Eid Mohammad Nizamuddin Vs ITO (ITAT Jaipur)
Conclusion: Delay in filing declarations in Form 27C being a technical breach was thus condoned and the same were being admitted as there was substantial compliance with the requirement of filing the declarations. The matter was set-aside to the file of AO for verification of declarations so filed by assessee in Form 27C and examination of claim of the assessee u/s 206C(IA) afresh in accordance with law.
Held: During the course of survey proceedings, it was found that assessee firm had sold Tendu Leaves to various parties which fell under the category of forest produce and assessee was required to collect tax at source as per the provisions of section 206C(1). AO, relying on the aforesaid survey proceedings and statement of the partner of the assessee’s firm so recorded during the course of survey, observed that assessee firm had failed to collect tax at source from buyers of Tendu leaves and also failed to submit Form No. 27C in the prescribed form to the effect that the goods were to be utilized for the purpose of manufacturing, processing or producing articles or thing and not for trading purposes and accordingly, assessee firm should be considered as an assessee in default for non collection of TCS on sale of Tendu Leaves as the amount received from the buyers were in the nature of trading in Tendu Leaves. It was found that similar declarations had been obtained from the same set of buyers, who were engaged in manufacturing of Beedies from the Tendu leaves so sold by the assessee, in the prescribed format and co-relation between the goods sold and reflected in such certificates having been established, the genuineness of such certificates prima facie didn’t seem to be in dispute. These certificates were vital and essential for the consideration of the subject matter of appeal as these certificates support the contention of the assessee that Tendu leaves had been sold to the manufacturers of Beedies and the case of the assessee fell under section 206C(1A) and not under section 206C(1). At the same time, given that these certificates had been filed for the first time during the present proceedings, in the interest of justice and fair play, these certificates needs to be verified by AO and where on such verification, AO was satisfied about the genuineness of such certificates, necessary relief u/s 206C(IA) could be granted and bestowed on the assessee firm. In the present case there was no culpable negligence or malafide on the part of assessee in not obtaining these declarations and assessee could not be penalized where all along it acted diligently based on advice of his Counsel and subsequently, when the Revenue made it aware of its obligation to obtain such declarations, it made necessary efforts and finally got these declarations. As held by the Courts, where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. The delay in filing such declarations being a technical breach was thus condoned and the same were being admitted as there was substantial compliance with the requirement of filing the declarations. The matter was set-aside to the file of AO for verification of declarations so filed by the assessee in Form 27C and examination of claim of the assessee u/s 206C(IA) afresh in accordance with law.
FULL TEXT OF THE ITAT JUDGEMENT
These are cross appeals filed by the assessee and the Revenue against the respective orders of Id. CIT(A)-3, Jaipur dated 05.03.2018 for A.Y 201314, 2014-15 and 2015-16 respectively. Since the common issues are involved, all these appeals were heard together and are being disposed off by this consolidated order.
2. With the consent of both the parties, the matter pertaining to financial year 2012-13 relevant to A.Y 2013-14 is taken as the lead case for the purposes of present discussions wherein the respective grounds of appeal are as under:-
ITA No. 422/JP/18 (Assessee’s appeal):
“1. The impugned order passed u/s 206C(6) r/w 206C(7) of the Act dated 05.03.2018 is bad in law and on facts of the case, for want of jurisdiction and for various other reasons and hence, the same kindly be quashed.
2. The Id. CIT(A)-III, Jaipur erred in law as well as on the facts of the case in holding that the impugned order passed u/s 206C(6) r/w 206C(7) of the Act dated 06.03.2017 by the ITO, is not barred by limitation and therefore, erred in upholding the validity of the impugned order. The impugned order so passed on dated 06.03.2017 i.r.t F. Y 2012-13 after a lapse of a long period, is contrary to the intention of the legislature and to the various judicial pronouncements and hence, is certainly barred by limitation and therefore, the same kindly be quashed in lime line.
3.1 Rs. 1,77,360/-: The Id. CIT(A)-III, Jaipur erred in law as well on the facts of the case in confirming the demand raised by the ITO due to alleged non collection of Tax at Source (TCS) u/s 206C(6) of the Act, which is the entire amount of sales itself and otherwise also is completely contrary to the provisions of law and facts in as much as Rs. 1,77,360/- is gross amount of sales effected by the assessee and not merely 5% TCS thereon. Hence, the impugned demand kindly be quashed and deleted in full.
3.2 The Id. CIT(A)-III, Jaipur further erred in law as well as on the facts of the case in raising demand of interest in relation to the alleged non Collection of Tax at Source (TCS) u/s 206C(7) of the Act, which is completely contrary to the provisions of law and facts hence, kindly be quashed and deleted in full.
4. The Id. CIT(A) III, Jaipur further erred in law as well as on the facts of the case in not considering that the present case fall under u/s 206C(1A) r/w Rule 37C in as much as the entire subjected sales was made to the ultimate consumers for use in manufacturing, processing or producing and hence the provision of s. 206C was not applicable.”
ITA No. 778/JP/18 (Revenue’s anneal):
“1. Whether on the facts and in the circumstances of the case, the Id. CIT(A) is justified in allowing relief on the basis of additional evidence without calling for remand report under Rule 46A and enquiry under Sec 250(4) of the Income Tax Act, 1961.
2. Whether on the facts and in the circumstances of the case, the Id. CIT(A) is justified in deleting the demand without appreciating the fact that the assessee deductor has failed to make payment of interest u/s 206C(7) and not mentioning details of challans in the prescribed Form 27BA before submission with claim of relief in view proviso to Sec. 206C read with Notification No.12/2016 dated 08.12.2016.
3. Whether on the facts and in the law, the Id. CIT(A) is justified in setting aside the issue to the AO for verification and directed to allow relief on verification u/s 250(1) as per the ratio of judgment in the case of M/s Hindustan Coca Cola (P) Ltd. where the words “he may set aside” have been omitted after amendment w.e.f 01.06.2001.
4. Whether on the facts and in the circumstances of the case, the Ld.C1T(A) is justified in holding that there is no material difference in the provisions of tax deduction at source (TDS) under Chapter-XVIIB and tax collection at Source (TCS) under Chapter-XVIIBB of the Income Tax Act, 1961 and the facts & the judgment held on assessment proceedings u/s 201(1)/201(1A) for Default in the case of M/S Hindustan Coca Cola (P) Ltd are squarely applicable in the case of the assessee for assessment proceedings u/s 206C(6)/206C(7) of the Act for TCS defaults.”
3. Briefly stated, the facts of the case are that the assessee is a partnership firm engaged in the business of manufacturing & trading of Bidi leaves at Tonk and Uniyara & in trading of Tendu leaves, which are mainly affected in states of Rajasthan, M.P (Betul) & Maharashtra. A survey u/s 133A(2A) was conducted on 23.03.2015 at the business premises of the assessee and during the course of survey proceedings, it was found that the assessee firm has sold Tendu Leaves to various parties which falls under the category of forest produce and the assessee was required to collect tax at source as per the provisions of section 206C(1) of the Income Tax Act, 1961. During the course of survey, statement of Sh. Moinuddin, a partner of the assessee firm was also recorded and the relevant contents of the statement, reproduced in the assessment order passed u/s 206C(6)/206C(7) dated 6.03.2017, reads as under:-
4. The Assessing officer, relying on the aforesaid survey proceedings and statement of the partner of the assessee’s firm so recorded during the course of survey, observed that the assessee firm has failed to collect tax at source from buyers of Tendu leaves and also failed to submit Form No. 27C in the prescribed form to the effect that the goods are to be utilized for the purpose of manufacturing, processing or producing articles or thing and not for trading purposes and accordingly, a show cause notice dated 21.09.2015 was issued to the assessee firm as to why the assessee firm should not be considered as an assessee in default for non collection of TCS on sale of Tendu Leaves amounting to Rs. 25,58,31,594/- as the amount received from the buyers are in the nature of trading in Tendu Leaves.
5. The assessee firm, in response to the show-cause notice, submitted that action on the part of the Assessing officer is pre-mature and without valid jurisdiction as the Assessing Officer, before invoking the provisions of section 206C(6) & 206C(7) has to satisfy himself that the concerned buyers to whom subjected sales has been made have already considered the subjected sales and paid tax thereon or not and without having fulfilled this condition or without having made such enquiries, the proceedings u/s 206C(7) and 206C(7) of the Act cannot be initiated and in support, reliance was placed on the decision of the Hon’ble Karnataka High Court in case of Shree Manjunatha Wines vs. CIT (2011) 202 Taxman 620 (Kar).
6. Further, during the assessment proceedings, the Assessing officer asked the assessee firm to reconcile the figures of turnover along with supporting documentary evidence and asked it to furnish Form No. 27BA/ITR, if any, of all the parties. In response, the assessee firm vide its submission dated 02.2017 submitted certificate/Form No. 27BA from the parties/accountant as prescribed in first proviso to section 206(C)(6A) of the Act.
7. The Assessing Officer, thereafter, referring to the statement of the partner of the assessee firm recorded during the course of survey, held that nowhere in the statement, the assessee has accepted the default. Thereafter, referring to the provisions of section 206C, it was held by the Assessing officer that the products sold by the assessee falls under the category of “Forest produce” and hence, the assessee was required to collect tax at source as per the provisions of section 206C of the Act which the assessee has failed to collect.
8. Further, referring to the provisions of sub clauses (1A) & (1B) of section 206C of the I.T. Act, 1961, the Assessing Officer held that the assessee firm failed to obtain the requisite forms in Form No. 27C from the buyers and submit the same to the Id. CIT(TDS) within the stipulated time. Regarding filing of Form No. 27BA and submission of the assessee firm that the parties who have purchased the Tendu Leaves have duly recorded the same in their respective books of accounts and maximum number of buyers have furnished their return of income u/s 139(1), it was observed by the Assessing Officer that he has gone through the documentation so submitted by the assessee firm and on perusal thereof, it is noticed that complete information in the Form/certificate have not been given by the accountant/party as required by the legislature and most of the columns are either not filled up as required or simply mentioned as per details/enclosure. Moreover the accountant has signed the forms with conditional remarks “As certified by the buyer” whereas the forms should have been filled up and certified by the accountant itself on the basis of records. Further, some of the parties have not filed return on or before due dates prescribed u/s 139 of the I.T. Act, 1961. It was accordingly held by the Assessing officer that the assessee firm has failed to fulfill the condition laid down as prescribed in the first proviso to section 206C(6A) of the Act and the assessee was held to be an assessee in default and demand of 1,93,86,906/- was raised on the assessee consisting of Rs. 1,28,01,338/-towards TCS u/s 206C(6) and Rs. 65,85,568/- towards interest payable u/s 206C(7) of the Act.
9. Being aggrieved, the assessee carried the matter in appeal before the Id. CIT(A) and the submissions made before the Assessing Officer were It was further submitted interalia as under:-
“3. Directly covered by the decision of CIT(A) in A. Y. 2008-09: Before proceeding further, at the outset it is submitted that all the contentions raised now were also raised in A. Y. 2008-09 wherefrom this controversy arose from the first time and your Id. Predecessor had accepted the contentions and granted substantial relief in appeal no. 46/2015-16 vide her order dated 29.02.2016 (refer PB 102-131 in A. Y 2010-11). The facts and circumstances being exactly identical in thr/s year also, the same decision has to be applied. More particularly when, the department not having gone in further appeal, the said order had become final.
4. Under this background, the assessee specifically agitated before the ITO, the invoking of Sec.206C of the Act vide its letter dated 25.01.2017 stating that out of 26 parties, the maximum number of buyers are already (1) assessed to tax, (ii) have already furnished their return of income u/s 139(1) of the Act (iii) they have already taken into account the cost of the purchases of tendu leaves made from the assessee firm while computing the total income for the above return of income and (iv) have already paid the income tax due on the incomes declared in the said return of income. In most of the cases, PAN numbers were also submitted to the ITO vide the letter of the assessee filed on dated 13.02.2017. In support of the above facts, showing three categories of the buyer-payees, were also admittedly submitted.
Category A: The names of 14 buyers and the respective amount of sales made to them totaling to Rs.25,57,81,536/- (who have already filed their ROI and paid the due tax) along with copies of certificates as admitted by the Id ITO at pg-7 of the impugned order.
Category B: The names of 11 buyers and the respective amount of sales made to them totaling to Rs. 1,59,72,693/- along with copies of certificates (with PAN) as admitted by the Id ITO at pg-7 of the impugned order.
Category C: For the remaining amount of the sales, the assessee was and is still in the process of collecting the requisite details and certificates on this aspect but their PAN were made available.
The ITO did not deny from these facts but rather failed to rebut the same and rejected merely on suspicion on the ground that copies of the respective returns from those buyer parties were not submitted before him. The ITO however, did not deny that no tax remained payable in the hands of the buyers. The ITO having not satisfied this pre requisite by making necessary enquiry to this effect, lacked jurisdiction and therefore, the impugned order deserves to be quashed in full.
5. Copy of Samman Patra dated 25.07.2002 issued by the CIT, Kota being the highest taxpayer award in income from business category for AY 1999-2000 in Additional CIT, 5awai Madhopur Range. This shows that the assessee is a law abiding respected citizen and also a respected tax payer whose conduct is not contumacious which aspect, kindly be taken into consideration while deciding the present appeal.
6. Even after filing sufficient and voluminious evidences which dearly served the purpose in substance, the ITO made various allegations which are more in the nature of suspicion and not substantial, as submitted herein below w.r.t each allegation:
