TaxTMI 
TaxTMI 
2020 (1) TMI 159
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....see was liable to deduct tax U/s 206C(1) in respect of scrap sale affected by it. As per the A.O. the assessee was liable to deduct tax at source in respect of scrap sold by him under the provisions of Section 206C(1) of the Act and held that the assessee was in default for non-deduction of tax, passed order U/s 201(1)/201(1A) of the Act. By the impugned order, the ld. CIT(A) confirmed the action of the A.O., against which the assessee is in appeals before the ITAT. 4. At the outset, the ld AR of the assessee placed on record the order of the ITAT Ahmadabad Bench in the case of Shri Azizbhai A. Lada Vs ITO in ITA No. 765/Ahd/2015 order dated 10/01/2018 wherein trading of scrap was not held to be liable to deduction of tax U/s 206C(1) of the Act. The precise observation of the Tribunal was as under: "6. We have carefully considered the orders of the authorities below. There is no dispute that the assessee is engaged in the business of trading of scraps obtained from Ship Breaking Yard. In our considered opinion, provisions of Section 206C do not apply in case of scrap generated in the course of ship breaking activity. Items generated out of ship breaking activity might be commerc....
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....facts as narrated hereinabove, it is apparent that the respondent assessee had collected and paid tax at source (TCS) on the seven items as enumerated in the orders passed by the Commissioner (Appeals) as well as the Tribunal and had not collected tax at source on the following four items :- 1. Old and used plates 2. Non-excisable (exempted) like furniture, wood, etc. 3. Trading of scrap (melting) 4. High seas sale. 6. The Tribunal, after considering the definition of scrap under clause (b) to section 206C of the Act, has noted that the assessee is engaged in ship breaking activity and the items in question are finished products obtained from the activity and constitute sizeable chunk of production done by ship breakers. Though such products may be commercially known as "scrap" they are not "waste and scrap", as such items are usable as such, and, therefore, do not fall within the definition of scrap as envisaged in the Explanation to section 206C(l) of the Act. 7. Section 206C of the Act bears the heading, "Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap etc." and provides that every person, being a seller shall, at the time of....
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....of section 206C(1) of the Act is concerned, no fault can be found in the approach adopted by the Tribunal, inasmuch as, out of the four items of which tax was not collected at source, the matter has merely been referred to the Assessing Officer for the purpose of examining as to what extent relief is required to be granted to the assessee under the provisions of section 206C(1) of the Act having regard to the findings of fact rendered by it. 10. In the opinion of this court, the impugned order passed by the Tribunal does not suffer from any legal infirmity so as to give rise to any question of law, much less, a substantial question of law warranting interference. The appeal, therefore, fails and is, accordingly, dismissed. 9. If the facts of the case in hand are considered in the light of the decision of the Hon'ble Jurisdictional High Court (supra), we find that the items sold by the assessee do not fit into the category of scrap as explained by the Hon'ble High Court (supra). Therefore, in our considered opinion, the assessee cannot be treated as an assessee in default and on the impugned sales cannot be treated as sale of scrap thereby making the assessee out of the purview ....
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....hers 253 ITR 745 has defined reasonable cause as follows: "Reasonable cause" as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinarily prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences follow. 12. In view of the same we agree with the Ld.CIT(A) that the assessee had reasonable cause for not collecting tax at source ,the absence of which is essential for levying penalty as held by the Delhi High Court in the case of woodward governor (supra).We therefore uphold the order of the Ld. CIT(Appeals) deleting the levy of penalty under section 271CA of the Act. 7 The appeal of the revenue is accordingly dismissed." 6. As per ld.AR, similar view has been taken by the ITAT Nagpur Bench in the case of....