Failure to Collect TCS on Sale of Metal Scrap before Limitation Period: ITAT Quashes AO's order [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has quashed an order passed by the Assessing Officer (AO) for failure to collect tax at source (TCS) on the sale of metal scrap.

The ITAT held that the AO's order was passed after the limitation period and that the assessee's failure to collect TCS did not cause any loss to the revenue.

The assessee, an individual who is engaged in the business of trading in metal scrap, sold metal scrap worth Rs. 4,90,30,865 in the assessment year 2012-13. The assessee failed to collect TCS on the sale of metal scrap. T

The AO issued a show cause notice to the assessee, demanding TCS of Rs. 4,90,309 and interest of Rs. 3,77,538. The AO passed an order on 26-07-2017, imposing TCS and interest on the assessee. The assessee challenged the order of the AO in the ITAT.

The AO contended that the AO's order was issued after the limitation period had expired. The limitation period for enforcing an order under Section 206C(6A) of Income Tax Act, 1961 is four years from the end of the financial year in which the failure to collect TCS occurred. The AO's order was issued on July 26, 2017, more than four years after the fiscal year ended in 2012-13.

The AO's order was invalid since it resulted in no revenue loss and the assessee reported the sale of metal scrap. As a result, the revenue had all of the information it required to determine the assessee's TCS responsibility.

The AO further argued that the limitation period did not apply in this case because the assessee had deliberately failed to collect TCS and the assessee's failure to collect TCS had caused loss to the revenue.

The Gujarat High Court ruled in CIT (TDS) v. Anagram Wellington Assets Management Co. Ltd. that the limitation period for passing an order under section 206C(6A) of the Income Tax Act is four years from the end of the financial year in which the failure to deduct TDS occurred. The court also held that the limitation period is a statutory provision and cannot be waived by the AO.

The Two Member Bench comprising M.N. Goswami (Judicial Member) and Kamlesh Chandra Agrawal (Accountant Member) agreed with the assessee's arguments and ruled that the AO's order was issued after the limitation period had expired.

The ITAT further ruled that the AO's ruling was illegal because it resulted in no income loss. As a result, the ITAT quashed the order of the AO.

To Read the full text of the Order CLICK HERE

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