Tribunal Remands Assessment, Emphasizes TCS Exemption for Sales to Manufacturers

The Tribunal allowed the appeals for the assessment years 2013-14 to 2016-17, remanding the matter to the Assessing Officer for verification regarding the sale of scrap to manufacturers and the filing of requisite forms, emphasizing that minor delays in filing Form 27C should not invalidate the TCS exemption for sales to manufacturing concerns. The Tribunal directed the AO to credit the forms if available before concluding the assessment.

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Issues Involved:
1. Determination of tax liability under Section 206C for failure to collect Tax Collected at Source (TCS) and file Form 27C.
2. Charging of interest under Section 206C(7) for non-compliance with TCS provisions.

Summary:

Issue 1: Determination of Tax Liability under Section 206C

The assessee was engaged in the business of selling "scrap" and was required to collect TCS and file a statement in Form 27EQ within the prescribed time. The Assessing Officer (AO) observed that the assessee failed to collect TCS amounting to Rs. 2,45,595/- on the sale of scrap worth Rs. 2,45,59,583/- for the financial year 2012-13 (Assessment Year 2013-14). The assessee also did not file Form 27EQ for the year under consideration. In appeal, the assessee argued that the goods were sold to manufacturers, which exempts them under Section 206C(1A), and that Form 27C was collected but not filed timely. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal, stating that the assessee did not comply with the requirements of Section 206C, including the timely filing of Form 27C. The CIT(A) held that the delay in filing Form 27C could not be considered a mere procedural lapse.

Issue 2: Charging of Interest under Section 206C(7)

The AO also charged interest under Section 206C(7) for the non-collection of TCS. The CIT(A) upheld this decision, noting that the assessee failed to comply with the statutory requirements, including the timely submission of Form 27C. The assessee contended that the procedural lapse should not attract such tax liability and cited various judicial precedents to support this view.

Tribunal's Decision:

The Tribunal noted that the assessee had sold scrap to manufacturers and obtained Form 27C, albeit with a delay. Citing various judicial precedents, the Tribunal held that a liberal view should be taken when the sale of scrap is made to manufacturing concerns, provided the requisite forms are eventually furnished. The Tribunal referred to cases like Chandmal Sancheti v. ITO and CIT v. Adisankara Spinning Mills, which held that minor delays in filing Form 27C should not invalidate the exemption from TCS.

The Tribunal restored the matter to the AO for verification of the requisite forms and evidence to support the assessee's contention that the sales were made to manufacturing concerns. The AO was directed to allow credit for the forms if they were available with the assessee before the assessment was concluded.

Conclusion:

The appeals for the assessment years 2013-14 to 2016-17 were allowed for statistical purposes, with the matter being remanded to the AO for necessary verification.

This Order pronounced in Open Court on 04/08/2023.

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