TaxTMI 
TaxTMI 
2018 (10) TMI 602
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....ce the additions may kindly be deleted in full. 2.1 Rs. 76,368/-: The Id. CIT(A) erred in law as well as on the facts of the case in sustaining the charging of interest of Rs. 76,368 u/s 201 (1A)/206C(7) on account of short collection of TCS of Rs. 79,551/- u/s 201 (1)/206C(6) on the alleged scrap sale. The interest so charged by the AO and sustained by the Id. CIT(A) is totally contrary to the provisions of law and facts on the record and hence the same may kindly be deleted in full. 2. Briefly stated, the facts of the case are that the assessee is engaged in the business of scrap trading. A spot verification was carried out at the business premises of the assessee on 19/3/2015 and thereafter, a notice was issued to the assessee U/s 201(1)/201(1A) and 206C(6)/206C(7) of the Income Tax Act, 1961 (in short the Act) for the financial year 2007-08 dated 20/3/2015 asking the assessee to provide the trial balance for the F.Y. 2007-08 alongwith the sales register/ledger account of scrap sales and asking reasons as to why the assessee should not be treated as assessee in default for non collection of TCS on the sale of scrap of Rs. 79.55 lacs and interest thereon. 3. In response, the ....
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....inly sold for their personal use, it was stated by the Assessing Officer that from the sales bills, it can be seen that the goods are sold in lots and sales bills have been issued to a single person quite a number of times in the same financial year which clearly shows that the buyer is also a business concern and not a person buying the scrap for personal use. It was further stated by the Assessing Officer that even if a buyer in the retail sale of such goods buys it for personal consumption, he has to furnish before the seller such declaration in prescribed Form 27C, which the seller has to submit to the Revenue authorities, but it has not happened in the present case. Regarding assessee's contention that the items traded were not scrap for them because it was their principal traded item and was not a waste and unused items for them, the Assessing officer held that the same has been dealt with by the CBDT vide its letter No. 275/86/2011-IT(B) dated 18/05/2012 wherein it has been clarified that 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 itse....
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....ation in Form 27BA/27C pursuant to proviso to Section 206C(6A) of the Act. The ld. CIT(A), accordingly, confirmed the findings of the Assessing officer and tax demand of Rs. 1,55,920/- so levied by the Assessing Officer. 8. Now the assessee is in appeal before us. The ld AR of the assessee has reiterated the submissions as made before the lower authorities. It was submitted by the ld AR that the Assessing Officer has issued notice U/s 201(1)/206C(6) & 201(1A)/206C(7) of the Act dated 19/3/2015 while the same can be issued only U/s 206C(6)/206C(7) for the reason that the default, if any was found U/s 206C(6) for non collection of TCS and not U/s 201(1) for non deduction of TDS as both are the separate and independent provisions. It was further submitted that even the order dated 19/03/2015 has been passed under 201(1)/206C(6) & 201(1A)/206C(7) of the Act and even the demand notice has been issued U/s 201(1)/201(1A) of the Act. It was accordingly submitted that the impugned order is itself illegal and void an initio and liable to be quashed. The notice itself was defective and for defective notice, no demand can be raised on the assessee. In support of this, reliance was placed on t....
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.... from the assessee. 13. Per contra, the ld DR vehemently argued the matter and relied on the findings of the Assessing Officer which we already discussed above and not been repeated again for sake of brevity. Further the ld DR referred to CBDT clarification vide its letter No. 275/86/2011-IT(B) dated 18/05/2012 and the decision of Special Bench of Tribunal, Rajkot Bench in the case of Bharti Auto Products Vs. CIT-II (Supra) where all these issues as raised by the ld AR have been dealt with in detail in favour of the Revenue. 14. We have heard the rival contentions and perused the material available on record. Undisputedly, the assessee is a dealer and not a manufacturer. It purchases scrap from various manufacturers and then carries out sorting of the scrap in different forms like copper, iron, plastics and PVC etc. and then sell the same in retail to various persons. 15. Now, coming to the first contention raised by the ld AR that the Assessing Officer has issued notice U/s 201(1)/206C(6) & 201(1A)/206C(7) of the Act dated 19/3/2015 while the same can be issued only U/s 206C(6)/206C(7) for the reason that the default, if any was found U/s 206C(6) for non collection of TCS and n....
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....aded item for the assessee and it is not a scrap which is generated by the assessee from its manufacturing or mechanical working of materials and the buyer in the retail sale is not a "buyer" as defined in Section 206C of the Act, we find that all these contentions have been dealt with in detail and the matter is squarely covered against the assessee by the decision of Special Bench of Tribunal in the case of Bharti Auto Products Vs. CIT-II (Supra) wherein it has been held as under (head Notes): "Section 3 of the Central Excise Act mandates levy of duty on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985. It therefore follows that the Central excise duty cannot be levied on the goods including scrap which are not manufactured or produced in India. It is in the context of the aforesaid provision that the courts and Tribunal have held, in the context of levy of excise duty, that the waste and scrap not generated from the manufacture of the prime product cannot be subjected to levy of central excise duty in t....
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....f materials. It does not further require that the scrap, in order to be covered by Explanation (b) to section 206C, should also be generated by the assessee from the manufacture or mechanical working of materials undertaken by the assessee himself. "Scrap from the manufacture or mechanical working of materials" may arise as a result of manufacturing activity undertaken by the assessee himself or by anyone else. Similarly, scrap may also arise from the mechanical working of materials, which is different from manufacture. For the aforesaid reasons, it is held that tax is required to be collected at source from the buyer, in terms of section 206C, on sale of, inter alia, scrap being waste and scrap from the manufacture or mechanical working of materials undertaken by the assessee himself or by anyone else. A seller of scrap is neither required to be a manufacturer himself nor the scope of 'scrap', as defined in Explanation (b), is restricted to scrap generated from the manufacture or mechanical working of materials undertaken by the seller himself. It is sufficient for the applicability of section 206C if the person sought to be fastened with liability under section 206C i....
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.... assessee was 'scrap'. Two, it was apparent that the material imported and subsequently sold by the assessee was 'scrap' within the meaning of Explanation (b) to section 206C. In this view of the matter, the ground taken by the assessee in both the assessment years under appeal is dismissed. [Para 37] It was further submitted that the provisions of section 206C require a seller to collect the tax at source from the buyer (and from none else) on sale, inter alia, of scrap. Attention was drawn to the definition of 'buyer' as given in sub- clause (i) of clause (aa) of Explanation to section 206C, which defines a 'buyer' as 'a person who obtains in any sale, by way of auction, tender, or any other mode, goods of the nature specified in the Table in sub-section (1)......' It was submitted that the buyer from whom tax is required to be collected at source should be one who obtains in any sale, by way of auction, tender or any other mode, goods of the specified nature. Placing reliance on the interpretative tools of noscitur a sociis and ejusdem generis, it was submitted that the phrase 'any other mode' in the expression 'a person ....
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....tute is required to be ascertained. If a given provision is plain and unambiguous and the legislative intent is clear, there is no occasion to call in aid that rule. Similarly, a phrase cannot be construed ejusdem generis unless it is susceptible of meaning analogous to the preceding words. [Para 41] As already stated earlier, section 206C seeks to prevent mischief, i.e., evasion of taxes in certain types of businesses. The words defining a buyer as 'a person who obtains in any sale, by way of auction, tender or any other mode .....' in Explanation (aa)(i) are plain and simple in their meaning and content. The buyer is one who obtains specified goods 'in any sale' which could be by way of auction, tender 'or any other mode'. The use of the word 'or' in the aforesaid expression shows that all the three phrases (namely, auction, tender or any other mode) are intended to carry independent meaning without being controlled by each other. The use of the words 'any other mode' in the said expression further shows that the mode of sale need not be by way of auction or tender alone but could be by any other mode. The words "any other mode" a....
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....-15 onwards and in the light of that, the notice issued by the assessee is void ab initio. Per contra, it has been stated by the Assessing officer that the notice so issued is in due compliance to the said provisions of section 201(3) of the Act. 18. The question is whether the limitation provisions provided under section 201(3) can be reasonably applied in the present case even though the proceedings are initiated in context of section 206C relating to default in collection of TCS in absence of specific limitation provisions provided under section 206C of the Act. 19. Even though the provisions of section 201 and section 206C are separate and independent provisions, the nature of TCS is exactly identical to the TDS and it is in the nature of tax on income which has been collected at source. In this regard, useful reference can be drawn to the decision of the Coordinate Bench in case of M/s Jai Ambey Wines vs ACIT (ITA No. 676/JP/15 dated 11.01.2017) where, speaking through one of us, it was held as under: "2.7 The essence of the above stated provisions and corresponding rules is that the tax deducted at source (TDS) is nothing but tax, and credit for TDS should go to the perso....
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....er declaring the assessee as assessee in default was passed on 31.03.2015 in respect of the tax not collected pertaining to financial year 2007-08. The contention of the assessee is that the Act does not give unfettered power to the AO for taking action under section 206C of the Act. The AO has to initiate action within a reasonable time. Merely because no limitation is prescribed that does not mean that the action can be taken at any point of time. Reliance is placed on the decision of Coordinate Bench in the case of State Bank of India vs. ITO in ITA Nos. 438, 437 & 439/LKW/2012 wherein the Coordinate Bench after considering the various decisions in para 10 to 11 has decided the issue in favour of the assessee holding that the orders under section 201(1), 201(1A) and 206C(7) of the Act are to be passed within a reasonable time i.e. at least within 6 years from the end of the assessment year. Further reliance is placed upon the judgment of the Hon'ble Andhra Pradesh High Court wherein the Hon'ble High Court after considering the various case laws held that the revenue authorities are bound to exercise the powers within a reasonable time. It was held that a period of four y....
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....e of assessment is under challenge. Therefore, respectfully following the decision of the Coordinate Bench rendered in the case of State Bank of India vs. ITO (supra) wherein the Hon'ble Coordinate Bench has considered the conflicting view and applied the judgment of the Hon'ble Apex Court in the case of CIT vs. Vegetable Products, 88 ITR 192 (SC), we hereby quash the order declaring assessee in default on the ground that action taken by AO suffers from delay and latches and the Revenue has not explained the cause of such delay." 21. Now, coming to the amendment brought in by the Finance Act, 2014 which has been relied upon by the assessee and said to be complied with by the AO, the Hon'ble Gujarat High Court in the case of Tata Teleservices Vs. UOI & Anr. (supra) has held that Section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(1) could be passed for which limitation had already expired prior to amended section 201(3) as amended by Finance Act No. 2 of 2014 came into force. The relevant findings are reproduced as under: "15. Considering the law laid down by the Hon'ble Supreme Court....