International Steel Corporation, Bhavnagar V. The Income Tax Officer, TDS-4, Now TDS-1, Ahmedabad

ITA 2201/AHD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2421 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 24-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILASH V SHINDE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.2201/AHD/2015 ASST. YEAR: 2006-07 INTERNATIONAL STEEL CORPORATION, 255, MADHAV DARSHAN, BHAVNAGAR. VS. INCOME-TAX OFFICER (TDS)-1, AHMEDABAD. APPELLANT RESPONDENT PAN/TAN AHMM0 4089B APPELLANT BY SHRI UMAID SINGH BHATI, AR RESPONDENT BY SHRI VILASH V. SHINDE, DR DATE OF HEARING: 3/12/2015 DATE OF PRONOUNCEMENT: 01/03/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-4, AHMEDABAD, DATED 12.05.2015 PASSED PURSUA NT TO THE ORDER OF ITO (TDS)-1, AHMEDABAD FRAMED U/S 206C(7) OF THE I.T. ACT, 1961 (IN SHORT THE ACT) DATED 7.5.2013. ASSESSEE HA S RAISED THREE GROUNDS OF APPEAL REVOLVING ROUND SOLITARY ISSUE AG AINST ACTION OF LD. CIT(A) FOR NOT ACCEPTING FORM NO.27C FOR THE SALE O F SCRAP AMOUNTING TO RS.1,57,60,687/- AND TREATING THE ASSESSEE IN DE FAULT U/S 206C(6A) OF THE ACT BY NOT APPLYING PROVISIONS OF SECTION 20 6(1A) OF THE ACT. ITA NO. 2201/AHD/2015 ASST. YEAR 2006-07 2 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF SHIP BREAKING. IT FILED ITS RETURN OF INCOME FOR ASST. Y EAR 2006-07 ON 10/10/2006 DECLARING TOTAL INCOME AT RS.4,97,460/- ALONG WITH TAX AUDIT REPORT. IT WAS OBSERVED BY THE ASSESSING OFFI CER THAT AS PER PROVISIONS OF SECTION 206C EVERY PERSON SHALL AT TH E TIME OF DEBITING THE AMOUNT PAYABLE BY THE BUYER TO THE ACCOUNT OF T HE BUYER OR AT THE TIME OF RECEIPT OF SUCH AMOUNT IN THE SAID BUYER IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHI CHEVER EARLIER, COLLECT FROM THE BUYER OF ANY GOODS, FOR E.G. SCRAP S, A SUM EQUAL TO ONE PERCENT OF SUCH AMOUNT AS INCOME TAX AND IF THE ASSESSEE FAILS TO COLLECT THE TAX IN ACCORDANCE WITH THE PROVISION S OF SECTION 206C(6) OF THE ACT THEN ASSESSEE WILL BE LIABLE TO PAY TAX TO THE CREDIT OF CENTRAL GOVERNMENT IN ACCORDANCE WITH THE PROVISION S OF SECTION 206(C) OF THE ACT. 3. DURING THE YEAR ASSESSEE HAS EFFECTED SALES OF RS.4,94,03,677/- OUT OF WHICH TAX COLLECTED AT SOUR CE (TDS) @ 1% WAS COLLECTED AND DEPOSITED ON THE SALES OF RS.68,8 0,152/- AND TCS AT LOWER RATE WAS COLLECTED ON SALES OF RS.87,00,01 1/-. FOR THE BALANCE SALES OF RS.3,10,81,253/- TAX WAS NOT COLLE CTED IN PURSUANCE TO RECEIPTS OF FORM NO.27C AS REFERRED IN RULE 37 O F THE IT RULES BEING A DECLARATION U/S 206C(1A) OF THE ACT. TO BE MADE B Y A BUYER FOR OBTAINING GOODS WITHOUT COLLECTION OF TAX. THE ASSE SSING OFFICER OBSERVED THAT ASSESSEE HAS FURNISHED PHOTOCOPY OF F ORM NO.27C RATHER THAN FURNISHING SECOND COPY OF FORM NO.27C A ND FURTHER IT WAS OBSERVED THAT IN SOME FORMS DATE WAS NOT MENTIONED IN PART -I OR PART ITA NO. 2201/AHD/2015 ASST. YEAR 2006-07 3 -II OF THE FORM AND FOR THIS REASON LD. ASSESSING O FFICER TREATED ASSESSEE IN DEFAULT AND LEVIED 1% TCS OF THE SALE O F SCRAPE AT RS.3,10,81,253/- ALONG WITH SURCHARGE AND EDUCATION CESS AND RAISED A DEMAND U/S 206C(1) AT RS.3,48,732/- AS WELL AS IN TEREST U/S 206C(7) AND RAISED A TOTAL DEMAND OF RS.6,90,489/-. 4. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE CIT(A) , WHO FURTHER EXAMINED FORM NO.27C FOR SCRAP SALES FOR RS.3,10,81 ,253/- RECEIVED FROM THE BUYERS AND ALLOWED THE CLAIM OF THE ASSESS EE FOR 0% TCS ON SALES OF RS.1,53,20,566/- ON THE BASIS OF FORM N O.27C SUBMITTED BY THE ASSESSEE AND FOR THE REMAINING SALES OF RS.1 ,57,60,687/- CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R BY GIVING A REASON FOR DENYING THE CLAIM OF THE ASSESSEE THAT O UT OF THE TOTAL 24 FORMS RELEVANT TO SALES OF RS.1,57,60,687/- IN 19 C ASES NO DATE WAS MENTIONED IN PART-I AND IN TWO CASES THERE WAS SOME OVER WRITING AND IN ONE CASE EACH THERE WAS NO DATA AND WRONG DATE M ENTIONED. 5. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. AR OF THE ASSESSEE SUBMITTED THAT FORM N O.27C ARE BEING PREPARED BY THE BUYERS OF GOODS AND THE SAME WERE SUBMITTED TO THE ASSESSEE. LD. REPRESENTATIVE SUBMITTED THAT OUT OF THE TOTAL 24 FORMS OF FORM 27C FOR SALES OF RS.1,57,60,687/- NOT A SINGLE DEFECT IN THE FORM OF IDENTITY AND NON-GENUINENESS OF THE BUY ER HAS BEEN ESTABLISHED ON RECORD AND ONLY FOR THE CLERICAL MIS TAKE THAT TOO ON THE PART OF THE BUYER, ASSESSEE HAS BEEN TREATED IN DEF AULT. HE FURTHER SUBMITTED THAT ONCE ANY DECLARATION IS RECEIVED BY THE SELLER OF SCRAP ITA NO. 2201/AHD/2015 ASST. YEAR 2006-07 4 FROM A BUYER ON FORM NO.27C THEN THE LIABILITY OF C OLLECTING AND DEPOSITING TCS SHEDS AWAY FROM THE SELLER OF SCRAP AND IN SUPPORT OF HIS CONTENTIONS HE HAS REFERRED AND RELIEF ON THE D ECISION OF ITAT, BANGALORE BENCH DATED 17.4.2015 IN THE CASE OF KARN ATAKA FOREST DEV. CORPN. LTD. VS. ITO IN ITA NO.1144 TO 1146/BAN G/2014 FOR ASST. YEAR 2009-10 TO 2011-12. 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE BEFORE US TO EXAMINE AS T O WHETHER LD. CIT(A) WAS CORRECT IN DENYING THE BENEFIT REFERRED IN SECTION 206C(1C) OF THE ACT FOR THE SALES OF RS.1,57,60,687 /- EVEN WHEN ASSESSEE HAS SUBMITTED FORM NO.27C FROM RESPECTIVE BUYERS. FROM GOING THROUGH THE DECISION OF THE TRIBUNAL, BANGALO RE IN THE CASE OF KARNATAKA FOREST DEV. CORPN. LTD. VS. ITO (SUPRA), WE FIND THAT THE CO-ORDINATE BENCH HAS OBSERVED AS UNDER :- 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. IT IS NOT DISPUTED THAT ASSESSEE HAD FILED THE DECLARATION FROM THE BUYER, AS MANDATED IN SECTION 206C(1A) ONLY ITA NO.1153/BANG/2014 DR.HAJJAJI KRISHNAMURTHY ANAN D PAGE 6 OF 9 WHEN SHOW CAUSE NOTICES WERE ISSUED BY THE AO, POINTING OUT FAILURE TO COLLECT TAX AT SOURCE. HOWEVER, IT REMAINS A FACT THAT ASSESSEE HAD PRODUCED FORM NO.2 7C OBTAINED FROM BOTH THE PARTIES. COPIES OF THESE FORMS HAVE BEEN PLACED ON RECORD AT PAPER BOOK PAGES 1 TO 66. BOTH PART I AND PART II OF THE FORMS HAVE BEEN FILLED UP. AT THIS JUNCTURE, IT IS NECESSARY TO HAVE A READING OF SECTION 206C(1A), 206(1B) AND RULE 37C W HICH PRESCRIBED FORM 27C. ITA NO. 2201/AHD/2015 ASST. YEAR 2006-07 5 206C. PROFITS AND GAINS FROM THE BUSINESS OF TRADI NG IN ALCOHOLIC LIQUOR, FOREST PRODUCE, SCRAP, ETC.- (1) EVERY PERSON, BEING A SELLER SHALL, AT THE TIM E OF DEBITING OF THE AMOUNT PAYABLE BY THE BUYER TO THE ACCOUNT OF THE B UYER OR AT THE TIME OF RECEIPT OF SUCH AMOUNT FROM THE SAID BUYER IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, COLLECT FROM THE BUYER OF ANY GOODS OF THE NATURE SPECIFIED IN COLUMN (2) OF THE TABLE BELOW, A SUM EQUAL TO THE P ERCENTAGE, SPECIFIED IN THE CORRESPONDING ENTRY IN COLUMN (3) OF THE SAID TABLE , OF SUCH AMOUNT AS INCOME-TAX: TABLE SL.NO. NATURE OF GOODS PERCENTAGE I) ALCOHOLIC LIQUOR FOR HUMAN CONSUMPTION ONE PER C ENT II) TENDU LEAVES FIVE PER CENT III) TIMBER OBTAINED UNDER A FOREST LEASE TWO AND O NEHALF PER CENT IV) TIMBER OBTAINED BY ANY MODE OTHER THAN UNDER A FOREST LEASE TWO AND ONEHALF PER CENT V) ANY OTHER FOREST PRODUCE NOT BEING TIMBER OR TENDU LEAVES TWO AND ONEHALF PER CENT VI) SCRAP ONE PER CENT: PROVIDED THAT EVERY PERSON, BEING A SELLER SHALL AT THE TIME, DURING THE PERIOD BEGINNING ON THE 1ST DAY OF JUNE, 2003 AND ENDING ON THE DAY IMMEDIATELY PRECEDING THE DATE ON WHICH THE TAXATION LAWS (AMENDMENT) ACT, 2003 COMES INTO FORCE, OF DEBITING OF THE AMOUNT PAYABLE BY THE BUYER TO THE ACCOUNT OF THE B UYER OR OF RECEIPT OF SUCH AMOUNT FROM THE SAID BUYER IN CASH OR BY THE ISSUE OF A CH EQUE OR DRAFT OR BY ANY OTHER ITA NO.1153/BANG/2014 DR.HAJJAJI KRISHNAMURTHY ANAND PA GE 7 OF 9 MODE, WHICHEVER IS EARLIER, COLLECT FROM THE BUYER OF ANY GOODS OF THE NATURE SPECIFIED IN COLUMN (2) OF THE TABLE AS IT STOOD IMMEDIATELY BEFORE THE 1ST DAY OF JUNE, 2003, A SUM EQUAL TO THE PERCENTAGE, SPECIFIED IN THE CORRESPONDING ENTRY IN COLUMN (3) OF THE SAID TABLE, OF SUCH AMOUNT AS INCOME-TAX IN ACCORDANCE WITH THE PROVISI ONS OF THIS SECTION AS THEY STOOD IMMEDIATELY BEFORE THE 1ST DAY OF JUNE, 2003. (1A) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECT ION (1), NO COLLECTION OF TAX SHALL BE MADE IN THE CASE OF A BUYER, WHO IS RESIDENT IN IND IA, IF SUCH BUYER FURNISHES TO THE PERSON RESPONSIBLE FOR COLLECTING TAX, A DECLARATION IN WR ITING IN DUPLICATE IN THE PRESCRIBED FORM2 AND VERIFIED IN THE PRESCRIBED MANNER TO THE EFFECT THAT THE GOODS REFERRED TO IN COLUMN (2) OF THE AFORESAID TABLE ARE TO BE UTILISED FOR THE P URPOSES OF MANUFACTURING, PROCESSING OR PRODUCING ARTICLES OR THINGS AND NOT FOR TRADING PU RPOSES. (1B) THE PERSON RESPONSIBLE FOR COLLECTING TAX UNDE R THIS SECTION SHALL DELIVER OR CAUSE TO BE DELIVERED TO THE CHIEF COMMISSIONER OR COMMISSIO NER ONE COPY OF THE DECLARATION REFERRED TO IN SUB-SECTION (1A) ON OR BEFORE THE SE VENTH DAY OF THE MONTH NEXT FOLLOWING THE MONTH IN WHICH THE DECLARATION IS FURNISHED TO HIM. DECLARATION BY A BUYER FOR NO COLLECTION OF TAX AT SOURCE UNDER SECTION 206C(1A). ITA NO. 2201/AHD/2015 ASST. YEAR 2006-07 6 37C. (1) A DECLARATION UNDER SUB-SECTION (1A) OF SE CTION 206C TO THE EFFECT THAT ANY OF THE GOODS REFERRED TO IN THE TABLE IN SUB-SECTION (1) OF THAT SECTION ARE TO BE UTILISED FOR THE PURP OSES OF MANUFACTURING, PROCESSING OR PRODUCING ARTICLES OR THINGS AND NOT FOR TRADING PU RPOSES SHALL BE IN FORM NO. 27C AND SHALL BE VERIFIED IN THE MANNER INDICATED THEREIN. (2) THE DECLARATION REFERRED TO IN SUB-RULE (1) SHA LL BE FURNISHED IN DUPLICATE TO THE PERSON RESPONSIBLE FOR COLLECTING TAX. (3) THE PERSON REFERRED TO IN SUB-RULE (2) SHALL DE LIVER OR CAUSE TO BE DELIVERED TO THE CHIEF COMMISSIONER OR COMMISSIONER, ONE COPY OF THE DECLARATION REFERRED TO IN SUB-RULE (1) ON OR BEFORE THE SEVENTH DAY OF THE MONTH NEXT FOLLOWING THE MONTH IN WHICH THE DECLARATION IS FURNISHED TO HIM. EXPLANATION.FOR THE PURPOSES OF SUB-RULE (3), THE CHIEF COMMISSIONER OR COMMISSIONER MEANS THE CHIEF COMMISSIONER OR COMMIS SIONER TO WHOM THE ASSESSING OFFICER, HAVING JURISDICTION TO ASSESS THE PERSON R EFERRED TO IN SUB-RULE (2), IS SUBORDINATE 9. SECTION 206C(1A) MANDATES THAT ANY PERSON RESPON SIBLE FOR COLLECTING TAX UNDER SECTION 206C(1) NEED NOT DO SO IF HE OBTAINS A DECL ARATION FROM THE BUYER THAT HE IS PURCHASING THE GOODS FOR USE IN MANUFACTURING, PROC ESSING OR PRODUCING ARTICLES OR THINGS. IT DOES NOT SAY THAT SUCH DECLARATION HAS TO BE OBT AINED AT THE VERY SAME MOMENT WHEN A SALE IS AFFECTED. A READING OF SUB SECTION (1B) CLE ARLY BRINGS OUT THIS SINCE OBLIGATION OF THE ASSESSEE TO FILE A COPY OF THE DECLARATION ARIS ES ONLY WHEN THE DECLARATION IS FURNISHED TO HIM BY THE BUYER. THE POINT OF REFERENCE IS FURN ISHING OF DECLARATION BY THE BUYER AND NOT THE MONTH OR DATE ON WHICH SALE IS AFFECTED BY THE ASSESSEE. EVEN IF WE CONSIDER THAT THERE IS A BREACH ON THE PART OF THE ASSESSEE IN NO T OBTAINING THE DECLARATION FROM THE BUYER THE MOMENT A SALE WAS AFFECTED, AND IN FILING IT BEFORE THE CCIT OR CIT, AS THE CASE MAY BE, A SIMILAR BREACH WAS CONSIDERED TO BE ONLY TECHNICAL AND ONE THAT COULD BE CONDONED BY HONBLE MADRAS HIGH COURT IN THE CASE O F ADISANKAR SPINNING MILLS (P) LTD., (SUPRA). IN THE SAID CASE, ASSESSEE HAD FILED FORM 27C SUBSEQUENT TO THE PROCEEDINGS, THROUGH A RECTIFICATION PETITION UNDER SECTION 154, BUT STILL CONSIDERED TO BE SUFFICIENT COMPLIANCE, WHICH VIEW OF THE TRIBUNAL W AS CONFIRMED BY HONBLE MADRAS HIGH COURT. PROCEEDINGS ON THE ASSESSEE FOR THE ALL EGED DEFAULT HERE WERE INITIATED ON 10/10/2011 AND ASSESSEE HAD BEFORE 31/10/2012 FILED THE FORMS. ASSESSMENT YEARS INVOLVED WERE ASSESSMENT YEAR 2009-10 TO 2011-12 AN D ITA NO.1153/BANG/2014 ITA NO. 2201/AHD/2015 ASST. YEAR 2006-07 7 DR.HAJJAJI KRISHNAMURTHY ANAND PAGE 9 OF 9 THERE WA S MUCH TIME LEFT WITH THE REVENUE TO VERIFY WHETHER THE BUYERS WERE INDEED USING THE WOOD PULP FOR MANUFACTURING, PROCESSING OR PRODUCING ARTICLE OR THING AND NOT FO R TRADING AND TO PROCEED AGAINST THEM IF THEY HAD FURNISHED FALSE DECLARATION. WE ARE THEREF ORE OF THE OPINION ASSESSEE COULD NOT HAVE BEEN DEEMED AS ONE IN DEFAULT UNDER SECTION 20 6C(6D) OF THE ACT OR LIABLE FOR INTEREST UNDER SECTION 206(7). ORDERS OF THE LOWER AUTHORITIES WERE SET ASIDE. 10. APPEALS OF THE ASSESSEE ARE ALLOWED. 9. APPLYING THE FACTS OF THE CASE ON THE ABOVE REFE RRED DECISION OF THE CO-ORDINATE BENCH WE FIND THAT ASSESSEE HAS DUL Y OBTAINED FORM 27C FOR THE SALES OF RS.1,57,60,687/- AND THERE IS A LIST OF 24 PARTIES SHOWN IN THE ORDER OF LD. CIT(A) AT PARA 5.3 AND OU T OF 24 PARTIES IN 19 CASES COLUMN OF DATE SHOWN IN PART-I IS NOT FILLED AND IN THE REMAINING SIX CASES EITHER THERE IS A MINOR OVERWRITING IN TH E FORM OR WRONG DATE IS MENTIONED. BUT THE FACT REMAINS THAT ALL THE DEC LARATIONS ARE DULY SIGNED, ALL THE NECESSARY DETAILS OF PURCHASE MADE BY THE BUYERS ARE CORRECTLY ENTERED, DETAILS MENTIONED BY THE BUYERS HAVE BEEN DULY VERIFIED BY THE ASSESSEE AND MOST IMPORTANTLY THE F IGURES SHOWN BY THE BUYERS IN THE DECLARATION ARE DULY REFLECTED IN THE SALES ACCOUNT OF THE ASSESSEE WHICH IS PART AND PARCEL OF THE AUDITE D FINANCIAL STATEMENTS AND NOT A SINGLE MISTAKE IN THE ABOVE FA CTS HAVE BEEN NOTICED BY THE LOWER AUTHORITIES. ACCORDINGLY, IN V IEW OF THE ABOVE DISCUSSION AND RELYING ON THE DECISION OF THE CO-OR DINATE BENCH IN THE CASE OF KARNATAKA FOREST DEV. CORPN. LTD. VS. ITO ( SUPRA), WE ARE OF THE VIEW THAT THE MOMENT ASSESSEE HAS RECEIVED FORM NO.27C FROM THE BUYERS HIS LIABILITY TO COLLECT TCS @ 1% GETS A WAY AND THE ASSESSEE SHOULD NOT BE DEEMED TO BE IN DEFAULT FOR ANY MINOR CLERICAL ITA NO. 2201/AHD/2015 ASST. YEAR 2006-07 8 MISTAKES IN THE FORMS SUBMITTED BY THE BUYERS IN TH E GIVEN CIRCUMSTANCES WHEN THERE IS NO VARIATION IN THE PUR CHASE FIGURES SHOWN BY THE BUYERS WITH THE SALES FIGURE SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 1/03 /2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 2201/AHD/2015 ASST. YEAR 2006-07 9 1. DATE OF DICTATION: 15/2/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 23/02/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:1 /3/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: