2022 (7) TMI 1380 - AT - Income Tax

Assessment of Scrap Sales Tax Default Appeal: Tribunal Emphasizes Hearing Opportunity

The Tribunal considered the assessee's appeal regarding default under section 206C of the Income Tax Act for not collecting tax at source on scrap sales. ... TCS u/s 206C(1) - default for not collecting tax at source on sale of scrap - assessee had not submitted Form 27C comprising of the buyer's declaration to the Commissioner of Income-tax in time - HELD THAT:- As perused the material on record in the case of Siyaram Metal Udyog (P.) Ltd. 2018 (5) TMI 1093 - GUJARAT HIGH COURT] AO made addition on the ground that the assessee had breached section 206C of the Income-tax Act, 1961 in case of sale of scrap and that the assessee had not submitted Form 27C comprising of the buyer's declaration to the Commissioner of Income-tax in time. The Tribunal held that there is no dispute about the fact that the assessee has belatedly submitted relevant Form No. 27C collected from its buyers. The same were placed on record before the Assessing Officer itself who declined to accept the same in view of delay in submission thereof. There is no issue qua genuineness of these Forms. Thus, the Gujarat High Court held that addition with the aid of section 206C could not be made. In the case of CIT vs. Chhaganbhai K Sanghani [2018 (5) TMI 1093 - 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 source, in view of fact that asssessee had submitted certificates provided by buyers under sub-section (1A) if section 206C before appellate authorities, impugned order passed by A.O. was to be set aside Further, in the case of Chandmal Sancheti [2016 (8) TMI 952 - ITAT JAIPUR] held that no time limit is provided in section 206C(1A) to make a declaration in Form 27 collected from buyers; hence delay in filing declaration shall not be ground to deny benefit of declaration to assessee. In light of the above judicial precedents on the subject, in the interests of justice, we are restoring the matter to the file of the Ld. Assessing Officer to decide the issue de novo after giving due opportunity of hearing to the assessee to present his case on merits. Appeal of the assessee is allowed for statistical purposes. Issues Involved:1. Whether the assessee was in default under section 206C of the Income Tax Act for not collecting tax at source on the sale of scrap.2. Whether the non-submission of Form 27C within the prescribed time period led to the assessee being treated as in default.3. Whether the submission of Form 27BA by the assessee was sufficient to prove that the buyers had paid taxes on the scrap purchased.Issue 1: Default under section 206C for not collecting tax at source:The case involved the assessee's appeal against the order of the assessing officer, who held the assessee in default for not collecting tax at source on the sale of scrap. The assessing officer determined the TCS amount to be collected and raised a demand. The CIT(Appeals) confirmed the order, stating that the assessee failed to comply with the provisions of section 206C by not collecting TCS on scrap sales. The CIT(Appeals) dismissed the appeal, emphasizing the mandatory requirement for the assessee to collect TCS and submit Form 27C within the stipulated deadline. The Tribunal, however, considered the arguments and judicial precedents cited by the assessee, concluding that the matter should be sent back to the Assessing Officer for a fresh decision after providing the assessee with a hearing opportunity.Issue 2: Non-submission of Form 27C and default status:The non-submission of Form 27C within the prescribed time period was a crucial point in the case. The assessee argued that the failure to submit the form on time should not automatically lead to being treated as in default. The CIT(Appeals) disagreed, stating that the assessee had noticeable instances of non-compliance, including not providing complete details and the required Form 27C within the deadline. The Tribunal, however, referred to judicial precedents where belated submission of Form 27C was considered a procedural lapse and not a ground for default status. Citing relevant case laws, the Tribunal held that the matter should be reconsidered by the Assessing Officer.Issue 3: Sufficiency of Form 27BA submission:The assessee contended that the submission of Form 27BA, evidencing that buyers filed returns and paid due taxes, should exempt the assessee from default status. The Tribunal considered similar cases where certificates provided by buyers were accepted as valid evidence. Citing judicial precedents, the Tribunal held that the submission of such certificates should be considered while deciding the default status. Consequently, the Tribunal allowed the appeal for statistical purposes, directing a fresh assessment by the Assessing Officer after providing a hearing opportunity to the assessee.This detailed analysis covers the key issues and the Tribunal's decision, highlighting the legal arguments and precedents considered in the judgment.