Tribunal directs AO to review Form 27C, penalty set aside for TCS default.

The Tribunal set aside the order and directed the Assessing Officer to examine the Form No. 27C declaration filed by the assessee, forwarding it for verification. The AO was instructed to pass an order after a hearing, interpreting the time limit for furnishing the declaration as directory, not mandatory. Additionally, the penalty under section 221 for default in TCS payment was set aside due to the prior orders being annulled. The appeals were allowed, and the decisions were announced on 19/05/2023.

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Issues involved:
The judgment involves appeals by the assessee company against the order of the Ld. CIT(A)/NFAC for multiple assessment years regarding non-collection of tax under section 206C of the Income Tax Act, 1961 while selling timber.

Issue 1: Non-consideration of Form no. 27C by Ld. CIT(A)
The main grievance of the assessee was the non-consideration of Form no. 27C despite being filed, which is required under section 206C(1A) of the Act. The assessee argued that the Ld. CIT(A) erred in not admitting and considering the additional evidence, and pleaded for the declaration form to be examined to resolve the issue.

Issue 2: Obligation to collect Tax Collection at Source (TCS)
The controversy revolved around whether filing Form 27C from buyers would relieve the assessee from the obligation to collect TCS under section 206C(1) of the Act. The Tribunal examined the provisions of section 206C, which require the seller to collect tax from buyers of specified goods, unless the buyer furnishes Form 27C stating the goods' purpose for manufacturing, processing, or producing articles.

Judgment:
The Tribunal set aside the impugned order and restored the issue to the Assessing Officer (AO) for examination of the Form No. 27C declaration filed by the assessee. The AO was directed to forward the declaration to the Principal Commissioner or Commissioner for verification, and subsequently pass an order in accordance with the law after affording a reasonable opportunity of hearing to the assessee. The decision was based on the interpretation that the time limit for furnishing Form No. 27C declaration is directory, not mandatory, as per the provisions of section 206C(1B) of the Act.

Separate Judgment:
In a separate judgment, the penalty levied under section 221 of the Act for default in making payment of tax collected as TCS was set aside, as the orders passed under section 206C(1)/206C(7) were already set aside for considering the declaration Form no. 27C. The principle applied was that when the foundation goes, the super-structure falls.

The appeals of the assessee were allowed in both instances, and the orders were pronounced in the open court on 19/05/2023.

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