The I.T.O., (TDS), Ujjain V. M/s. District Minor Forest Produce Co-operative Union Ltd., Dewas

ITA 116/IND/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5821 (ITAT-INDORE)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2010
• Assessment Year: 2008-2009
• Appeal Filed On: 03-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MITRA
• Assessee Lawyers: S S DESH

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS.114 TO 116/IND/2010 A.YS. 2005-06, 2006-07 & 2008-09 ITO(TDS), UJJAIN APPELLANT VS DISTRICT MINOR FOREST PRODUCE CO-OPERATIVE UNION LT D., A.B. ROAD, DEWAS PAN BPLDO 3299 C RESPONDENT APPELLANT BY : SH. P.K. MITRA, SR. DR RESPONDENT BY : SH. S.S. DESHPANDE, CA O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THESE APPEALS ARE BY THE REVENUE AGAINST THE DIFFER ENT ORDERS OF THE LEARNED CIT(A)-UJJAIN, DATED 4.12.2009 WHEREIN THE COMMON GROUND RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CANCELLING THE ORDER U/S 206C(6)/206C(7) WHICH WAS RIGHTLY PASSED BY THE ASSESSING OFFICER FOR FAILURE TO COLLECT THE TAX AT SOURCE FR OM THE BUYERS AT THE TIME 2 OF DEBITING THE AMOUNT PAYABLE BY THE BUYER TO THE ACCOUNT OF THE BUYER OR AT THE TIME OF RECEIPT OF SUCH AMOUNT IN ABSENCE OF PROPER FORM NO. 27C. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD S HRI P.K.MITRA, LEARNED SR. DR AND SHRI S.S. DESHPANDE, LD. COUNSE L FOR THE ASSESSEE. AT THE OUTSET, THE LD. COUNSEL FOR TH E ASSESSEE ASSERTED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF DISTRICT FORESTS OFFICER (PRODUCTION), DEWA S (ITA NOS. 502 TO 504/IND/2009) ORDER DATED 31.5.2010. THE FACTUAL MA TRIX WAS NOT CONTROVERTED BY THE REVENUE. 3. IN VIEW OF THE ABOVE ASSERTION/ADMISSION, WE ARE REPRODUCING HEREUNDER THE AFORESAID ORDER OF THE TR IBUNAL DATED 31.5.2010: THESE APPEALS ARE BY THE REVENUE AGAINST THE ORDERS OF THE LEARNED CIT(A) DATED 25.8.2009 ON THE COMMON GROUND THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CANCELING THE ORDER U /S 206C(6) AND (7) FOR FAILURE TO COLLECT TAX AT SOURC E FROM THE BUYERS AT THE TIME OF DEBITING THE AMOUNT PAYAB LE BY THE BUYER AT THE TIME OF RECEIPT OF SUCH AMOUNT IN THE ABSENCE OF PROPER FORM NO. 27C. 2. DURING HEARING OF THESE APPEALS, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER WHEREAS THE LEARNED CIT DR THOUGH DEFENDED THE ASSESSMENT ORDER BUT DID NOT CONTROVER T THE FACTUAL FINDING MENTIONED IN THE IMPUGNED ORDER . 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SINCE IDENTICAL ISSU E IS INVOLVED IN ALL THESE APPEALS, THEREFORE, THESE ARE 3 DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER F OR THE SAKE OF BREVITY. BRIEF FACTS ARE THAT ON VERIFI CATION OF TDS/TCS OF THE OFFICE OF THE DISTRICT FOREST OFFICE R (PRODUCTION), DEWAS, THE ASSESSING OFFICER OBSERVED THAT THE DFO MADE SALES OF FOREST PRODUCE THROUGH AUCTION AMOUNTING TO RS.13, 13.32 AND 14.70 CRORES FOR THE RESPECTIVE FINANCIAL YEARS AND DID NOT COLL ECT THE TAX AT SOURCE AND MERELY COLLECTED DECLARATION FORM IN FORM NO. 217C FROM THE BUYERS. IT WAS FURTHER OBSERVED THAT THE SAID DECLARATION FORMS WERE RECEI VED AFTER THE DATE OF AUCTION AND SOME OF THE FORMS WER E INCOMPLETE. THE LEARNED ASSESSING OFFICER WAS OF T HE VIEW THAT THE SELLER (DFO) WAS LIABLE TO COLLECT TA X AT SOURCE AMOUNTING TO RS.29,38,771/-, RS.37,36,697/-, RS. 41,63,175/-, RESPECTIVELY, UNDER SECTION 206C(1 ) AND RS. 12.06,055/-, RS. 10,94,336/- AND RS. 6,95,675/- AS INTEREST U/S 206C(7) OF THE ACT. THE ASSESSEE ORGANIZATION IS OWNED BY THE STATE GOVERNMENT AND IS ADMINISTERED BY THE OFFICER OF TH E FOREST DEPARTMENT AND HIS DUTY INCLUDES, AMONGST OTHERS, PRESERVATION OF FOREST AND SALE OF TIMBER A ND OTHER FOREST PRODUCTS. AT THE TIME OF SALE, THE ASSESSEE ANNOUNCES THE TERMS OF AUCTION AND ON LOT BASIS, THE AUCTION IS HELD AS THE TIMBER IS NORMALL Y SOLD IN LOTS. ON THE AUCTION DATE VARIOUS BIDDERS APPEA RED FOR BIDDING, WHO WERE REQUIRED TO DEPOSIT 10% OF T HE BIDDING PRICE OR RS.1000/-, WHICHEVER IS MORE, THE HIGHEST BIDDER IS ALLOTTED A PARTICULAR LOT. AFTER THE ALLOTMENT OF A PARTICULAR LOT, A LOT NUMBER/MARK IS ALLOTTED AND THE HIGHEST BIDDER IS SUPPOSED TO DEPO SIT UPTO 25% OF THE BID AMOUNT WITHIN 7 DAYS FROM THE S ALE OF AUCTION. ON RECEIPT OF 25% OF THE BIDDING PRICE , A SANCTION LETTER IS ISSUED DIRECTING THE BIDDER TO D EPOSIT THE REMAINING BALANCE I.E. 75% AND THE AMOUNT OF SALES TAX AND INCOME TAX. AFTER THE ISSUANCE OF SANCTION, THE BALANCE 75%, THE REMAINING AMOUNT IS PAYABLE WITHIN 45 DAYS FROM THE DATE OF APPROVAL/SANCTION OF THE SALE. THE PERIOD MAY BE EXTENDED UPTO 75 DAYS ON PAYMENT OF INTEREST AT THE RATE OF 18% PER ANNUM. THE BIDDER IS ALLOWED TO REMOVE THE GOODS/LOT ON THE RECEIPT OF FULL AMOUNT AND THEN A WORK ORDER IS PASSED AUTHORISING THE BIDDER TO REMOVE THE GOODS FROM THE SITE OF AUCTION/STORAGE. AT 4 THE TIME OF DEPOSIT OF REMAINING 75% THE BIDDER IS REQUIRED TO FURNISH THE DECLARATION FORM 27C OR PAY THE TAX COLLECTED AT SOURCE U/S 206C(1) OF THE ACT. TH IS PRACTICE IS CONSISTENTLY FOLLOWED. IF THIS PROCEDUR E IS ANALYSED THE SALE IS COMPLETE ONLY WHEN THE FULL CONSIDERATION IS PAID AND THE EARMARKED GOODS ARE ALLOWED TO BE REMOVED. IF THE PROVISIONS OF SECTIO N 206C ARE KEPT IN JUXTAPOSITION WITH THE AFORESAID PROCEDURE/FACTS, THEN THERE IS NO MUCH RELEVANCE REMAINS TO THE OBSERVATION OF THE ASSESSING OFFICER BECAUSE MOST OF THE BIDDERS ARE INCOME TAX ASSESSEE S AND HAVE FURNISHED THEIR PANS. IN THE PRESENT APPEALS, THE ASSESSEE FURNISHED THE COPY OF BID SHE ETS AND SANCTION LETTERS WHEREIN THE LIABILITY OF INCOM E TAX IS CLEARLY MENTIONED WHEREAS THE SUCCESSFUL BIDDER WAS ASKED TO PREPARE SEPARATE BANK DRAFTS TOWARDS INCOME TAX AND SALES TAX LIABILITIES PAYABLE ON THE BID AMOUNT. EVEN OTHERWISE, THE AMOUNT OF RS.2.52 CRORES WAS COLLECTED AT SOURCE OUT OF THE SALE OF R S.13 CRORES DURING THE FINANCIAL YEAR 2005-06 AND DID NO T COLLECT THE TAX AT SOURCE ONLY IN THOSE CASES WHERE THE DECLARATION IN FORM NO,. 27C WAS RECEIVED BY HIM, THEREFORE, UNDER THE EXPRESS PROVISIONS OF SECTION 206C(1)(A), SELLER WAS NOT SUPPOSED TO COLLECT THE TAX AS PER SECTION 4 OF THE SALE OF GOODS ACT, WHEN THE PROPERTY IS TRANSFERRED TO THE BUYER BY THE SELLER, AT THAT STAGE THE CONTRACT CYSTALISES AND IF SUCH CONTRACT TO TRANSFER IS SUBJECT TO CERTAIN CONDITIONS OR HAS T O TAKE PLACE ON FUTURE DATE, IT IS CONSTRUED AS AGREEMENT TO SELL. IN THE PRESENT APPEALS, SINCE THE SELLER WAS TO ISSUE SANCTION LETTER TO THE BIDDER IN CONFIRMATION OF CONTRACT, WHICH CAN BE TERMED AS AGREEMENT TO SALE AND THE TRANSFER OF THE GOODS IS TO TAKE PLACE ON S OME FUTURE DATE, IT CAN BE SAID THAT THE SALE HAS NOT A CTUALLY TAKEN PLACE ON THE DATE OF AUCTION.IN VIEW OF THESE FACTS, NO LIABILITY U/S 206C(1) AROSE TO COLLECT TH E TAX AT SOURCE, THEREFORE, THE APPLICABILITY OF INTEREST U/ S 206C(7) IS CONSEQUENTIAL. IN VIEW OF THESE FACTS, WE FIND NO INFIRMITY IN THE STAND OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND CONFIRM THE SAME. FINALLY, THESE APPEALS OF THE REVENUE ARE DISMISSED . 5 ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF HEARING ON 31 ST MAY, 2010. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSESSEE IS A STAT E GOVERNMENT ORGANIZATION, ADMINISTERS THE TRANSACTIONS OF THE F OREST DEPARTMENT WHICH INCLUDES THE PRESERVATION OF MINOR FOREST AND SALE OF MINOR PRODUCES LIKE TENDU LEAVES AND OTHER MINOR FOREST PRODUCES. TDS/T CS INSPECTION WAS CARRIED OUT IN THE OFFICE OF THE ASSESSEE ON 7.8.20 08 WHEREIN DURING VERIFICATION FOR FY 2005-06, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE AUCTIONED TENDU PATTA AT TOTAL SE LLING PRICE OF RS.7,19,17,853/- ON DIFFERENT DATES ON WHICH TAX WA S NOT COLLECTED AT THE TIME OF THE AUCTION OR AT THE TIME OF RECEIVING THE INSTALLMENTS FROM SUCH BUYERS ON THE PRETEXT THAT SALE IS CONSIDERED COMPL ETE ONLY WHEN THE PROSPECTIVE BUYER MAKES THE PAYMENTS OF ALL INSTALL MENTS AND PERMISSION TO REMOVE THE GOODS IS GRANTED TO THEM A ND AT THAT TIME, FORM NO. 27C WAS COLLECTED FROM SUCH BUYERS. AS PER THE REVENUE, NEITHER FORM NO. 27C WERE COLLECTED IN TIME NOR THE SE FORMS WERE COMPLETE, THEREFORE, AS PER THE ASSESSING OFFICER, THE ASSESSEE IS DEFAULTER AS PER SEC. 206C(1) FOR NOT COLLECTING TA X AT SOURCE AMOUNTING 6 TO RS.40,34,592/- AS WELL AS INTEREST U/S 206C(7) A MOUNTING TO RS.16,06,106/- (TOTAL AMOUNTING TO RS.57,00,690/-). IDENTICALLY, AS PER THE REVENUE, FOR ASSESSMENT YE AR 2006-07, THE AMOUNT OF RS.79,90,225/- AS WELL AS INTEREST AMOUNT ING TO RS.21,62,958/- (TOTAL RS.1,01,53,213/-) AND FOR ASS ESSMENT YEAR 2008- 09, AMOUNTING TO RS.12,19,209/- AND RS.78,201/- (TO TAL RS.12,97,409/-) WERE NOT COLLECTED. THE ASSESSING OFFICER FOUND THE ASSESSEE GUILTY UNDER THE IMPUGNED SECTION. THE ACTION OF THE ASSES SING OFFICER IS SUMMARIZED AS UNDER: AYS TAX U/S 206C(1) S.C. @10% E.C. @2% TOTAL INTEREST U/S 206C(7) TOTAL 2005-06 35,95,893 3,59,589 79,110 40,34,592 16,66,1 06 57,00,698 2006-07 71,21,439 7,12,144 1,56,672 79,90,255 21,62 ,958 1,01,53,213 2008-09 10,86,639 1,08,664 23,906 12,19,209 78,201 12,97,409 ON APPEALS, THE LD. CIT(A) DELETED THE ADDITIONS W HICH ARE UNDER CHALLENGE BEFORE THIS TRIBUNAL. THE FINDING OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2005-06 (WHICH IS IDENTICAL IN ALL THE ASSESSMENT YEARS) IS REPRODUCED HEREUNDER: 7. IN VIEW OF THE ABOVE DISCUSSIONS, IT IS CONCLUDED THAT NO LIABILITY TO COLLECT TAX AT SOURC E U/S 206C(1) ARISES IN THE INSTANT CASE. FURTHER, APPLICABILITY OF INTEREST U/S 206C(7), WHICH IS CONSEQUENTIAL TO SEC.206C(1) DOES NOT ARISE. IN EXTREME CIRCUMSTANCES EVEN IF THE VIEW TAKEN BY THE ITO THAT FORM NO. 27C WAS NOT FURNISHED ON THE DATE OF AUCTION AND HENCE THE APPELLANT IS LIABLE TO COL LECT TAX AT SOURCE IS SUSTAINED, IT WOULD AMOUNT TO JUST A TECHNICAL DEFAULT ON THE PART OF THE APPELLANT, AS HE HAS ULTIMATELY FILED DECLARATION IN FORM NO.27C AT A 7 LATER DATE BEFORE LIFTING THE GOODS FROM SELLERS PREMISES. THE SELLER WAS FULLY EMPOWERED TO ENTERTAIN DECLARATION IN FORM NO.27C AS SUBMITTED B Y THE BUYERS BEFORE HIM AND THEREFORE, THE APPELLANT WAS NOT LIABLE TO COLLECT TAX AT SOURCE FROM THE BUYERS. IN PARA 5.2 OF THE IMPUGNED ORDER, THERE IS AN UNCO NTROVERTED FINDING THAT NEITHER THE SELLER DEBITED THE ACCOUNT OF THE BUYER WITH THE TOTAL SALE PROCEEDS NOR RECEIVED THE AMOUNT OF SALE PROCEEDS O N THE DATE OF AUCTION AS IT WAS ONLY THE PROCESS OF ACCEPTANCE OF SALE IN WHICH THE SALE PRICE WAS DETERMINED AND THE IDENTITY OF THE B IDDER WAS CONFIRMED. AS A TOKEN OF GUARANTEE, 10% OF SECURITY AMOUNT AND 15% OF THE BID AMOUNT WHICH WAS TAKEN IN THE FORM OF POST DATED CH EQUES WAS TAKEN ADDITIONALLY FROM THE SUCCESSFUL BIDDER WHICH WAS T O BE ADJUSTED TOWARDS SALE PRICE. THIS AMOUNT (25%) WAS LIABLE TO FORFEIT URE IN CASE OF DEFAULT ON THE PART OF THE BIDDER TO DEPOSIT THE REMAINING BALANCE AMOUNT (75%) WITHIN STIPULATED TIME. IN THE SANCTION LETTER, THE INCOME-TAX LIABILITY WAS CLEARLY MENTIONED AND THE SUCCESSFUL BIDDER WAS ASK ED TO PREPARE SEPARATE BANK DRAFTS TOWARDS INCOME-TAX AND SALES-T AX LIABILITY PAYABLE ON THE BID AMOUNT. THE SELLER HAS NOT COLLECTED THE TAX AT SOURCE IN THOSE CASES WHERE THE DECLARATION IN FORM NO.27C WAS RECE IVED BY HIM, THEREFORE, UNDER THE EXPRESS PROVISIONS OF SEC. 206 C(1A), THE SELLER WAS NOT LIABLE TO COLLECT TAX AT SOURCE FROM SUCH BUYER S. IN VIEW OF THESE UNCONTROVERTED FACTS AND THE AFORESAID DECISION OF THE TRIBUNAL DATED 8 31.5.2010 (SUPRA) ON THE IDENTICAL FACTS & CIRCUMST ANCES, WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEALS IS COVERE D AGAINST THE REVENUE AND AS SUCH, THE STAND OF THE LD. CIT(A) IS UPHELD IN THESE APPEALS. FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF L EARNED COUNSEL OF BOTH SIDES AT THE CONCLUSION OF HEARING ON 8 TH DECEMBER, 2010. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08.12.2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE !VYAS!