District Mining Officer Vs DCIT (ITAT Raipur)
ITAT Raipur held that assessee is liable to collect tax at source (TCS) under section 206C(1C) of the Income Tax Act on the amounts received from illegal miners/transporters.
Facts- The assessee, i.e. District Mining Officer (DMO), a department of the State Government of Chhattisgarh was subjected to a TDS survey u/s. 133A(2A) of the Act. During the course of aforesaid proceedings the survey officials came across certain issues, viz. (i) the assessee by not collecting tax at source (TCS) on the amount of compounding fees that was received from illegal miners and transporters of minerals had violated the provisions of Section 206C(1C) of the Act; (ii) the assessee had failed to collect tax at source (TCS) as per Sec. 206C of the Act on the amount deposited by the lease holders in the District Mining Fund (DMF); and (iii) the assessee had failed to collect tax at source (TCS) as per Section 206C of the Act on the amount deposited by lease holders in the National Minerals Exploration Trust (NMET).
Conclusion- We are of the considered view that the obligation cast upon an assessee to collect tax at source (TCS) under section 206C(1C) of the Act does not presuppose the existence of a lease or license or a contract, but would also apply to a case where a person had transferred any right or interest, either in whole or in part, inter alia, in a mine to another person. Claim of the assessee that as there is no lease deed/license/contract executed between the assessee, i.e. DMO and the illegal miners/transporters of minerals, therefore, in absence of satisfaction of the said pre-condition no obligation for collection of tax at source under section 206C(1C) of the Act could have been fastened upon the assessee w.r.t the amount of compounding fees received from the aforesaid persons is devoid and bereft of any force of law and cannot be accepted.
We, thus do not infirmity in the view taken by the lower authorities that the assessee who was liable to collect tax at source (TCS) on the amounts received from illegal miners/transporters, having failed to do so, was to be treated as ‘assessee-in-default’ u/s. 206C(6) of the Act, uphold the same.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned thirty-eight appeals filed by the aforementioned assessee’s are directed against the respective orders of the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, which in turn arises from the orders passed by the A.O u/ss. 206C(1C) and (6) & (7) of the Income-tax Act, 1961 (in short ‘the Act’) for the aforementioned assessment years. As common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order.
2. We shall take up the appeal in ITA No.1 1/RPR/2023 for the assessment year 2016-17 as the lead matter and the order therein passed shall apply mutatis-mutandis to the remaining cases. The assessee has assailed the impugned order on the following grounds of appeal before us:
“Grounds of appeal 1. That under the facts and the law, the learned Commissioner of Income Tax (Appeals), NFAC erred in dismissing the Appeal ex-parte though Application for Adjournment was filed, the Appellant is a Department of Chhattisgarh Government and is a regulatory authority for mining in the district., the Ld. CIT(A), NFAC further erred in not considering the material available with him on statement of facts, grounds of appeal and Assessment order. Prayed to cancel the demand of Rs.35,100/- raised u/s. 206C (1C), (6) & (7).
Grounds of Appeal 2. That under the facts and the law, the learned Commissioner of Income Tax (Appeals) further erred in confirming the Order of the Ld. AO who raised demand of Rs.2,927/- including interest at Rs. 903/-, dismissing the explanation that there was no liability u/s 206C (1 C) on the Appellant to collect tax at source on Compounding Fee received on illegal mining. Prayed that there was no liability and demand be cancelled.
Grounds of appeal 3. That under the facts and the law, the learned Commissioner of Income Tax (Appeals) further erred in confirming the Order of the Ld. AO who raised demand of Rs. 29,638/- including interest at Rs. 9,559/-, dismissing the explanation that there was no liability u/s 206C (1C) on the Appellant to collect tax at source on Compounding Fee received on illegal transporting. Prayed that there was no liability and demand be cancelled.
Grounds of Appeal 4. That under the facts and the law, the learned Commissioner of Income Tax (Appeals) further erred in confirming the Order of Ld. AO who raised demand of Rs.2,273/- which includes interest amounts at Rs.683/-, dismissing the explanation that there was no liability u/s 206C (1C) on the Appellant to collect tax at source on contribution towards District Mineral Foundation. The appellant neither received amount towards DMF nor it go to State Revenue. Prayed that there was no liability and demand be cancelled.
Grounds of Appeal 5. That under the facts and the law, the learned Commissioner of Income Tax (Appeals) further erred in confirming the Order of Ld. AO who raised demand of Rs.262/-which includes interest amounts at Rs.82/-, dismissing the explanation that there was no liability u/s. 206C(1C) on the Appellant to collect tax at source on contribution towards National Mineral Exploration Trust. The appellant neither collected amount towards NMET nor go to coffers of State Government. Prayed that there was no liability and demand be cancelled.”
CONDONATION OF DELAY:-
3. We find that out of the captioned appeals those filed by the respective assessee’s in ITA Nos. 64 to 69/RPR/2013, ITA Nos. 120 to 126/RPR/2023 and ITA Nos.158 to 164/RPR/2023 involves a delay of 36 days (wrongly mentioned as 28 days), 117 days (wrongly mentioned as 272 days) and 157 days (wrongly mentioned as 351 days), respectively.
(A) As regards the delay involved in filing of the appeals in ITA Nos. 64 to 69/RPR/2013, the Ld. Authorized Representatives (for short ‘AR’) for the respective assessee’s elaborating on the reasons leading to the delay in filing of the said appeals in its application seeking condonation of delay a/w. affidavit filed in support thereof, had come forth with multi-facet reasons, viz. (i) there was shuffling of the officers/staff members due to transfers during the relevant period; (ii) there being a skeletal staff available in the office for looking after the multi-tasks therein assigned, viz two clerks and one inspector; (iii) substantial time was devoted by the officers/staff in the cases relating to illegal mining and transportation of minerals and compounding of the same; (iv) substantial time was exhausted for preparing of replies to the various queries raised during Vidhan Sabha Session; (v) the officers/staff having remained busy during the period i.e. November to January as regards the work that was assigned to them regarding checking of procurement of paddy of co-operative societies; (vi) change in the email-id by the earlier mining officer without making necessary information available to the Income-tax department, a fact which was not to the knowledge of the assessee, due to which the assessee remained unaware of the orders uploaded by the CIT(Appeals), NFAC; (vii) staff members of the assessee not being computer savvy had remained unaware of the Income tax proceedings; and (viii) that the fact about the order having been passed by the CIT(Appeals), NFAC, Delhi dated 25.11.2022 came to the notice of the assessee only when its counsel had opened the portal on 18.02.2023. For the sake of clarity the reasons leading of the delay mentioned in the application seeking condonation of delay involved in filing of the present appeals are culled out as under (extract):
“3. In the year 2022, all the officers and the staff were changed due to transfers. The Deputy Director i.e. the Appellant who is filing the present appeal, i.e., Bhupendra Kumar Chandrakar jointed on 23.08.2022 as earlier officer Shri Pramod Kumar Naik was transferred on 18.08.2022. The Inspector Shri Deepak Kumar Tiwari joined the duties on 10.09.2022 in place of Shri Bharat Lal Banjare. Shri Rakesh Kumar Thakur joined on 18.10.2022. Assistant, Grade-3, Shri Arun Pandey joined on 02.09.2022. Presently, the royalty collected is to the tune of Rs. 20 to 25 crores per month by this office. The office works with limited staff, there is undersigned, who is Officer, there are two clerks and one Inspector. The Appellant is to pay attention in the cases detected for illegal mining & transportation and the compounding procedures to be followed, then Appellant also devotes time when there is Vidhan Sabha session for preparing replies to various questions raised. The Appellant is also given the assignment with regard to checking of procurement of paddy of Co-operative Societies during the period November to January every year. This is one of the priorities of the State Government.
4. In the meanwhile, the E-mail Id which was “[email protected]” became full, and therefore, the earlier Mining Officer amended the same as “miningkanker2@gmaiLcom”. This was not known to the Appellant. Therefore, Notices & order uploaded by Ld. CIT(A) on e-Mail could not reach the appellant, as it was not updated. Moreover, the Appellant is not computer savvy and is to rely on the person who has skill. Apart from that, the Appellant is not aware of the Income Tax proceedings. When the counsel of the Appellant opened the portal on 18.02.2023, it came to the knowledge that the Ld. CIT (Appeals), NFAC, Delhi has passed above Order dated 25.11.2022. Immediately thereafter the Appellant contacted the counsel, made the payment of Challan on 22.02.2023 and the Appeal has been prepared.”
(B) Elaborating on the reasons dealing to the delay in filing of the appeal in ITA Nos. 120 to 126/RPR/2023, the assessee had filed an application seeking condonation of the same a/w. an affidavit of the Assistant Mining Officer deposing the said facts. On a careful perusal of the aforesaid application, it transpires that it is the claim of the assessee that the delay had occasioned for multi-facet reasons, viz. (i) shuffling of the concerned staff members who were responsible for filing of the appeals; (ii) the concerned staff members not being computer savvy remained unaware of operating the income tax portal; (iii) the office of the assessee was situated in a Naxal infested area in South Bastar with poor rail and road connectivity; (iv) the concerned staff members who were responsible for filing of the appeals had remained busy in visiting various mines, inspection of illegal mining, preparation of replies to the queries raised by Vidhan Sabha, arranging protocol of the ministers etc; and (v) staff members during the relevant period remained busy in one “Jan Sunwai (Public Hearing)” carried during the year which had turned violent and was followed by stalling of working in the mines for a period of 3 days. For the sake of clarity, the reasons given by the assessee appellant for the aforesaid delay are culled out as under (extract):
“5. As submitted earlier, Shri Yogendra Singh wh0 was earlier holding the post as Mining Officer was transferred to Raigarh on 24.08.2022. Apart from not having knowledge of passing of such Order, Shri Yogendra Singh as well as thereafter Shri Hemant Cherpa who take over charge, were all the time busy in visiting various Mines, inspection of illegal mining and taking care of that, again they had to move to other places which were in their charge viz as Sukma and Bijapur. Apart from routine work, they were also involved in preparation of replies to Vidhan Sabha questions, look to the protocol of visit of Hon’ble Ministers. Further, as submitted earlier, this area is highly affected area of Naxal activities, therefore, the movements of Govt. Officers are restricted. Detecting illegal mining is one of the challenging tasks. During the relevant period, as many as 58 cases of illegal mining and transportation were deducted. This consumes lot of time registering seizure of the vehicle and material then handing over the material & vehicle to the police station, subsequent compounding etc. This resulted in collection of revenue at Rs. 10,38,423/- as Compounding Fees. Some time was also consumed in first week of November, 2022 during one “Jan Sunwai (Public Hearing)” case with regard to Deposit 14 wherein the production capacity was to be increased. This turned violent. The public stopped production in the Mines and that continued for 3 days. The Appellant is also required to visit various places and also head-quarters for meetings from time to time. On 8th March, 2023 there was visit of Chief Minister, and therefore, there was ‘protocol duty of the Appellant. Further, to achieve the target, the Appellant was busy in month of March. This delayed filing of appeal timely.”
(C) Ostensibly, a perusal of the application filed by the assessee seeking condonation of delay involved in filing of the appeal in ITA Nos. 158 to 164/RPR/2023 a/w. an affidavit filed in support thereof, reveals multi facet reasons which had resulted to delay in filing of the appeals, viz. (i) the assessee was functioning in a remote place at Jagdalpur which is a tribal area and badly affected by Naxal movement, due to which, movement of government officers was highly restricted; (ii) the officers/staff members of the assessee remained busy in detecting illegal mining/transportation and attending meetings called for by the Collector from time to time a/w. preparation of replies to the questions which were raised by the Members of Legislative Assembly in the State Assembly; (iii) the officers/staff members of the assessee were not conversant with the newly introduced faceless appeal system and were not computer savvy due to which the order of the CIT(Appeals), NFAC did not come to their notice; (iv) shuffling of the staff members specifically transfer of Shri Rakesh Thakur i.e. computer operator and Assistant Programmer who was looking after the TDS matters to Kanker on 14.10.2022 followed by appointment of a new incumbent; (v) disturbance of working during the relevant period due to strike of the staff; (vi) income tax raid at the premises of Deputy Director (Mineral Administration), viz. Shri Shiv Shankar Nag on 08.09.2022 due to which he remained very much disturbed and did not attend the office for a long period; (vii) proceedings initiated by the Enforcement Directorate against Shri Shiv Shankar Nag (supra) on 21/22.11.2022, pursuant whereto he was arrested on 25.01.2023, as a result of which, an atmosphere of fear and apprehension remained in the mind of the officers and the sub-ordinates; (viii) taking over the charge of the assessee’s office by Shri Haresh Mandavi, Additional Collector, Jagdalpur on 02.02.2023 who was having additional charge of 39 other departments and had remained busy in implementing government schemes for the benefit of general public etc; (ix) officers of the assessee had remained busy in preparing replies to the question raised during the Vidhan Sabha session; and (x) that the assessee learnt about the order of the CIT(Appeals), NFAC dated 25.03.2022 only when its counsel gathered about the same from the income tax portal on 04.10.2022. For the sake of clarity the reasons given by the assessee appellant for the aforesaid delay in filing of the appeals are culled out as under (extract):
“2) The Appellant is to look-after the regulatory functions’ as per the statutes mainly Mines and Minerals (Development and Regulation) Act, 1957 (“MMDR”) and for that purpose visit various Mines sites and regularly do vigilance for the offenders who are making illegal mining, illegal transportation without valid Licence. The Appellant is also to attend meetings called by the Collector from time to time. The Appellant is also required to give attention, leaving all the other assignments, to the questions being raised by the Members of Legislative Assembly in the Chhattisgarh State Assembly.
3) The officers of the Appellant department are not conversant with the newly introduced Faceless Appeal system. They are also not computer savvy. Government work is carried out in Hindi language. Therefore, the Order passed by the Ld. CIT (Appeals), NFAC, Delhi dated 25.03.2022 did not come to the knowledge of the Appellant.
4) The above Order was located by the counsel on the Income Tax Portal on 04.10.2022. Counsel thereafter informed about passing of above order.
5) Shri Hemant Cherpa, Assistant Mining Officer took charge on 15.03.20 19 and was transferred to Dantewada on 08.2022. In his place Shri Shiv Shankar Nag joined as Deputy Director (Mineral Administration) on 22.08.2022. Office is managed with limited staff. There was further disturbance due to strike of the staff. The entire staff went on strike from 25.08.2022 to 01.09.2022.
6) In the meanwhile Shri Rakesh Thakur who was “copa” i.e. Computer operator and assistant programmer, and was looking after on line matters and also TDS matters was transferred to Kanker and was relieved on 14.10.2022. In his place Shri Rohan Kamble joined on 12.10.2022. He was new to working of this office.
7) The Income tax department raided the premises of above Shri Shiv Shankar Nag on 08.09.2022, as published in News Papers. Therefore, Shri Shiv Shankar Nag became very much disturbed and puzzled. He also did not attend the office, for long time. Thereafter, the Enforcement Directorate also proceeded against him and raided his office as well as residence of Shiv Shankar Nag on 21st and 22nd November 2022. Subsequently he was arrested by Enforcement Directorate on 25.01.2023. These all proceedings created atmosphere of fear and apprehension in the minds of officers and subordinates. He is still under detention.
Thereafter, Shri Haresh Mandavi, Additional Collector, Jagdalpur took additional charge on 02.02.2023. This was additional charge to the Additional Collector. He was also having additional charges of other departments namely Additional District Magistrate, Nazul officer, P.O. Tribe Department and was Officer in charge (OIC) of various departments numbering 39. Post at Jagdalpur of District Mining Officer is Class II Post. Apart from looking after above charges additional collector was also busy continuously in maintaining law-and-order and other day-to-day work of implementing the Government schemes for the benefit of general public, etc. Further, the office was also sometime remained busy in preparing reply to the questions raised in the Vidhan Sabha Meetings.”
4. Per contra, the Ld. Departmental Representative (for short ‘DR’) objected to the seeking of condonation of delay involved in filing of the present appeals by the aforementioned assessee’s.
5. We have given a thoughtful consideration to the explanation of the aforementioned assessees as regards the delay involved in filing of the captioned appeals before us. The government officers who were concerned/responsible for filing the captioned appeals ought to have been vigilant for filing the same within the stipulated time period prescribed under the statute. At the same time we cannot remain oblivion of the aforesaid multi-facet reasons, which in our considered view are not merely an eye-wash and inspires confidence as regards veracity of the explanation of the assessee about the reasons leading to delay in filing of the captioned Admittedly, it is a matter of fact that the procedure of framing faceless assessments/disposing off the appeals during the relevant period were in its infancy stage. Also, the offices of the aforementioned assessees during the period under consideration was functioning in far flung areas with skeletal staff, which as brought to our notice was neither computer savvy not had any exposure about the obligations under the Income-tax Act, had witnessed transfers/shuffling that had adversely hit its functioning. Inadvertent failure of the concerned staff members to access the email account had resulted to the order of the CIT(Appeals), NFAC going unnoticed, which thereafter was brought to its knowledge by their counsel who had learnt about the same from the income tax portal. Considering the aforesaid multiple reasons which as stated by the respective assesses in their applications seeking condonation of delay involved in filing of the appeals a/w. supporting affidavits, we are of the view that as the delay therein involved has certain justifiable reasons as demonstrated by the aforementioned assesses, which do not smack of any malafide intention or lackadaisical approach on their part, therefore, we deem it fit to condone the same without imposing any cost. Once again, as a word of caution, we may herein observe that the officers/staff members in the times to come should remain extra vigilant about affecting compliance to the statutory requirements/obligations within the prescribed time period contemplated under law.
ON FACTS:
6. Succinctly stated, the office of the assessee, i.e. District Mining Officer (“DMO”, for short), a department of the State Government of Chhattisgarh was subjected to a TDS survey u/s. 133A(2A) of the Act on 09.2018.
7. During the course of aforesaid proceedings the survey officials came across certain issues, viz. (i) the assessee by not collecting tax at source (TCS) on the amount of compounding fees that was received from illegal miners and transporters of minerals had violated the provisions of Section 206C( 1 C) of the Act; (ii) the assessee had failed to collect tax at source (TCS) as per Sec. 206C of the Act on the amount deposited by the lease holders in the District Mining Fund (DMF); and (iii) the assessee had failed to collect tax at source (TCS) as per Section 206C of the Act on the amount deposited by lease holders in the National Minerals Exploration Trust (NMET).
8. On being queried about its failure to collect tax at source on the compounding fees received from illegal miners and transporters of minerals, it was submitted by the assessee that no liability was cast upon it to collect any tax at source on the said receipts. Elaborating on its aforesaid claim, it was submitted by the assessee that no direction to collect tax at source on the compounding fees/penalty received from the illegal miners and transporters of minerals was issued by the Directorate of Mining, State Government of Chhattisgarh. However, the aforesaid explanation of the assessee did not find favour with the A.O. The AO was of the view that as the amount received by the assessee from the illegal miners and transporters of minerals was towards royalty and market value of mineral, therefore, as per the mandate of Sec. 206C( 1 C) of the Act it was obligated to have collected tax at source (TCS) on the said amount. Referring to the fact that the very mechanism for computing the amount of compounding fees in itself was based on the amount of royalty which the assessee would have otherwise recovered, the AO was of the view that the amounts recovered by the assessee from the illegal miners/transporters of minerals was not in the nature of penalty but was a compensatory payment. Also the AO rejected the claim of the assessee that as per Section 23A of Mines and Minerals (Development and Regulation) Act, 1957 (“MMDR Act”, for short) as the amounts collected from illegal miners and transporters was for compounding of offence, therefore, no obligation was cast upon it to collect tax at source on the same. It was further observed by the A.O that as the assessee had failed to provide any bifurcation of the amounts that were received on the compounding of the offence of illegal mining and transportation of minerals, viz. (i). amount of penalty/fine; (ii). value of minerals; and (iii). receipts on account of other factors, thus, he had failed to distinguish the amounts, if any, which it had collected towards penalty/fine vis-a-vis that received towards value of minerals. The A.O on the basis of his exhaustive deliberations concluded that as the assessee as per the mandate of sub-section (1C) of Section 206 of the Act had failed to collect tax at source on the amounts received from the illegal miners and transporters of minerals, therefore, it was to be held as an “assessee-in-default” within the meaning of sub-sections (6) and (6A) of Section 206C of the Act. Accordingly, the A.O raised a consequential demand towards collection of tax at source (a/w. interest) w.r.t amounts collected by the assessee from the illegal miners and transporters of Rs.32,564.81/- [Rs.2927.09 (TCS a/w. interest as regards the compounding fees collected w.r.t illegal mining) (+) Rs.29,637.72/-(TCS a/w. interest as regards the compounding fees collected w.r.t illegal transportation)].
9. It was further observed by the A.O that the State and Central funds were created in each mining district of the state. It was observed by him that the Central Government in exercise of the powers conferred by sub-section (5) & (6) of Section 9B of the Mining and Minerals (Development and Regulation) Act, 1957 had pursuant to Notification F. No.16/7/2015- M.VI dated 17.09.2015 created “District Mineral Foundation” (“DMF”, for short) in December 2015. Also, it was observed by him that the Ministry of Coal in exercise of powers conferred by sub-section (2), (3) and (4) of Section 9C and Section 13 of the Mining and Minerals (Development and Regulation) Act, 1957, had vide Notification F. No.11/8/20 15-M.I dated 14.08.2015 created “National Minerals Exploration Trust” (“NMET”, for short) on 14.08.2015.
10. The AO further observed that the assessee had to collect amounts from the lease holders towards the aforesaid funds, viz. (i). 30% of the amount of royalty collected during the year for DMF; and (ii). 2% of the amount of royalty collected during the year for NMET. Carrying his observations further, it was noticed by the A.O that the aforesaid funds were utilized for the development of mining area and also for funding other agencies under the control of District Collector for various development works of that district. The AO further observed that though the amounts collected by the assessee towards the aforesaid Central government and State government funds would vary from year to year as the same would be dependent on the quantity of mineral explored and royalty received during the year, but the percentage of the apportioned amount was static. It was further observed by him that the aforesaid amounts which the lease holders had to pay towards the aforesaid funds were in addition to royalty that was separately collected from them. Adverting to the mechanism that was adopted, it was observed by the A.O that the lease holders remained under an obligation to deposit the amounts separately and submit copy of challans of the amounts deposited in the aforesaid funds a/w. challan for royalty paid with the Mining Officer. It was observed by him that it was only on receipt of the aforesaid challans that the Mining Officer would issue a pit-pass to the lease holder for exploring minerals. Referring to the aforesaid methodology that was adopted for collection of the aforesaid funds, it was observed by the A.O that the District Mining Officer (DMO) i.e. the assessee while calculating its gross revenue from mineral exploration had failed to include the aforesaid amounts that were collected from lease holders towards their respective contributions to DMF and NMET. It was observed by the A.O that the DMO i.e. the assessee during the course of assessment proceedings had admitted that it had not collected tax at source on the aforesaid additional revenue i.e. the amounts that were collected from the lease holders towards their contributions to DMF and NMET.
11. The AO observed that as per Section 206C of the Act the assessee remained under a statutory obligation to collect tax at source on any “Amount Payable” by the lease holders and it was not to be restricted only to the amount of royalty. Elaborating further, the A.O observed that the “Amount Payable” as envisaged in Section 206C( 1 C) of the Act was well defined in Section 9 of the Mining Act and took within its sweep royalty, fine, penalty, dead rent and any amount authorized by State or Central notification. The AO held a conviction that as the amounts collected from the lease holders for funding DMF and NMET were on the basis of the State and Central notifications and in accordance with the provisions of Section 9 of the Mining Act, therefore, the same fell within the meaning of the term “Amount Payable” provided in Section 206C of the Act, and thus, were exigible for collection of tax at source.
12. The A.O held a conviction that as the additional amounts collected from the leaseholders i.e. towards their respective contributions to DMF and NMET were a part of the value of mineral explored and the income of the mining department, therefore, the same being a revenue receipt was liable for being subjected to collection of tax at source under Section 206C of the Act. Referring to the provisions of Section 206C of the Act, it was observed by the A.O that as the assessee i.e DMO had failed to comply with the statutory obligation of collecting tax at source (TCS) on the amount of contributions made by the lease holders towards DMF and NMET, thus on the said count also it was liable to be held as an ‘assessee-in-default’ u/s. 206C(6) of the Act.
13. On being queried as to why tax was not collected at source on the amount of contributions by the lease holders towards DMF and NMET, it was submitted by the assessee that there were no directions from their senior authority to collect any such amount on the contributions made by the leaseholders towards the said respective funds. Observing, that the assessee i.e. DMO had failed to come forth with any explanation for not having collected tax at source on the amounts collected towards DMF and NMET from the lease holders, the A.O after treating the assessee as ‘assessee-in-default’ under sub-section (6) to Section 206C of the Act saddled it with an obligation to make good the said non-collection of tax at source amounting to Rs.2534.60/- [Rs.2273.00/- (TCS a/w. interest on DMF) (+) Rs.261.60/- (TCS a/w. interest on NMET)].
14. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) on both the aforesaid issues, viz. (i) saddling it with the liability for failure to collect tax at source (TCS) on the amount of compounding fees received from illegal miners/transporters of minerals; and (ii) saddling it with the failure to collect tax at source (TCS) on the contributions made by the lease holders towards DMF and NMET. However, the CIT(Appeals) not finding any infirmity in the view taken by the A.O, upheld the same. For the sake of clarity the relevant observations of the CIT(Appeals) are culled out as under:
“As per Section 206(1C)
(1 C) Every person, who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a public sector company (hereafter in this section referred to as “licensee or lessee”) for the use of such parking lot or toll plaza or mine or quarry for the purpose of business shall, at the time of debiting of the amount payable by the licensee or lessee to the account of the licensee or lessee or at the time of receipt of such amount from the licensee or lessee in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the licensee or lessee of any such licence, contract or lease 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”
From a plain reading of the above section there is an onus on “every person”, who grants a lease or a license or enters into a contract for the purpose of business B & U, (emphasis supplied) at the time of debiting of the amount payable by the licensee or assessee to the account of the license or assessee or at the time of receipt of such amount from the license or assessee in cash or by the issue of a cheque or draft or by any other made, whichever is earlier, collect from the licensee or assessee in cash or by the issue of a cheque or draft or by any other mode, a sum equal to the percentage specified,
The above section clearly provides that every person as stated above is responsible for collecting the tax at the prescribed rates. This is mandatory and there stands no element of discretion in law. Also in this particular case the mining office of the district is a “Person “under this section as such the district mining officer being the Principal Officer should have discharged his responsibility on behalf of the state government. He was rightly the lessor within the meaning of this section. The plea of the appellant assessee before the AO and now that the state Directorate has not issued directions for tax collection on the amount are invalid when the provisions of TCS are amply clear.
As per section 206 (6)
“Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3).”
206 (7)
Without prejudice to the provisions of sub-section (6), if the person responsible for collecting tax does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of one per cent per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance with the provisions of sub-section (3):
Thus 206(6) clearly provides that any person responsible for collecting the tax, even if he fails to collect the tax in accordance with the provisions of the said section, shall not withstanding such failure, be liable to pay the tax to the credit of the Central Government. In such a case of failure, this section fixes the liability of the collector , who in case of failure too is required to pay the tax to the Central Government.
The provisions of TLS are unambiguous. It was the statutory liability of the District mining Officer to have collected and credited the tax. Having failed to do so the AO aptly held him liable to pay the TCS amount and interest under 206c (6) and (7) of the Act. It goes without saying that such failure leads to initiation of penalty. The penalty is not a subject matter of this appeal and may be agitated in a separate appeal.
Reliance is placed on the following cases-
a. IN THE ITAT AGRA BENCH in case of Agra Development Authority vs. Assistant Commissioner of Income-tax (TDS) Agra [2012] 25 taxmann.com187 (Agra) held as under:
Even where these is no written contract, liability to TCS arises- Even where asses see city development authority allotted contractors parking lots to run same without executing any written contracts between them, it would not affect liability of assessee to make collection of tax at source under section 206C( 1 C)
“Section 206C of the Income Tax Act, 1961, read with Section 2(h) and 10 of the Contract Act, 1872-Collection of tax at source-Assessment year 2007-08 to 2009- 1 0-Assessee, City development authority, auctioned for running of parking lots and allotted same to different persons-As assessee defaulted in collecting taxes at source, Assessing Officer raised demand under Section 206C(1C) along with interest-Assessee pleased that though auction was held for parking lots, but no contract was executed in terms of auction and contractors did not sigh any contract and continued to charge parking charges and therefore, provisions of Section 206C( 1 C) could not be applied-Whether since an agreement could be oral in view of Section 2(h) and Section 10 of Contract Act, plea of assessee was be upheld- Held yes [in favour of the Revenue]
b. In the High Court of Madhya Pradesh in the case of Executive Engineer, PWD (nh) Divisions. Recovery Officer, tds. ii, Indore
For failure to collect tax at source (TCS), assessee would be liable to pay interest on amount of tax not collected by assessee and not on tax liability of deductees.
Section 206C of the Income-tax Act, 1961 – Collection of tax at source – Assessment years 2005-06 and 2006-07 – Assessee was awarded a contract for collecting toll – It had not collected tax at source while collecting amount of licence fees from contractors (deductees) – Whether in view of section 206C(7) interest was required to be paid on tax which was not collected by appellant and not on tax liability of deductee-contractors – Held, yes [In favour of revenue].
C. Girijan Co-op. Corporation Ltd, Vs. Assistant Commissioner of Income-tax, Range-2(TDS), Visakhapatnam.
Section 206C of the Income-tax Act, 1961 – Collection of tax at source – Assessment year 2005-06 Assessee was cooperative society engaged in collection of forest produce and selling them to various organization – During relevant assessment year, assessee sold minor forest produce and agriculture produce for certain sum – Assessing Officer noticed that product sold by assessee fell under category of forest produce and assessee was required to collect tax at source – He raised demand under section 206C – Assessee contended that sales were made to buyers who had already been assessed to tax and who had filed their Income-tax returns disclosing impugned transaction arid, therefore, assessee was not liable under section 206C since buyers had already paid tax thereon – Whether as per section 206C(6), person being seller of specific goods, is not deemed to be an assessee-in-default; however, is made liable to pay TCS amount – Held, yes – Whether, therefore, assessee was liable to pay demand raised under section 206C(6) – Held, yes [In favour of revenue].
D. Divisional Forest Officer Vs. Income Tax Officer (TDS), Haldwani
“Section 206C of the Income Tax Act, 1961-Collection of tax at sources (Sale of forest produce)-Assessment year 2008-09-Whether furnishing of Form No.27C by buyer at the time when collection of tax at source is contemplated under section 206C, has to be construed as mandatory-Held Yeas-whether therefore, where assessee failed to collect tax at source from buyers of Lisa without receipt of Form 27Cs at the time of debiting their accounts or receiving amounts, whichever was earlier, it was to be regarded as assessee-in-default in terms of Section 206C(6A)- Held yes [Para 6.2. and 9) ( in favour of revenue).
The appellant has quoted the case of the Hindustan Coca Cola Beverage (P.) Ltd. Vs. Commissioner of Income Tax [2007] 163 Taxman 355(SC).
“Circular No. 275/201/95/1T(B), dated 29.1.1997 issued by the Central Board of Direct Taxes would put an end to the controversy. The circular declares that no demand visualized under section 20 1(1) should be enforced after the tax deductor has satisfied the officer- in- charge of TDS That taxes due have been paid by the deductee- asses see. However, this will not alter the liability to charge interest under section 201(1A) till the date of payment of taxes by the deductee-assessee or the liability for penalty under section 271 C. In the instant case, the assessee had paid the interest under section 201(1A) and there was no dispute that the tax due had been paid by ‘P’ it was not disputed that the circular was applicable to the facts situation at hand[para1 1].
Thus it is clear that the satisfaction of the TDS officer in charge has been upheld.
Reliance is placed on the case law of
Girijan Co-op. Corporation Ltd. Vs. Assistant Commissioner of Income Tax-Range-2(TDS), Visakhapatnam.[2011] 13 taxmann.com42 (Visakhapatnam [2011] 47 SOT 323 (Visakhapatnam)/[2012] 143TTJ 256 (Visakhapatnam [02.06.2011]
In this case law it has been held-
“In this context, it is observed that with reference to section 201 of the Act where an assessee is deemed to be an assessee in default in case of failure to deduct tax at source on payments made by him on which he was liable to deduct tax that the Hon’ble Supreme Court in the case of HindustanCocacola Beverage (P.) Ltd. V. CIT293 ITR 226 unequivocally stated that where the payees have already paid tax on the income on which there was a short deduction of tax at source, recovery of tax cannot be made once again from the tax deductor. While rendering the above decision, the Hon’ble Supreme Court took into account Circular No. 275/201/95- IT(B), dt. 24 January, 1997 issued by the CBDT wherein it was clarified “no demand visualized under section 201(1) of the IT Act should be enforced after the tax deductor has satisfied the officer incharge of TDS, The taxes due have been paid by the deductee assessee. However, this will not alter the liability to charge interest under 201C1A) of the IT Act till the date of payment of taxes by the deductee assessee or the liability for penalty under section 271 C of the IT Act”. However, this is the position of law insofar as, the provisions of section 201(1) and 201(1A) are concerned section 206C(6) and section 201(1) are not similarly worded. While section 201(1) treats an assessee AS who fails to deduct the tax at source or after deduction, does not pay the same to the Government as an assessee in default, section 206C(6) clearly provides that any person responsible for collecting the tax who falls to collect the tax in accordance to the provisions of the said section, shall, not withstanding such failure, be liable to pay the tax to the credit of the Central Government. Thus, in case of failure to effect the TCS, becomes the liability of the collector of such tax and he is mandatorily required to pay the same to the Central Government as the word used in the said section is “shall”. Under section 206C(6) we are basically concerned with the liability of the assessee-collector and not with the liability of the assessee from whom tax was liable to be collected. Further, in case of failure to deduct tax at source on certain payments, such payments become receipts in the hands of persons, whereas in the case of tax collection at source on certain sales, the same become an expenditure in the hands of the persons who purchase such goods. Therefore, the case law relating to section 201(1) wouldnot be applicable to the cases covered under section 206C(6) of the Act. In view of the above, this argument of the appellant is not accepted and this ground of appeal is dismissed”.
In view of the foregoing discussion, we are also of the view that the ratio of decision of Hon’ble Supreme Court in the case of Hindustan Coco Cola Beverages (P) Ltd. (supra) cannot be applied to the facts of the instant case. Further the provisions of section 206(6) are very specific and we have already discussed about the effect of that section. Hence we are in agreement with the decision of Learned CIT(A) in holding that the assessee is liable to pay the demand raised under section 206(6) of the Act. Accordingly, we confirm his order on this issue.
Thus, in the above facts and circumstances of appellant case, the completion of assessment at demand of Rs. 35,100/- for the A.Y 2016-17 is hereby confirmed and grounds raised by appellant is dismissed.
Ground of appeal no. 1 & 7 are general in nature which do not require separate adjudication.
6. In the result, the appeal of the assessee is dismissed.”
15. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
16. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements a/w. the various statutory enactments, viz (i). The Mines and Minerals (Development and Regulation), Act 1957 (Act No. 67 of 1957), (ii). Chhattisgarh Minor Minerals Rules, 2015 (Extract); and (iii). The Coal Bearing Areas (Acquisition and Development) Act. 1957 (Extract) as had been pressed into service by the ld. AR.
17. Controversy involved in the present appeal lies in a narrow compass, (i) that as to whether or not the assessee i.e. DMO was liable for collection of tax at source (TCS) u/s. 206C of. the Act on the amount of compounding fees received from persons involved in illegal mining and transportation of minerals; and (ii) that as to whether or not any obligation was cast upon the assessee to have collected tax at source (TCS) on the amount of contributions made by the lease holders i.e. lessees towards DMF and NMET.
18. Before dealing with the aforesaid issue, it would be relevant to cull out the provisions of Section 206C( 1 C) of the Act, which reads as under:
“(1 C) Every person, who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a public sector company (hereafter in this section referred to as “licensee or lessee”) for the use of such parking lot or toll plaza or mine or quarry for the purpose of business shall, at the time of debiting of the amount payable by the licensee or lessee to the account of the licensee or lessee or at the time of receipt of such amount from the licensee or lessee in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the licensee or lessee of any such licence, contract or lease 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:
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