Income Tax Appellate Tribunal - Nagpur
Hukumchand Lalchand Munot, Nagpur vs I.T.O. Tds Ward -1(1), Nagpur on 2 November, 2016
1 ITA Nos. 364 to 368/Nag/2016.
IN THE INCOME TAX APPELLATE TRIBUNAL,
NAGPUR BENCH, NAGPUR
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER.
(S.M.C.)
S.No. ITA No. Asstt. Year.
1. 364/Nag/2016 2010-11.
2. 365/Nag/2016 2011-12.
3. 366/Nag/2016 2012-13.
4. 367/Nag/2016 2013-14.
The Income-tax Officer, Shri Hukumchand Lalchand Munot,
(TDS), Ward-1(1), Nagpur. Vs. Nagpur.
PAN ABKPJ2917N.
Appellant. Respondent.
S.No. ITA No. Asstt. Year.
1. 460/Nag/2016 2010-11.
2. 461/Nag/2016 2011-12.
3. 462/Nag/2016 2012-13.
4. 463/Nag/2016 2013-14.
Shri Hukumchand Lalchand Munot, The Income-tax Officer,
Nagpur. Vs. (TDS), Ward-1(1), Nagpur.
Appellant. Respondent.
Department by : Smt. Agnes P. Thomas.
Assessee by : Shri Sandeep Jain.
Date of Hearing : 26-10-2016
Date of Pronouncement : 2nd Nov.., 2016
O R D E R.
These are cross appeals by the Revenue and the assessee against
common order of learned CIT(Appeals) for assessment years 2010-11 to 2013- 14 dated 07-03-2016.
2 ITA Nos. 364 to 368/Nag/2016.2. 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.1,20,739/-, Rs.2,93,178, Rs.2,59,048/- and Rs.10,25,609/- for A.Ys. 2010-11, 2011-12, 2012-
13, 2013-14 respectively including interest u/s 206C(6A)/206C(7) of the I.T. Act, 1961?
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?
The grounds raised by the assessee read as under :
1. On the facts and circumstances of the case and in law the learned CIT(A) erred by rejecting appellant's contention that if at all the interest has to be charged under the proviso to section 206C(7) of Income Tax Act, 1961 at the very maximum it should be charged upto the date when the buyers liability to pay advance tax arises.
2. On the facts and circumstances of the case and in law the learned CIT(A) erred by allowing benefit of late filing of form 27C only till date of remand proceedings but not thereafter.
3. That the order of the learned CIT(A) is contrary to the facts of the case and the law applicable thereto, and the same needs to be modified suitably.
3. 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 3 ITA Nos. 364 to 368/Nag/2016. 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%.
4. 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.
5. 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 :
.
"4.1 With regard to A.Y.2013-14 it was also submitted by the appellant that it 4 ITA Nos. 364 to 368/Nag/2016. had collected and submitted Form No. 27C from some of the parties and that though the said Forms were collected and submitted late, such a delay was technical in nature and that appropriate relief in this regard should be given to the appellant.
5. I have considered the facts of the case and submissions of the appellant. Each of the arguments taken by the appellant shall now be dealt with in detail.
5.1 The first argument of the appellant is that it was never required to collect tax in respect of scrap sale in view of detailed findings given in the case of Navine Fluorine International Ltd. Vs. ACIT (Supra). Such a conclusion of the appellant is erroneous as the said case law is not a good law in view of the finding of Special Bench, ITAT Rajkot in the case of Bharti Auto Products Vs. CIT Rajkot (Supra) wherein it has been clearly held that section 206C fastened the liability on the seller of scrap for collection of tax at source and that there is no requirement that such a seller should himself generate scrap from manufacturing or mechanical working of material undertaken by him. In the said order it was also held that in order to invoke provision to section 206C, mode of sale need not be by way of auction or tender but it could be by any other mode. Thus in view of the clear finding of the Hon'ble Special Bench, the action of the Ld. AO of holding the appellant to be in default because of non-collection of tax in respect of scrap sale is held to be correct and is upheld.
5.2 The next argument of the appellant is that in view of certain case laws no interest should be levied on the appellant and that even if interest is to be levied u/s.206C(7) it should only be levied up to the date of buyers liability to pay advance tax. In this regard the appellant has placed its reliance on Gujarat High Court's case in the case of CIT Vs Rishikesh Apartments (supra).
5.3 In this regard it may be mentioned that the above judgment of the Hon'ble High Court was passed in 2001 and various further High Courts and Tribunals have since decided the issue of levy of interest imposable in the event of default of TDS / TCS.
Notable cases are the Delhi High Court decision in the case of CIT Vs. Anand Prakash 316 ITR 141, Madras High Court decision in the case of CIT Vs. Chennai Metropolitan Water Supply and Sewerage Board 14 Taxman.com 73, ACIT (TDS) Vs. Punjab Infrastructure Chandigarh Development Board in ITAT 1021 / Chd/ 2013 and DCIT (TDS) Vs. Sahara India Commercial Corporation Ltd 52 Taxman. Cam 383 (2014). In all these cases it has been held that where the recipient / payee has suffered a loss or has no tax liability, no interest u/s. 201(lA) is required to be Charged from the payer for not deducting tax at source."
7. Learned CIT(Appeals) further observed as under :
"5.5 From the above judgment it can be seen that if it is found that in the return of income filed by the deductee it has included the impugned amount in its receipts and there is loss as per return of income, no interest can be imposed u/s. 201(lA). Respectfully following the above clear findings which emerge from the above Judicial pronouncement it is held that the appellant cannot be held to be liable for interest u/s.206C(7) in respect of parties to whom sales have been made by the appellant and who have incorporated the said purchase in their books of accounts and are filing loss returns. In respect of each of the above 4 years the relevant Form No. 27BA has been duly submitted by the appellant to the Ld. AO and for each of the 4 years appropriate credit has also been given by the Ld. AO while passing the order u/s.206C(6A) / u/s. 206C (7) of the I T Act. Thus, the Ld. AO is already in possession of relevant information as whether the said parties are having profit or loss since the relevant information is already in the file of the Ld. AO. The Ld. AO is accordingly directed to work out the final interest Iiability of the appellant. However, this benefit shall be made available to the appellant 5 ITA Nos. 364 to 368/Nag/2016. only till the period prior to 01-07-2012 in view of the 1st proviso to section 206C (6A) which was introduced by the Finance Act 2012 w.e.f. 01-07-2012. These grounds are therefore partly allowed.
6. In passing it may be mentioned that there is no merit in the appellant's contention that if at all the interest has to be charged under the proviso to section 206C (7), at the very maximum it should be charged upto the date when the buyers liability to pay advance tax arises. This is because of the clear wordings of proviso to section 206C(7) which states that "interest shall be payable from the date on which such tax was collectible to the date of furnishing of return of income by such buyer". Thus the said contention of the appellant is hereby rejected.
7. For the A.V. 2013-14 the appellant has further mentioned that it had submitted certain Form No. 27C which have not been taken cognizance of by the Ld. AO. 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 certain 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.
7.1 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.
7.2 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. Learned CIT(Appeals) further referred to certain case laws and concluded as under :
" 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 for the A.Y. 2013-14, 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 6 ITA Nos. 364 to 368/Nag/2016. proceedings. The corresponding demand is therefore directed to be deleted."
9. Against the above order, Revenue and assessee are in cross appeals.
10. I have heard both the counsel and perused the records. At the outset, learned counsel of the assessee submitted that in some of the assessment years the tax demand is less than Rs.10 lakhs fixed by the CBDT for filing appeals before the ITAT. Hence he pleaded that these appeals should be dismissed in limine.
11. Per contra learned D.R. contended that since it is a composite order and in one of the years the demand exceeds Rs.10 lakhs, these cases fall under the exception carved out of the Circular prescribing limits for filing appeals before the ITAT.
12. Upon careful consideration, agreeing with the learned D.R. I hold that these appeals are not liable to be dismissed in limine.
13. I find that in this case, learned CIT(Appeals) has referred to several case laws for the proposition that where the recipient/payee has suffered a loss or has no tax liability, no interest u/s 201(1A) is required to be charged from the payer for not deducting tax at source. Learned CIT(Appeals)'s order is further reasonable as regards he holds that where Form No. 27BA has been submitted and the AO has in his possession all the relevant information, no adverse inference should be drawn against the assessee. Further I find that learned CIT(Appeals) has rightly rejected the assessee's contention that even if the said interest has to be charged under the proviso to section 206C(7), at the very maximum it should be charged upto the date when the buyers' liability to pay advance tax arises as the wordings in proviso to section 206C(7) states that interest shall be payable from the date on which such tax is collectible to the 7 ITA Nos. 364 to 368/Nag/2016. date of furnishing of return of income by such buyer.
14. Further I affirm the learned CIT(Appeals)' finding that delay in furnishing form No. 27C is only a technical breach. Further more I accept the request of the learned counsel of the assessee that two more months time should be granted to the assessee to furnish the remaining form No. 27C and 27BA as the provisions were new and there was some genuine hardship in furnishing those forms.
15. Accordingly I direct the AO to grant the assessee two months more time to furnish form No. 27BA and 27C. Thereafter the AO shall grant further relief, if any, apart from the relief already granted by the learned CIT(Appeals).
16. In the result, Revenue's appeals stand dismissed and assessee's appeals stand partly allowed for statistical purposes.
Order pronounced in the Open Court on this 2nd day of Nov., 2016.
Sd/-
( SHAMIM YAHYA) ACCOUNTANT MEMBER.
Nagpur, Dated: 2nd Nov. , 2016.
8 ITA Nos. 364 to 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.