The ITO, TDS-3, JAMNAGAR V. Shree Suresh B. Jain, JAMNAGAR

ITA 516/RJT/2012

• Counselvise Citation: 51624914 RSA 2012
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 12-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT B JHAVERI DR E
• Section: 133A

Judgement Text

A , IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. 9 . . T E R . . R R BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO S . 516 & 517 /RJT/2012 ( ( / ASSESSMENT YEAR S 200 9 - 10 & 2010 - 11. THE INCOME - TAX OFFICER, TDS - 3 , JAMNAGAR. ( / APPELLANT) SHRI SURESH B. JAIN, PROP: LOKPRIYA METAL CORPORATION, 428/1/A, SHANKER TEKRI, UDHYOGNAGAR, JAM NAGAR. PAN : AA YPJ3650R/RKTS00447G S / RESPONDENT D / REVENUE BY DR. JAYANT B. JHAVERI, DR (E / ASSESSEE BY NONE. (WRITTEN SUBMISSIONS) / DATE OF HEARING 1 0 - 0 9 - 2013 / DATE OF PRO NOUNCEMENT 13 - 09 - 2013 / ORDER 9 . . T , E R / T. K. SHARMA, J. M. : THE S E TWO APPEAL S BY THE REVENUE ARE AGAINST THE COMMON ORDER DATED 19 - 06 - 2012 OF LD. CIT (A) - II, RAJKOT FOR THE ASSESSMENT YEAR S 200 9 - 10 & 2010 - 11. 2 . T HE FACTS , I N BRIEF, ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND PROPRIETOR OF M/S. LOKPR I YA METAL CORPORATION WHICH IS ENGAGED IN BUSINE SS OF TRADING OF SCRAP. A SURVEY U/S.133A OF THE ACT WAS CARRIED OUT AT THE ASSESSEES PREMISES ON 22 - 12 - 2009. DURING THE COURSE OF SURVEY, AO OBSERVED THAT ASSESSEE HAD SOLD SCRAP OF RS.4,78,05,520 / - DURING THE PREVIOUS YEAR RELE VANT TO ASSESSMENT YEAR 2008 - 09 AND SCRAP OF RS.5,60,74,904/ - DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009 - 10. AO THEREFORE ISSUED A SHOW CAUSE NOTICE DATED 22 - 12 - 2009 PROPOSING TO PASS AN ORDER U/S.206C (6) AND TO CHARGE INTERES T U/S.206C (7) OF THE I.T. ACT. IN RESPONSE TO ABOVE, ASSESSEE VIDE LETTER DATED 29 - 12 - 2009 SUBMITTED AS UNDER: - AS REGARDS ALLEGED DEFAULT IN COLLECTING AND DEPOSITING TAX (TCS) INTO THE GOVERNMENT ACCOUNT ON SCRAP SOLD BY US, WE WISH TO DRAW YOUR KIND ATTENTION TO OUR REPLY DATED 30.11.2009 WHEREIN WE HAVE CLEARLY SHOWN TO YOUR GOODSELF THAT THE GOODS IN WHICH WE DEAL VIZ. SCRAP DO NOT FALL WITHIN THE DEFINITION OF SCR AP GIVEN IN SECTION 206C AND ACCORDINGLY WE HAVE NOT ITA 516 & 517 - 2012 2 COLLECTED AND PAID ANY TCS ON THE SCRAP TRADED BY US. THIS FACT WAS ALSO EXPLAINED TO YOUR GOODSELF DURING THE COURSE OF SURVEY U/S 133A CONDUCTED ON 22/12/2009 AT OUR BUSINESS PREMISES. AT THE COST O F PAIN OF REPETITION, WE RE - ITERATE THE FOLLOWING FACTS TO SHOW THAT THERE IS NO DEFAULT ON OUR PART IN MAKING COMPLIANCE TO TCS PROVISIONS: 1 . WE ARE ENGAGED IN THE BUSINESS OF TRADING IN NON - FERROUS METAL VIZ. SCRAP. 2 . AS PER PROVISIONS OF SECTION 206C(1), THE SELLER IS REQUIRED TO COLLECT TAX AT SOURCE FROM THE BUYER ON SALE OF CERTAIN GOODS AND ONE OF SUCH GOODS INCLUDES SCRAP. 3 . THE WORD SCRAP HAS BEEN DEFINED IN EXPLANATION (B) OF SECTION 206C OF THE INCOME TAX ACT, 1961 WHICH IS REPRODUCED IN YOUR SH OW CAUSE NOTICE AND IT READS AS UNDER: SCRAP MEANS WASTE AND SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS. 4 . IT IS UNDISPUTED FACT THAT WE ARE JUST THE TRADER OF SCRAP SIMPLICITER. FURTHER, SCRAP SO TRADED BY US IS NOT GENERATED BY US OUT OF ANY MANUFACTURE OF MECHANICAL WORKING OF MATERIALS AS WE DO NOT CARRY OUT ANY MANUFACTURING ACTIVITY IN THE SCRAP PURCHASED BY US AND IT IS BEING PURCHASED AND SOLD BY US AS SUCH. 5 . THE SCRAP SO TRADED (PURCHASED AND SOLD) BY US CANNOT BE SAID TO HAVE BEEN THE SCRAP GENERATED OUT OF ANY MANUFACTURING OR MECHANICAL WORKING BY ANY STRETCH OF IMAGINATION OR LOGIC. 6 . IN VIEW OF THE ABOVE NOTED FACTS, SCRAP TRADED BY US FALLS OUTSIDE THE PURVIEW OF DEFINITION OF SCRAP FOR THE PURPOSE OF PROVISIONS OF SECTION 206C RELATING TO COLLECTION OF TAX AT SOURCE. IT IS THEREFORE TO SUBMIT THAT THE PROVISIONS OF SECTION 206C RELATING TO COLLECTION OF TAX AT SOURCE DO NOT APPL Y TO US. 7 . IT IS SUBMITTED WITH RESPECT THAT IF THE INTENTION OF THE LEGISLATURE WAS TO INCLUDE ALL KIND OF SCRAPS FOR THE PURPOSE OF LEVY OF TCS (I.E. IRRESPECTIVE OF THE FACT WHETHER IT IS GENERATED OUT OF MANUFACTURING OR IT IS MERELY TRADED) THEN THE DE FINITION GIVEN IN SECTION 206C WOULD NOT HAVE INCLUDED / USED THE WORDS SCRAP FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS. IN VIEW OF THE ABOVE, WE REQUEST YOU SIR TO KINDLY APPRECIATE OUR ABOVE SUBMISSIONS IN PROPER PERSPECTIVE AND NOT TO TREAT US AS AN ASSESSEE DEEMED TO BE IN DEFAULT AND ACCORDINGLY DROP THE PROPOSAL TO PASS AN ORDER U/S 206C(6) AND 206C(7) OF THE INCOME TAX ACT, 1961 AND OBLIGE. IN CASE YOU DO NOT AGREE WITH OUR SUBMISSIONS AS MADE ABOVE, WE REQUEST YOU TO KINDLY PROVI DE US AN OPPORTUNITY OF PERSONAL HEARING TO PROVE / EXPLAIN OUR CASE. 3. AO VIDE TWO SEPARATE ORDERS BOTH DATED 12 - 01 - 2010 HELD THAT ASSESSEE IS A TRADER IN SCRAP AND NOT A MANUFACTURER. ACCORDINGLY, SEC. 206C(1) SQUARELY APPLIES TO THE ASSESSEE. AO ACCO RDINGLY WORKED OUT TCS @ 1% AT RS.4,78,055/ - AND RS.5,60,749/ - FOR THE ASSESSMENT YEAR 2009 - 10 AND 2010 - 11 PLUS INTEREST @ ITA 516 & 517 - 2012 3 1% PER MONTH WHICH WORKED OUT TO RS.73,192/ - FOR THE ASSESSMENT YEAR 2009 - 10 AND RS.27,953/ - FOR THE ASSESSMENT YEAR 2010 - 11. 4. ON A PPEAL, LD. CIT (A) IN THE IMPUGNED ORDER DATED 19 - 06 - 2012 HELD THAT THOUGH THE ASSESSEE FOUND TO HAVE SOLD SCRAP BUT SUCH SCRAP IS NOT THE SCRAP AS DEFINED IN EXPLANATION (B) TO SECTION 206C OF THE I.T. ACT. HE FURTHER HELD THAT SCRAP SO SOLD WAS NEITHER G ENERATED FROM THE MANUFACTURE OR MECHANICAL WORKING OF MATERIALS NOR WAS THE SCRAP SOLD NOT USABLE AS SUCH. FOR THIS REASON, THE LD. CIT (A) FOLLOWING THE DECISION OF ITAT RAJKOT BENCH IN ITA NO.1167 & 1168/RJT/2010 IN THE CASE OF NATHULAL P. LAVTI HELD TH AT AO WAS NOT JUSTIFIED IN PASSING ORDER U/S.206C(6) /206C(7) OF THE ACT THEREBY DIRECTING THE ASSESSEE TO PAY RS.5,51,247/ - & RS.5,88,702/ - FOR THE FINANCIAL YEARS 2008 - 09 & 2009 - 10. AGGRIEVED WITH THE ORDER OF LD. CIT (A), THE REVENUE IS IN APPEAL BEFOR E THE TRIBUNAL ON THE FOLLOWING GROUND: - THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN DELETING THE ORDER PASSED U/S 206C(6) OF THE I.T. ACT OF RS.4,78,055/ - AND INTEREST CHARGE UNDER SECTION 206C(7) OF THE I.T. ACT OF RS.73,192/ - A.Y. 2008 - 09 & ORDER PASSED U/S 206C(6) OF THE I.T. ACT OF RS.5,60,749/ - AND INTEREST CHARGE UNDER SECTION 206C(7) OF THE I.T. ACT OF RS.27,953/ - BY THE A.O. EVEN THOUGH SECTION 206C OF THE I.T. ACT IS CLEAR TO SPECIFY THAT SELLER IS REQUIRED TO COLLECT TAX AT SOURCE FROM THE BUYER ON SALE OF WASTE AND SCRAP EVEN THOUGH SUCH WASTE AND SCRAP IS NOT GENERATED FROM THE MANUFACTURE OR MECHANICAL WORKING CARRIED OUT BY THE SELLER BUT BY THE OTHER PARTY. THE BUSINESS OF THE ASSESSEE IS TO PURCHASE SUCH TYPE OF SCRAP IN BULK AND SELL IT TO VARIOUS PARTIES. THEREFORE, BEING OF A SELLER OF SCRAP, THE ASSESSEE IS LIABLE TO COLLECT TAX AT SOURCE. 5. ON THE DATE FIXED FOR HEARING, NONE WAS PRESENT FORM THE SIDE OF THE ASSESSEE. ONLY WRITTEN SUBMISSION WAS FILED WHICH READS AS UNDER: - AT THE OUTSET, WE HUMBLY SUBMIT THAT THE DECISION OF SPECIAL BENCH IN THE CASE OF BHARTI AUTO PRODUCTS HAS BEEN RECENTLY PRONOUNCED WHICH HAS BEARING ON THE CAPTIONED APPEALS. WE NEED SOME TIME TO STUDY THE SAME WITH RESPECT TO FACTS OF THE AP PELLANTS CASE. WE THEREFORE REQUEST YOUR HONOUR TO KINDLY GIVE US SOME TIME FOR THE SAME AND OBLIGE. IF OUR ABOVE REQUEST IS NOT TO BE ACCEDED TO, WE REQUEST THAT THE MATTER MAY PLEASE BE RESTORED THE FILE OF A.O. AS THE APPELLANT IS IN A POSITION TO EST ABLISH THAT THE BUYERS HAVE PAID THE DUE TAXES AND THAT THERE IS NO LOSE TO THE REVENUE IN VIEW OF THE PROVISO TO SECTION 206C(6A). IT MAY PLEASE BE APPRECIATED THAT THE ABOVE PLEA WAS TAKEN BY THE APPELLANT BEFORE CIT (A) BY RELYING UPON APEX COURT JUDGM ENT IN THE CASE OF HINDUSTAN COCA COLA (293 ITR 226). KINDLY REFER TO POINT NO.10 OF THE APPELLANTS SUBMISSION ON PAGE NO.4 OF CIT (A)S ORDER. HOWEVER, SINCE THE LD. CIT (A) ALLOWED THE APPEAL OF THE APPELLANT ON PRINCIPLE GROUND THAT TCS WAS NOT APPLICA BLE THIS PLEA WAS NOT ADJUDICATED UPON. THUS, THE CONTENTION OF THE APPELLANT WHICH IS IN LINE WITH THE FIRST PROVISO TO SECTION ITA 516 & 517 - 2012 4 206C (6A) IS ALREADY ON THE RECORD AND THE SAME IS NOT A NEW GROUND/CONTENTION. 6. SHRI DR. JAYANT B. JHAVERI, DR POINTED O UT THAT ITAT SPECIAL BENCH IN THE CASE OF M/S. BHARTI AUTO PRODUCTS IN ITA NOS.391 & 392/RJT/2011 VIDE ORDER DATED 06 - 09 - 2013 HELD THAT TCS APPLIED TO HOLD AS MEANING OF SCRAP NOT RESTRICTED TO ONE ARISEN FROM MANUFACTURER OR MECHANICAL OPERATION; SEC. 206C ALSO APPLIES TO BUSINESS OF TRADING IN SCRAP. WITH REGARD TO NON - ADJUDICATION OF PLEA OF THE ASSESSEE REGARDING JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA, 293 ITR 226 SUPREME COURT, THE LD. DR POINTED OUT THAT ITAT RAJKOT SP ECIAL BENCH IN THE CASE OF BHARTI AUTO PRODUCTS (SUPRA) HAS HELD THAT ASSESSEE WOULD BE ENTITLED TO RELIEF IN RESPECT OF AMENDMENT TO SEC TION 206C BY FINANCE ACT, 2012, IF THE BUYER HAS PAID THE TAXES AS REVENUES INTEREST IS PROTECTED. FOR THIS PURPOSE, T HE MATTER BE REMANDED TO THE FILE OF AO. 7. AFTER CONSIDERING WRITTEN SUBMISSION AND SUBMISSION OF LD. DR, WE ARE OF THE VIEW THAT AS PER JUDGMENT OF ITAT SPECIAL BENCH IN THE CASE OF M/S. BHARTI AUTO PRODUCTS IN ITA NOS.391 & 392/RJT/2011 (SUPRA), AO RIG HTLY HELD THAT ASSESSEE IS LIABLE TO TCS @ 1% PLUS INTEREST THEREON @ 1%. WE THEREFORE, SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORE THE MATTER TO THE FILE OF AO WITH THE DIRECTION THAT AO MAY ALLOW THE RELIEF AS PER AMENDMENT TO SECTION 206C BY FINANCE ACT, 2012 WHEREBY ASSESSEE WOULD BE ENTITLED TO RELIEF, IF BUYER HAS PAID THE TAXES BECAUSE REVENUES INTEREST IS PROTECTED. FURTHER, AS PER JUDGMENT OF SPECIAL BENCH, AMENDMENT TO FIRST PROVISO OF SUB - SECTION (6A) OF SECTION 206C IS APPLICABLE RETROSPECTI VELY. FOR THIS PURPOSE, THE MATTER IS RESTORED TO THE FILE OF AO AND HE WILL CARRY OUT THE NECESSARY CLARIFICATION AND ALLOW THE APPROPRIATE RELIEF AS PER JUDGMENT OF HONBLE ITAT RAJKOT SPECIAL BENCH IN THE CASE OF M/S. BHARTI AUTO PRODUCTS IN ITA NOS.391 & 392/RJT/2011 (SUPRA). 8 . IN THE RESULT, FOR THE STATISTICAL PURPOSES, BOTH THE APPEALS OF THE REVENUE ARE TREATED AS ALLOWED. 9 . THIS O RDER IS PRONOUNCED IN OP EN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( . . D . D. K. SRIVASTAVA ) ( . . ( / T. K. SHARMA) D / ACCOUNTANT MEMBER D /JUDICIAL MEMBER , / ORDER DATE 13 - 0 9 - 2013. /RAJKOT NVA/ - ITA 516 & 517 - 2012 5 3 EJO O / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT - THE INCOME - TAX OFFICER, TDS - 3, JAMNAGAR. 2 . S /RESPONDENT - SHRI SURESH B. JAIN, PROP: LOKPRIYA METAL CORPORATION, 428/1/A, SHANKER TEKRI, UDHYOGNAGAR, JAMNAGAR. 3 . A / CONCERNED CIT - TDS, RAJKOT 4 . FORW RDED - / CIT (A) - II, RAJKOT. 5 . SA , A , / DR, ITAT, RAJKOT 6 . ( / GUARD FILE. / BY ORDER TRUE COPY. PRIVATE SECRETARY, ITAT, RAJKOT