Seller is not responsible for verification of Form 27C for obtaining goods without Collection of Tax at Source if it is duly filed in and signed by the declarant and forwarded within the prescribed time limit
In a recent judgment, the Hon’ble Jharkhand High Court has declined to interfere with the order of the ITAT holding that seller company was not responsible for verification of Form 27C for non Collection of Tax at Source if it is duly filed in and signed by the declarant and forwarded to the respective revenue authorities, within the prescribed time limit.
ABCAUS Case Law Citation:
4509 (2025) (04) abcaus.in HC
In the instant case, the appeal had been preferred by the Revenue under section 260-A of the Income-tax Act, 1961 (the Act) challenging the Order passed by the Income Tax Appellate Tribunal (ITAT), Ranchi in holding that that assessee company was not responsible for verification of Form 27C if it is duly filed in and signed by the declarant.
Section 206C of the Act provides for Collection of Tax at Source (TCS). However Sub-section (1A) provides that no collection of tax shall be made if the buyer furnishes to the person responsible for collecting tax, a declaration in Form No. 27C to the effect that the goods referred are to be utilised for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes.
Further, the sub-section (1B) casts a duty on the person responsible for collection of tax to deliver the said declaration in Form No. 27C to Income Tax Department on or before the seventh day of the month next following the month in which the declaration is furnished by the declarant buyer.
The assessee company was a PSU enaged in the coal production. The assessee had supplied the coal to the buyers without collection of tax at source on the strength of said declaration in Form No. 27C from the buyers.
The Revenue conducted an enquiry with respect to declaration in Form 27C and it transpired that the buyer were not the end user of the coal purchased from the assessee. As a result, the Revenue treated the assessee company as “assessee in default” and raised the demand.
However, the ITAT held that the assessee company was not responsible for verification of Form 27C once it is duly filed in and signed by the declarant. The ITAT deleted the entire demand of TCS by holding that the Revenue authorities had wrongly treated the company as “assessee in default” under section 206C of the Act.
Before the Hon’ble High Court, the Revenue contended that it was the duty and the responsibility of the assessee company to collect TCS @ 1% under section 206C (1A) of the Act from all buyers on the sale of coal if it was not used for self-consumption or for the purpose for which it was intended to be used.
It was submitted that the language of the provisions requires the seller to verify the declaration as mentioned in the sub-section (1A) of the section 206C, meaning thereby that not only it should be furnished in prescribed form in duplicate, but also verified in prescribed manner. Therefore, the assessee company was required to verify the genuineness of the buyers who submitted Form 27C for they being the end user of the coal for manufacturing, processing or producing articles or things or for the purpose of generation of power and not for trading purposes.
It was further submitted that ITAT was not correct in shifting the entire onus to verify the genuineness of such buyers who submitted the Form 27C to the seller, on the Income Tax Department.
The Hon’ble High Court observed that the fulcrum of the Revenue’s appeal was the interpretation of section 206C of the Act. As per the Revenue, under section 206C (1A) of the Act, the verification of the declaration (Form No. 27C) to be furnished by the purchaser is to be done by the seller.
The Hon’ble High Court observed that the ‘declarant’ in Form-27C is the ‘purchaser’ and not the ‘seller’. the phrase ‘verified in the prescribed manner’ in the scheme of the Act and the Rules, mean that the verification/ declaration is to be made by the purchaser who is providing the signed/ verified form to the seller, and neither the Act, nor the Rules, in any manner lay down that any verification whatsoever is to be done by the seller, as was being sought to be contended by the Revenue.
The Hon’ble High Court further observed that the ITAT had rightly held that once Part I of Form 27C dully filled and signed by the declarant is received by the assessee and Part-II of Form 27C is dully filled and signed by the seller is forwarded to the respective revenue authorities, within the prescribed time limit, then nothing more is required to be done by the assessee and if any buyer is found to have given a false statement, then the assessee should not be held responsible for such act of the buyer.
The Hon’ble High Court opined that there was no question of law, much less any substantial question of law involved in the instant appeal, as, what was being contended by the Revenue was clearly de hors what is laid down in section 206C(1A) of the Act read with Rule 37C of the Rules and Form 27C.
Accordingly, the appeal of the Revenue was dismissed.
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Author’s Note:
Form No. 15G and Form No. 15H are similar declarations for claiming certain incomes with TDS. The language of the declaration by the receiver and the verification by the person responsible for making payments are akin to Form No. 27C. This judgment with respect to Form No. 27 should apply mutatis mutandis to the Form No. 15G and/or 15H.
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