been held in several judicial pronouncements that the breach was technical and was liable to be condoned. In the case of CIT Vs. Adisankara (supra) it has been held as under :-
"2. As far as the second question is concerned, the Tribunal has noted in paragraph 3 that the assessee had obtained Form 27C from the buyers of the cotton waste. In the course of the appellate proceedings, the same was also filed before the assessing authority by applying the provisions of 4 ITA No. 368/Nag/2016. section 154 of the Act. The Tribunal held that the assessee having filed the statutory form, viz., Form 27C, the technical breach was liable to be condoned by folio wing the decision of this court in the case of CIT v. A. N. Arunachalam [1994} 208 ITR 481/75 Taxman 529 (Mad.). Therefore, we do not find any scope to entertain the said question ... "
8.4 Subsequently in a recent judgement the ITAT Bangalore Bench in the case of Karnataka Forest Development Corporation Ltd. Vs. ITO (supra) held as under :-
" .. 8. We have perused the orders and heard the rival contentions. It is not disputed that assessee had filed the declaration from the buyer, as mandated in section 206C(1A) only when show cause notices were issued by the AO, pointing out failure to collect tax at source. However, it remains a fact that assessee had produced Form No.27C obtained from both the parties. Copies of these Forms have been placed on record at paper book pages 1 to 66 ...
9. Section 206C( lA) mandates that any person responsible for collecting tax under section 206C(1) need not do so if he obtains a declaration from the buyer that he is purchasing the goods for use in manufacturing, processing or producing articles or things. It does not say that such declaration has to be obtained at the very same moment when a sale is affected. A reading of sub section (18) clearly brings out this since obligation of the assessee to file a copy of the declaration arises only when the declaration is furnished to him by the buyer. The point of reference is furnishing of declaration by the buyer and not the month or date on which sale is affected by the assessee. Even if we consider that there is a breach on the part of the assessee in not obtaining the declaration from the buyer the moment a sale was ettected, and in filing it before the CCIT or CITr as the case may be, a similar breach was considered to be only technical and one that could be condoned by Hon 'ble Madras High Court in the case of AdisankaraSpg. Mills (P.) Ltd. (supra). In the said cese, assessee had filed Form 27C subsequent to the proceedings, through a rectification petition under section 154r but still considered to be sufficient comptience, which view of the Tribunal was confirmed by Hon 'ble Madras High Court. Proceedings on the assessee for the alleged default here were initiated on 10/10/2011 and assessee had before 31/10/2012 filed the Forms. Assessment years involved were assessment year 2009-10 to 2011- 12 and there was much time left with the Revenue to verify whether the buyers were indeed using the wood pulp for menutectutinq, processing or producing article or thing and not for trading and to proceed against them if they had furnished false declaration. We are therefore of the opinion assessee could not have been deemed as one in default under section 206C(6D) of the Act or liable for interest under section 206(7). Orders of the lower authorities were set aside ... (emphasis provided) N 8.5 Considering the facts of the case and the above clear legal position it is held that since the appellant has obtained and submitted Form No. 27C, the technical breach on account of delayed submission is required to be condoned. Consequently the Ld. AO is directed to delete the demand u/s. 206C in respect of sales made to parties who were able to submit Form No. 27C till the time of remand proceedings. This demand is therefore directed to be deleted."
5 ITA No. 368/Nag/2016.8. Against the above order, Revenue is in appeal before the ITAT.
9. I have heard both the counsel and perused the records. I find that the only grievance of the Revenue is that the learned CIT(Appeals) erred in allowing belated furnishing of form No. 27C. I find that as per following decisions which have also taken into account Hon'ble Madras High Court decision, this belated furnishing of form No. 27C can be condoned;
CIT vs. Adisankara (Hon. Madras High Court) "2. As far as the second question is concerned, the Tribunal has noted in paragraph 3 that the assessee had obtained Form 27C from the buyers of the cotton waste. In the course of the appellate proceedings, the same was also filed before the assessing authority by applying the provisions of section 154 of the Act. The Tribunal held that the assessee having filed the statutory form, viz., Form 27C, the technical breach was liable to be condoned by folio wing the decision of this court in the case of CIT v. A. N. Arunachalam [1994} 208 ITR 481/75 Taxman 529 (Mad.). Therefore, we do not find any scope to entertain the said question ... "
ITAT Bangalore in Karnataka Forest Development Corporation Ltd. vs. ITO, dated 17-04-2015.
" . 8. We have perused the orders and heard the rival contentions. It is not disputed that assessee had filed the declaration from the buyer, as mandated in section 206C(1A) only when show cause notices were issued by the AO, pointing out failure to collect tax at source. However, it remains a fact that assessee had produced Form No.27C obtained from both the parties. Copies of these Forms have been placed on record at paper book pages 1 to 66 ...
9. Section 206C( lA) mandates that any person responsible for collecting tax under section 206C(1) need not do so if he obtains a declaration from the buyer that he is purchasing the goods for use in manufacturing, processing or producing articles or things. It does not say that such declaration has to be obtained at the very same moment when a sale is affected. A reading of sub section (18) clearly brings out this since obligation of the assessee to file a copy of the declaration arises only when the declaration is furnished to him by the buyer. The point of reference is furnishing of declaration by the buyer and not the month or date on which sale is affected by the assessee. Even if we consider that there is a breach on the part of the assessee in not obtaining the declaration from the buyer the moment a sale was affected, and in filing it before the CCIT or CITr as the case may be, a similar breach was considered to be only 6 ITA No. 368/Nag/2016. technical and one that could be condoned by Hon 'ble Madras High Court in the case of AdisankaraSpg. Mills (P.) Ltd. (supra). In the said cese, assessee had filed Form 27C subsequent to the proceedings, through a rectification petition under section 154r but still considered to be sufficient comptience, which view of the Tribunal was confirmed by Hon 'ble Madras High Court. Proceedings on the assessee for the alleged default here were initiated on 10/10/2011 and assessee had before 31/10/2012 filed the Forms. Assessment years involved were assessment year 2009-10 to 2011- 12 and there was much time left with the Revenue to verify whether the buyers were indeed using the wood pulp for manufacturing, processing or producing article or thing and not for trading and to proceed against them if they had furnished false declaration. We are therefore of the opinion assessee could not have been deemed as one in default under section 206C(6D) of the Act or liable for interest under section 206(7). Orders of the lower authorities were set aside ... (emphasis provided)."
N
10. Hence following the above precedents, I affirm the learned CIT(Appeals)' order that delay in furnishing form No. 27C is only a technical breach. Hence I do not find any infirmity in the order of learned CIT(Appeals). Accordingly I uphold the same.
11. In the result, Revenue's appeal stands dismissed.
Order pronounced in the Open Court on this 2nd day of Nov., 2016.
Sd/-
( SHAMIM YAHYA) ACCOUNTANT MEMBER.
Nagpur, Dated: 2nd Nov. , 2016.
7 ITA No. 368/Nag/2016.Copy forwarded to :
1. Shri Hukumchand Lalchand Munot, Prop. M/s Jain Steel Traders, 266, J.K. Tower Small Factory Area, Bagadganj, Nagpur.
2. I.T.O., (TDS), Ward-1(1), Nagpur.
3. C.I.T.- (TDS), Nagpur.
4. CIT(Appeals), -II, Nagpur.
5. D.R., ITAT, Nagpur.
6. Guard File True Copy By Order Assistant Registrar, Income Tax Appellate Tribunal, Nagpur Bench, Nagpur.
Wakode.