2016 (3) TMI 281 - AT - Income Tax

Assessing Officer's Appeals Dismissed in TCS Case

The appeals filed by the Assessing Officer challenging the deletion of additions made under section 206C(1) of the Income Tax Act regarding non-collection ... TCS demands - tax liability of the buyer of the scrap - Held that:- TDS demands raised under section 201, TCS demands raised under section 206C are in the nature of vicarious liabilities which survive only as long as principal liability of the taxpayer remains in existence. When the principal tax liability itself is extinguished, the very reason of the demand raised under section 206C ceases to hold good in law. The details furnished by the assessee before the Assessing Officer and the verifications by the Assessing Officer are intended to ensure that the buyer of the goods has duly discharged his tax liability in respect of the income earned in respect of goods in question. Once that satisfaction is arrived at, there cannot be any justification of recovering the tax collectible at source which is, in any event, adjustable against the tax liability of the buyer of the scrap. The relief granted by the Assessing Officer is in accordance with the law laid down by the binding judicial precedents. In view of these discussions the CIT(A), in the second round, was indeed justified in granting the impugned relief. As for the appeals filed by the assessee against the order passed by the CIT(A) in the first round, these appeals are now infructuous as the relief is granted to the assessee by the AO while giving effect to the directions of the CIT(A) in the second round which now stands confirmed and approved by us. Issues Involved:1. Non-collection of Tax Collected at Source (TCS) on the sale of scrap.2. Calculation of interest under section 206C(7) of the Income Tax Act.3. Treatment of belatedly filed Form 27C.4. Assessment of sales figures and TCS liability.5. Applicability of Section 206C(1) to the scrap material traded by the assessee.6. Retrospective application of the proviso to section 206C(6A).Issue-Wise Detailed Analysis:1. Non-collection of TCS on Sale of Scrap:The Assessing Officer (AO) contended that the assessee, being a trader of scrap, was required to collect TCS under section 206C(1) of the Income Tax Act. The CIT(A) deleted the additions made under this section, which the AO challenged, arguing that the provisions apply to the assessee.2. Calculation of Interest under Section 206C(7):The AO argued that the CIT(A) incorrectly directed that interest should be calculated only for buyers who had not paid tax on the returned income, whereas it should apply to all buyers who filed Form 27BA. The CIT(A) had reduced the liability based on the verification of details in Form 27BA, which the AO disputed.3. Treatment of Belatedly Filed Form 27C:The AO contended that the CIT(A) erred by not treating the assessee as in default for non-collection of TCS on sales to manufacturers where Form 27C was filed late. The CIT(A) directed not to charge interest on sales where Form 27C was filed belatedly, which the AO challenged.4. Assessment of Sales Figures and TCS Liability:The AO and CIT(A) had discrepancies in the assessment of sales figures and TCS liability. The CIT(A) directed the assessee to furnish Form 27BA and the AO to verify the details, leading to a reduction in liability based on compliance with section 206C.5. Applicability of Section 206C(1) to Scrap Material:The assessee argued that the provisions of Section 206C(1) did not apply to the scrap material traded, as it was not generated from manufacturing or mechanical processes. The CIT(A) and AO had differing views on whether the trading of used discarded items constituted scrap under Section 206C(1).6. Retrospective Application of Proviso to Section 206C(6A):The Tribunal referenced the special bench decision in Bharti Auto Products Vs CIT, which held that the proviso to section 206C(6A) is retrospective. This proviso states that a person responsible for collecting tax at source is not deemed in default if the buyer has filed a return, included the income, and paid the tax due. The Tribunal upheld this view, stating that the proviso applies retrospectively and provides relief to the collector of tax at source from the consequences of non-collection.Conclusion:The Tribunal found that the issues were covered by the special bench decision in Bharti Auto Products, which was supported by the Delhi High Court's judgment in CIT Vs Ansal Landmark Township Pvt Ltd. The Tribunal concluded that the relief granted by the AO, based on the verification of Form 27BA and compliance with section 206C, was justified. Consequently, the appeals filed by the AO were dismissed, and the relief granted to the assessee was upheld. The appeals filed by the assessee against the initial order of the CIT(A) were deemed infructuous as the relief was already granted in the second round.Result:All appeals were dismissed. The judgment was pronounced in the open court on February 29, 2016.