Case Law Details
Girishkumar Ramnarayan Shah Vs ITO (ITAT Ahmedabad)
In the case Girishkumar Ramnarayan Shah vs. ITO, the ITAT Ahmedabad addressed the applicability of Tax Collected at Source (TCS) under Section 206C of the Income Tax Act on scrap sales made by the appellant, a trader in ferrous and nonferrous metal scrap. The main dispute involved whether the appellant was liable to collect TCS on scrap sales totaling approximately INR 3.07 crore for the financial year 2011-12. The Assessing Officer (AO) had imposed a tax demand of INR 5.53 lakh, as the appellant did not collect TCS or submit timely declarations (Form 27C) from buyers. The appellant argued that Form 27C submissions, even when delayed, were valid as Section 206C lacks a strict timeline for such filings, and cited case law supporting procedural flexibility in such matters.
The Commissioner of Income Tax (Appeals) [CIT(A)] partially accepted the appellant’s arguments, recognizing Forms 27C from five buyers but dismissing their late filing as acceptable evidence due to a delay of nearly five years. For the remaining 17 buyers, where Form 27BA declarations were provided to indicate tax compliance, the CIT(A) directed the AO to verify these forms and adjust the tax demand accordingly. The ITAT upheld the CIT(A)’s approach, noting that the absence of a prescribed timeline in Section 206C supports the appellant’s stance on delayed Form 27C filings, provided there was no question of their authenticity. The ITAT’s decision highlights the procedural considerations in TCS collection and offers clarity on the treatment of delayed compliance for declarations under Section 206C.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-8, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 06.02.2020 passed for A.Y. 201213.
2. The assessee has taken the following grounds of appeal:-
“(1) That on facts, and in law, the learned CIT(A) has grievously erred in holding that the appellant is liable for collection of TCS u/s 206C of the Income-tax Act, 1961.
(2) That on facts, and in law, it ought to have been held that the appellant’s business is not covered by the definition of “scrap”, as defined in Section 206C of the Act, and hence the appellant is not deemed to be an assessee in default within the meaning of the said Section.
(3) That the learned CIT(A) has grievously erred in law and on facts in confirming the order of ITO- TDS whereby the appellant is treated in default u/s 206C and demand of Rs.3,07,689/- is raised u/s. 206C(1), and Rs. 2,46,151/- is raised u/s 206C(7), totaling to Rs.5,53,840/-.
(4) That the learned CIT(A) has grievously erred in not giving adequate and reasonable opportunity to the appellant to file certificates in Form no. 27C and/or Form no. 27 BA in terms of Section 206C, sub-Sections (1A) and (6A) of the Act.
(5) The appellant craves leave to add, alter, amend any ground of appeal.”
3. The brief facts of the case are that the assessee is a partnership firm and is engaged in the business of trading in ferrous and nonferrous metal scrap. During the year under consideration, the assessee had sold scrap amounting to Rs.3,07,68,942/- to various parties. However, the assessee did not collect TCS on such amounts under Section 206C of the Act on such scrap sale @1% amounting to Rs.3,07,689/-. The Assessing Officer issued a show cause notice, in response to which the assessee did not furnish any reply/submissions. Accordingly, the Assessing Officer was of the view that the assessee had committed fault under Section 206C by neither collecting tax at source@1% and neither submitting declaration in Form-27 BA from the buyers of the scrap to the tune of Rs.3,07,68,942/-. Accordingly, the Tax Officer imposed tax demand of Rs.5,53,840/- under Section 206C of the Act.
4. In appeal, Ld. CIT(Appeals) observed that the assessee submitted Form 27C from 5 parties and the assessee submitted that in view of these Forms 27C, the assessee was not liable to collect TCS from these persons as per law. Further, with respect to 17 parties, the assessee furnished Form 27 BA and submitted that in view of proviso to Section 206C(6A), since the respective parties had filed return of income, the amount of demand with respect to these entities from whom Form 27BA has been obtained, is liable to be reduced. The Ld. CIT(Appeals) held that so far as furnishing of Form 27C from 5 parties is concerned, the transaction which is under consideration had taken place in Financial Year 2011-12, whereas the assessee had furnished Form 27C during the course of appellate proceedings in January 2017, which is almost after a period of 5 years after the sale had taken place, and therefore such late deposit of Form 27C is not acceptable. Further, CIT observed that out of the overall sale of metal scrap to various parties amounting to Rs.3,07,68,942/-, the assessee has furnished copies of Form 27C amounting to Rs.72,65,051/- only. Therefore, in respect of above 5 parties, the CIT(A) was of the view that AO has correctly come to the conclusion that the assessee was in default under Section 206C(6A) and the Ld. Assessing Officer has correctly charged TCS @1% on sale of scrap of relating to this sale. With respect to the balance 17 parties in respect of which the assessee submitted Form 27BA, in view of the order of Hindustan Coca-Cola beverages by the Supreme Court and the insertion of proviso to Section 206C (6A), the CIT(A) directed the AO to verify the claim of the assessee and reduce the amount of tax demand under Section 206C(6A) with respect to those entities for which Form 27BA has been filed by the assessee and the same is found to be in order/correct. Further, Ld. CIT(Appeals) held that the interest leviable under Section 206C(7) is consequential, compensatory and mandatory in nature. Accordingly, CIT partly allowed the appeal of the assessee.
5. The assessee is in appeal before us against the aforesaid order passed by CIT(A). Before us, the submissions of the Counsel for the assessee were two-fold. Firstly, it was submitted before us that the Assessing Officer has till date not given effect to the directions given by Ld. CIT(Appeals) with respect to the 17 parties and has not carried out the necessary verification to ascertain whether these parties have paid taxes in terms of Section 206C of the Act. Secondly, with respect to balance 5 parties in respect of which the assessee submitted Form 27C, it was submitted before us that Section 206C(1A)/(1B) of the Act does not specify any time limit within which the aforesaid Form 27C have to received from the concerned purchasers. Accordingly, since in the instant case the assessee submitted Form 27C as soon as it received the same from the purchasers of scrap and further, since the genuineness of these Forms have not been doubted by the Department, the CIT(A) erred in not admitting the same during the course of appellate proceedings. The Counsel for the assessee relied on judicial precedents in support of the contention that filing of Form 27C was a procedural requirement and therefore, the same could also be submitted at subsequent stage as well.
6. In response, Ld. D.R. placed reliance on the observations made by CIT(A) and Assessing Officer in their respective orders.
7. We have heard the rival contentions and perused the material on record. Before us, the first contention of the Counsel for the assessee is that since Section 206(1A)/(1B) of the Act read with Rule 37C(3) does not specify any timeline for submission of Form 27C, then the assessee should be permitted to furnish the aforesaid Form even at later stage, so long as the genuineness of the aforesaid Forms are not doubted by the Department. It would be useful to reproduce the relevant extracts of Section 206(1A) and 1(B) of the Act for ready reference:
“Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.
206C. (1) 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:
1A 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 verified in the prescribed manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes.
1B The person responsible for collecting tax under this Section shall deliver or cause to be delivered to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner one copy of the declaration referred to in sub-Section (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him.”
8. A bare perusal of the contention of the Section shows that as per Section 206C(1B) of the Act, the person responsible for collecting tax shall deliver or not before the 7th day of the month next following the month in which the declaration is furnished to him. However, no specific timeline has been prescribed as to the precise date on which the purchaser is required to furnish the declaration in Form 27C to the seller, who is under legal obligation to collect TCS. The Section only provides that the person responsible for collecting TCS shall deliver before the 7th day of the next month the declaration in prescribed Format, in which such declaration is furnished to him by the purchaser of goods. Therefore, we observe that from plain language of the Statute, since no specific timeline has been prescribed on the date when such declaration is to be received by the person collecting TCS from the purchaser i.e. no specific time obligation has been cast upon the purchaser of goods to furnish Form 27C to the seller. In our considered view, it would be onerous on person collecting TCS (seller) to be denied the opportunity of furnishing Form 27C, provided the seller is able to demonstrate that there was no lack on his part in furnishing Form 27C as soon as it was received by him from the purchaser to whom scrap had been sold. In the case of Siyaram Metal Udyog (P.) Ltd 71 taxmann.com 204 (Gujarat), the Gujarat High Court held that Section 206C(1A) itself does not provide for any time limit within which declaration of buyers in prescribed Form27 for non-collection of TCS is to be made. The main thrust of sub-Section (1A) of Section 206C is to make a declaration as prescribed, upon which liability to collect tax at source under sub-Section (1) would not apply; when there was no dispute about such a declaration being filed in a prescribed Format and there was no dispute about genuineness of such declaration, delay in filing said declaration would not make assessee liable for non-collection of TCS. In the case of Gopallal Ramprasad Kabra 149 taxmann.com 291 (Rajkot – Trib.), the ITAT held that where assessee-company sold scrap without collecting TCS, since, Form no. 27C was submitted by assessee although belatedly before Commissioner (TDS) and as there was no time-limit provided in Section 206C(1A) to furnish declaration in Form no. 27C by buyers, delay in filing said declaration to prescribed authority would not be ground to deny benefit to assessee. In the case of G.K. Traders 143 taxmann.com 425 (Rajkot – Trib.), the ITAT held that where assessee-company sold scrap to various companies and failed to submit a statement in Form 27C comprising of buyer’s declaration to prescribed authority in time, since there was no limit provided in Section 206C to make a declaration in Form 27C collected from buyers, delay in filing same would not be ground to deny benefit to assessee-company. In the case of Chhaganbhai K Sanghani 94 taxmann.com 459 (Gujarat), the Gujarat High Court held that where in case of assessee, a dealer in scrap, AO levied interest and tax in terms of Section 206C(7) on account of non-collection of tax at source, in view of fact that assessee had submitted certificates provided by buyers under sub-Section (1A) of Section 206C before appellate authorities, impugned order passed by AO was to be set aside. In the case of Chandmal Sancheti 72 taxmann.com 237 (Jaipur – Trib.), the ITAT held that since no time limit is provided in Section 206C(1A) to make a declaration in Form27 collected from buyers; hence delay in filing declaration shall not be ground to deny benefit of declaration to assessee.
9. Further, we observe that the Ld. CIT(Appeals) has already referred the matter back to the file of Assessing Officer for carrying out the necessary verification with respect to 17 parties in respect of whom the assessee had submitted Form 27BA and we observe that till date the Assessing Officer has not carried out the necessary verification to ascertain whether these parties have date paid taxes in terms of Section 206C of the Act. Accordingly, looking into the instant facts, in the interest of justice, the entire matter is restored to the file of Assessing Officer to firstly, verify the veracity/genuineness of Form 27C submitted by the assessee with respect to the aforesaid parties, and if the same is found to be in order, to grant necessary relief, accordance with law. Secondly, the Assessing Officer is also directed to carry out the necessary verification in terms of the directions given by Ld. CIT(Appeals) with respect to the balance 17 parties, in respect of whom the assessee has already furnished Form 27BA and the respective parties have filed returns of income reflecting the aforesaid amounts therein.
10. In the result, the appeal of the assessee is allowed for statistical purposes.
This Order pronounced in Open Court on 30/04/2024
