2014 (8) TMI 716 - AT - Income Tax

Appellant Exempt from Tax Collection Obligation, Tribunal Emphasizes Procedural Compliance & Tax Discharge

KPG. Enterprise Versus The Income Tax Officer, TDS-4, Ahmedabad

KPG. Enterprise Versus The Income Tax Officer, TDS-4, Ahmedabad - TMI Issues Involved:1. Applicability of liability under Section 201(1) & 201(1A) for failure to collect tax under Section 206C.2. Definition of 'scrap' and 'buyers' under Section 206C.3. Mandatory requirement of submitting Form No. 27C to CCIT/CIT.4. Applicability of Section 206C to consignment dispatches.5. Status of the appellant as an 'assessee in default' for non/low collection of tax at source under Section 206C.Issue-wise Detailed Analysis:1. Applicability of liability under Section 201(1) & 201(1A) for failure to collect tax under Section 206C:The appellant argued that the liability under Section 201(1) & 201(1A) is not applicable for failure to collect tax under Section 206C. The Tribunal noted that the Assessing Officer treated the appellant as 'assessee in default' for short-collection of Tax Collected at Source (TCS) amounting to Rs. 8,41,060 and levied interest of Rs. 2,25,020 under Section 201(1A). The Tribunal found that the appellant received declarations in Form No. 27C from 31 out of 33 parties, indicating that the scrap purchased was for manufacturing and not for trading, thus exempting the appellant from collecting TCS as per Section 206C(1A). The Tribunal cited the Gujarat High Court decision in CIT vs. Valibhai Khanbhai Mankad, supporting that the failure to submit the declaration to the Commissioner does not reinstate the obligation to collect TCS.2. Definition of 'scrap' and 'buyers' under Section 206C:The appellant did not press this ground during the hearing, leading to its dismissal.3. Mandatory requirement of submitting Form No. 27C to CCIT/CIT:The Tribunal observed that the appellant cannot be treated as an 'assessee in default' for not collecting TCS if declarations under Section 206C(1A) are received, even if not submitted to the Commissioner. The Tribunal referenced decisions from the Gujarat High Court, Mumbai Bench of the Tribunal, and Supreme Court, affirming that non-submission of Form No. 27C does not invalidate the exemption from collecting TCS if declarations are received.4. Applicability of Section 206C to consignment dispatches:This issue was not separately adjudicated as it was inherently linked to the primary issue of TCS collection and the status of the appellant as an 'assessee in default.'5. Status of the appellant as an 'assessee in default' for non/low collection of tax at source under Section 206C:The Tribunal found that for the remaining two parties, the appellant provided auditor's certificates in Form No. 27BA, confirming that these parties filed their returns and paid due taxes. The Tribunal cited the Rajkot Special Bench decision in Bharti Auto Products vs. CIT and the Supreme Court decision in Hindustan Coca Cola Beverage (P.) Ltd. vs. CIT, which support that no further TCS is required if the recipient has paid taxes. The Tribunal remanded the matter back to the Assessing Officer for verification of declarations and certificates and re-adjudication as per law, ensuring no revenue loss.Interest under Section 201(1A):Given the remand on the primary issue, the Tribunal also remanded the issue of interest under Section 201(1A) back to the Assessing Officer for fresh adjudication based on the findings.Conclusion:The appeal was partly allowed, with directions for the Assessing Officer to verify declarations and certificates and re-adjudicate the issues as per law, ensuring proper opportunity for the appellant to present their case. The judgment underscores the importance of procedural compliance and the substantive relief available when the ultimate tax liability is discharged by the recipient.