AI Insights
The case involves appeals by Shri Vinod Sukhwani against the orders of the CIT(A) for the assessment years 2015-16 and 2016-17, which upheld the Assessing Officer's decision that the appellant was in default for not collecting TCS at 1% on the sale proceeds of scrap. The appellant argued that the buyers of the scrap did not fall under the definition of 'buyers' as per the Income Tax Act, and that some buyers were manufacturers who had submitted Form 27C, exempting the need to collect TCS. However, the CIT(A) and the tribunal found that the appellant was required to collect TCS on the sale of scrap and had failed to do so, thus confirming the demand raised by the Assessing Officer.
Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 113215 (ITAT-LUCKNOW)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 9 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-07-2023
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
19-07-2023
Assessment Year
2015-2016
Appeal Filed On
27-09-2021
Judgement Text
I.T.A. No. 83 & 84/Lkw/2021 Assessment Year:2015-16 & 16-17 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘A’, LUCKNOW BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.A. No. 83 & 84/Lkw/2021 Assessment Year:2015-16 & 2016-17 Shri Vinod Sukhwani, D-19, Swastik Foundry, Kanpur Road, Sarojini Nagar, Lucknow. PAN:AOWPS5483D Vs. Income Tax Officer, TDS-1, Lucknow. (Appellant) (Respondent) O R D E R PER ANADEE NATH MISSHRA:A.M. (A) These two appeals have been filed by the assessee against the impugned appellate orders of learned CIT(A) for the assessment year 2015- 16 and 16-17. For the sake of convenience these appeals are being taken up together and are being decided through this consolidated order. The grounds of appeal are as under: Appellant by None Respondent by Shri Sanjeev Krishna Sharma, Senior Departmental Representative (“Sr. DR” for short) Date of hearing 20/07/2023 Date of pronouncement 25/07/2023 I.T.A. No. 83 & 84/Lkw/2021 Assessment Year:2015-16 & 16-17 2 Assessment Year :2015-16 “1. Because the CIT(A) has erred on facts and in law in upholding the fact that the business activity of trading in ferrous and non- ferrous metals carried on by the appellant, as an activity of sale of scrap, as defined in section 206C(1) of the I.T. Act, 1961, thereby wrongfully treating the appellant as an assessee in default for not collecting TCS @1% on the entire sale proceeds made by the appellant. 2. Because the CIT(A) has erred on facts and in law by upholding the inadvertent applicability, by the Assessing Officer, of provision of section 206C(1) on the appellant, despite of the fact that customers who are buying goods from the appellant do not fall in the definition of Buyers as provided in the Explanation (aa) to section 206C of the Income Tax Act, 1961. There by wrongfully treating the appellant as an assessee in default for not collecting TCS @1% on the entire sale proceed of the appellant firm. 3. Because the AO as well as the CIT(A) have erred on facts and in law by ignoring the fact that some of the buyers of the appellant are manufacturers, from whom Form 27C has been received by the appellant, thus, provisions of section 206C(1) of the Income Tax Act, 1961 are not applicable on the appellant, and as such, the appellant cannot be held an assessee in default as per provisions of section 206C(6) and 206C(6A) of the Income Tax Act, 1961 with respect to the said buyers. 4. Because the CIT(A) has erred in law and on facts by upholding ignorance made by the Assessing Officer with respect to the Obtainment of Form 27BA as specified under Rule 37J of the Income Tax Rules, 1962, owing to which the assessee cannot be held liable as an assessee in default as per the first proviso to section 206C(6A) of the Income Tax Act, 1961. 5. Because the Judgements relied upon by the CIT(A) are distinguishable on law and facts as well as the CIT(A) has erred in law by not following the Jurisdictional Judgement passed in the similar case by Hon'ble Income Tax Appellate Tribunal, Lucknow Bench.” I.T.A. No. 83 & 84/Lkw/2021 Assessment Year:2015-16 & 16-17 3 Assessment Year :2016-17 “1. Because the CIT(A) has erred on facts and in law in upholding the fact that the business activity of trading in ferrous and non- ferrous metals carried on by the appellant, as an activity of sale of scrap, as defined in section 206C(1) of the I.T. Act, 1961, thereby wrongfully treating the appellant as an assessee in default for not collecting TCS @ 1% on the entire sale proceeds made by the appellant. 2. Because the CIT(A) has erred on facts and in law by upholding the inadvertent applicability, by the Assessing Officer, of provision of section 206C(1) on the appellant, despite of the fact that customers who are buying goods from the appellant do not fall in the definition of Buyers as provided in the Explanation (aa) to section 206C of the Income Tax Act, 1961. There by wrongfully treating the appellant as an assessee in default for not collecting TCS @1% on the entire sale proceed of the appellant firm. 3. Because the Judgements relied upon by the CIT(A) are distinguishable on law and facts as well as the CIT(A) has erred in law by not following the Jurisdictional Judgement passed in the similar case by Hon'ble Income Tax Appellate Tribunal, Lucknow Bench.” (A.1) At the time of hearing before us today, the applicant assessee was represented by none. Earlier, hearings were fixed on 07/07/2022 and 22/05/2023 but on these dates also, no one had appeared on behalf of the assessee at the time of hearing. The Revenue was represented by Shri Sanjeev Krishna Sharma, learned Sr. D.R. (A.2) First we take up the appeal in I.T.A. No.83/Lkw/2021 for assessment year 2015-16. In this case the Assessing Officer passed order dated 30/03/2019 u/s 206C(6), 206C(6A) & 206C(7) of the Income Tax Act, 1961 (“IT Act” for short) whereby he held that the assessee was liable to pay an amount of Rs.3,90,763/- on account of default u/s 206C(6), 206C(6A) & 206C(7) of the IT Act. The relevant portion of the aforesaid order dated 30/03/2019 of the Assessing Officer is reproduced as under: I.T.A. No. 83 & 84/Lkw/2021 Assessment Year:2015-16 & 16-17 4 “2. As per provisions of section 206C(1) of the Income Tax Act, 1961, every person selling the scrap is required to collect the TCS @1% of the sale amount from the buyer and deposit the same in the Government Account. For ready reference, provisions of section 206C(1) are reproduced as under: "Every person being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified.” 3. On perusal of records it was found that the assessee has neither collected the TCS from the buyers @ 1% of the sale amount nor deposited the same in the Government Account as per requirement of the provisions of section 206C(1) of the Income Tax Act, 1961. It was also noticed that assessee has not obtained Form 27C from the buyers meaning thereby that the scrap was not to be utilised for the purpose of manufacturing, processing or producing articles or things or for the purpose of generation of power. 4. In view of the above, a show-cause notice dated 08.03.2019 was issued to the assessee asking it to explain as to why it should not be treated as an assessee in default in terms of provisions of section 206C(6A) and 206C(7) of the Income Tax Act, 1961 for non-collection of tax @1% of total amount of scrap sold. 5. The case was fixed for hearing on 18.03.2019. In response to show-cause notice the assessee vide letter dated 19.03.2019 submitted its reply, which is reproduced here as under: "I have received your notice dated 08.03.2019 regarding TCS defaults u/s 206(C). Date of hearing was fixed on 18.03.2019. Due to some reason I am not able to provide relevant document today. Kindly give me next date of hearing as you think fit or 1 week" 6. Next date of hearing fixed on 26.03.2019. On 26.03.2019 no one appeared and nor any adjournment has been sought. On 29.03.2019 a letter dated 29.03.2019 received in this office and I.T.A. No. 83 & 84/Lkw/2021 Assessment Year:2015-16 & 16-17 5 provide month wise sale of scrap for F.Y. 2013-14. No reply and information or audit report provided for F. Y 2014-15 on the date of passing the order. I have carefully considered the facts of the case and submission made by the assessee. The term "scrap" is defined in the explanation to section 206C as per which '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. 7. Further there is no requirement that for the liability collect TCS on sale of scrap to arise, the scrap shall be processed/ produced/ manufactured by the seller himself. The seller of scrap is liable to collect tax at source from the buyer of such scrap in all the cases except if the buyer submits a declaration in Form 27C stating that the scrap is to be utilized for the purpose of manufacturing/ processing/ producing articles or things or for the purpose of generation of power and not for trading purposes. 8. This issue has been clarified by the Circular F.No. 275/86/2011- IT(B) dated 18.05.2012 issued by the Central Board of Direct Taxes which is reproduced as under: "Subject: Liability of Old Iron (Scrap) Dealers cum Traders under section 206C of the Income Tax Act, 1961- regarding Representations were received from certain Associations of Old Iron Scrap Dealers cum Traders alleging wrong interpretation of law regarding applicability of Income Tax Act, 1961 in their case. The Income Tax Act, 1961 as per Section 206C requires a seller of goods of specified nature (defined in the Act and includes scrap) to collect Tax at source at specified percentage of the receipt from the buyer and deposit the same in the Government account. The term scrap is clearly defined in the explanation to this section and there is no requirement that the goods to be eligible for scrap should be produced/ manufactured by the seller itself. Further the term buyer is also defined in the same Explanation and means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the specified nature. Thus a buyer is not restricted to a person who buys the specified goods in an auction or tender and thus includes a buyer in the retail sale of specified goods as well. As I.T.A. No. 83 & 84/Lkw/2021 Assessment Year:2015-16 & 16-17 6 per Taxation Laws (Amendment) Act 2003, w.e.f 08-09 2003, if a buyer in the retail sale of such goods buys it for personal consumption and furnishes before the seller such declaration in prescribed Form 27C, then the Seller is not liable to collect tax on the same. Thus all Sellers of Scrap, within the meaning of Section 206C, including those trading in scrap are liable to collect tax at source from the buyers of such scrap. However if the buyer declares by furnishing Form 27C before the seller its purpose for obtaining such goods being manufacturing/processing producing articles and not trading purpose then the seller is exempted from collecting such tax from such buyer. If it may be added that Sellers as defined in the explanation to Section 206C only are liable to collect tax at source. It may further be added the Act as per section 206C (9) allows any buyer to approach the Assessing Officer for obtaining a certificate of lower rate of collection of TCS". 9. In view of the above discussion, I hold that the assessee is in default as per provisions of section 206C(6A) & 206C(7) of the Income Tax Act, 1961 for not collecting tax @ 1% of sale or from the buyers. The total sale of scrap in the year under consideration is Rs.2,44,22,709/-.Hence, TCS and interest thereon for the F.Y.2014-15 are computed as under. (Rs) Total sale of scrap 2,44,22,709/- i) TCS @ 1%. 2,44,227/- ii) Interest @ 1% u/s 206C(7) 1,46,536/- TOTAL 3,90,767/- Total :Rs.3,90,763/- (Three Lakh Ninety Thousand Seven Hundred Sixty Three only) 10. Interest under sub section (7) of sec 206C of I.T. Act, 1961 has been charged @ one per cent for every month or part of month on the amount of such tax from the date on which such tax was collectible to the date on which such tax is collected and such interest shall be paid before furnishing the statement in accordance with the provisions in sub section (3) of section 200. I.T.A. No. 83 & 84/Lkw/2021 Assessment Year:2015-16 & 16-17 7 11. The demand is in addition to any other existing demand for A.Y. 2015-16 or any other demand which may be raised on any other issue not covered in this order for A.Y. 2015-16 relevant to financial year 2014-15.” (B) The assessee filed appeal against the order of the Assessing Officer in the office of learned CIT(A). In the impugned appellate order dated 30/07/2021 the learned CIT(A) dismissed the assessee’s appeal. The relevant portion of the order of learned CIT(A) is reproduced as under: “4.1 Ground Nos.1 to 6:- Through these grounds of appeal, the appellant has challenged the raising of demand amounting to Rs.3,90,763/- on account of none deduction of TCS and interest. The appellant firm is engaged in the business of trading of scrap. During the year under consideration the appellant has sold scrap amounting to Rs.2,44,22,709/-. As per the provision of section 206C(1), the appellant was required to collect the TCS @1% of the sale amount from the buyer. The appellant has neither collected the TCS nor it has deposited into the government account. As per the details available with the department it is observed that the assessee had not collected the TCS an amounting to Rs.2,44,227/- on total payment received as scrap sale of Rs.2,44,22,709/- during the year under consideration, whereas the assessee collector was liable to collect TCS Rs.2,44,227/- on the above amount but the assessee collector has not made any collection of TCS amount. Hence, the assessee collector is in default for not collecting the TCS of Rs.3,90,763/- (Rs.2,44,227+ 1,46,536/-) @1% as per u/s 206C(6) of the IT Act, 1961. 4.1.1. After considering to the above, the demand raised by the AO amounting to Rs.3,90,763/- on account of none deduction of TCS and interest is Confirmed. Therefore, the appeal on these grounds is Dismissed.” (C) At the time of hearing before us, learned Sr. Departmental Representative relied on the aforesaid orders of Assessing Officer and learned CIT(A). (D) Having regard to facts and circumstances of the case and applicable law, we find no infirmity in the orders of the Assessing Officer and learned I.T.A. No. 83 & 84/Lkw/2021 Assessment Year:2015-16 & 16-17 8 CIT(A). No material has been brought for our consideration during appellate proceedings in the ITAT to persuade us to take view different from the view taken by the learned CIT(A) in the impugned appellate order dated 30/07/2021 and the view taken by the Assessing Officer in the aforesaid order dated 30/03/2019. Accordingly, we dismiss all grounds of appeal in assessee’s appeal No.83/Lkw/2021. (E) The assessee’s appeal vide I.T.A. No.84/Lkw/2021 is pari materia with the assessee’s appeal in I.T.A. No.83/Lkw/2021 for assessment year 2015- 16. No distinguishable facts and circumstances have been brought to our notice in assessee’s appeal for assessment year 2016-16 as compared with assessment year 2015-16. Therefore, in accordance with our view taken in the assessee’s appeal in I.T.A. No.83/Lkw/2021 for assessment year 2015- 16, we dismiss all grounds in assessee’s appeal No.84/Lkw/2021 for assessment year 2016-17 also. (F) In the result, both the appeals are dismissed. (Order pronounced in the open court on 25/07/2023) Sd/. Sd/. (SUDHANSHU SRIVASTAVA) (ANADEE NATH MISSHRA) Judicial Member Accountant Member Dated:25/07/2023 *Singh Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Assistant Registrar
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