No penalty under section 271CA for violation of section 206C liable if the assessee furnished Form 27BA

Brief Facts:

The assessee is an individual business liable to collect tax at source on the transactions of trading in iron and steel scrap which he fails to do so. He later deposited the amount of TCS due along with interest due thereon. The assessee also provided Form No. 27BA duly certified by a CA in support of its contention that the parties from whom tax ought to be collected are duly assessed to tax and has reflected the alleged sum liable to TCS in their ITR. However, the A.O. imposed penalty u/s 271CA which was later confirmed by the Ld. CIT(A). Thus, the assessee is in appeal before the Tribunal.

Observations:

Proviso to section 206C(6A) reads as follows:

“Provided that any person responsible for collecting tax in accordance with the provisions of sub-section (1) & (1C), who fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licensee or lessee shall not be deemed to be an assessee in default in respect of such tax if such buyer or licensee or lessee- (i) has furnished his return of income u/s 139; (ii) has taken into account such amount for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed.”

With reference to the above provision, we find that the assessee once files Form 27BA duly certified by a CA stating that the buyer or licensee or lessee has furnished the ITR u/s 139 of the Act, after taking into account such amount for computing income in such return of income and has paid the tax due on the income declared by him in such ITR, he fulfills his condition and he will not be treated as assessee in default and thus would be precluded from the levy of penalty u/s 271CA of the Act.

Though in the instant case, the assessee has deposited TCS and interest thereon subsequently but even in the cases where tax is not collected but the assessee furnishes the Form 27BA of the IT Rules, then also the assessee is not liable to have violated the provisions of section 206C.

Ruling:

In view of the above discussion, it is noticed that there is no violation of the provisions of section 206C of the Act. Examining the facts of the instant case, we find that the case of the assessee is on a much better footing as TCS is deposited, interest levied thereon have also been deposited and Form 27BA of the Act certified by CA containing all the details as required in the proviso to section 206C(CA) of the Act have been fulfilled. We, therefore, find no justification in the action taken by the Ld. AO of levying penalty u/s 271CA of the Act by treating the assessee in default. Accordingly, the penalty levied for A.Y. 2011-12 & 2015-16 are deleted.

Read detailed order: Ajit Lalwani vs. ACIT (TDS)

Disclaimer: The above article is based on the ruling of the Hon'ble ITAT Indore and is meant for educational purposes only. Readers are therefore requested to act diligently and under consultation with any professional before applying the information contained in this article.