2017 (12) TMI 1129 - HC - Income Tax

Non-collection of TCS on sale of scrap and interest charged u/s.206C(C) - Held that - The expression scrap as defined under clause (b) of the Explanation to section 206C of the Act clearly provides that scrap means waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such. In the facts of the present case the rags wipers or chindi are actually products manufactured by the assessee and are used as such by the buyers for the purpose of manufacturing other items and are not products which cannot be used as such because of breakage cutting up wear and other reasons. The articles manufactured by the respondent assessee therefore would not fall within the ambit of the expression scrap as envisaged in clause (b) of the Explanation to section 206C of the Act. No infirmity can be found in the impugned order passed by the Tribunal in holding that the rags wipers or chindi sold by the appellant would not fall within the meaning of scrap so as to attract the provisions of section 206C of the Act making the assessee liable to deduct tax at source under the said provision. Violation of Rule 46A(3) of the Income Tax Rule by not giving opportunity to the AO after admitting evidences in the form of photographs samples - Held that - If the additional evidence furnished by the assessee before the first appellate authority is in the nature of clinching evidence leaving no further room for any doubt or controversy in such a case no useful purpose would be served by forwarding such evidence/material to the Assessing Officer to obtain his report and in such exceptional circumstances the said requirement can be dispensed with. In the facts and circumstances of the present case the additional evidence was only in the nature of the photographs and samples of the articles manufactured by the assessee. In the opinion of this court considering the nature of the additional evidence produced by the assessee no useful purpose would have been served by forwarding such evidence/material to the Assessing Officer to obtain his report as such evidence was in the nature of clinching evidence leading no further room for any doubt or controversy. Under the circumstances the second question proposed by the appellant also does not merit acceptance.

Summary

Issues:
- Whether the Appellate Tribunal erred in deleting the addition made under section 206C(1) of the Income Tax Act on account of non-collection of TCS on the sale of scrap?
- Whether the Appellate Tribunal violated Rule 46A(3) of the Income Tax Rule by not giving an opportunity to the AO after admitting evidence in the form of photographs and samples?

Analysis:

Issue 1:
The appellant-revenue challenged an order by the Income Tax Appellate Tribunal regarding the addition made under section 206C(1) of the Income Tax Act. The assessee was found selling scrap and not collecting tax at source as required by the Act. The Commissioner (Appeals) distinguished between different items sold by the assessee, classifying some as pure scrap and others as products used for further manufacturing. The Tribunal upheld the findings, stating that the items in question were not scrap as defined under the Act. The court concurred with the Tribunal and Commissioner (Appeals), emphasizing that the products manufactured by the assessee were usable as raw material for other items and did not qualify as scrap under the Act.

Issue 2:
Regarding the alleged violation of Rule 46A(3) of the Income Tax Rule, the court held that the Commissioner (Appeals) admitting additional evidence in the form of photographs and samples did not necessitate providing the AO with an opportunity to comment. The court reasoned that if the additional evidence conclusively supported the case without ambiguity, there was no requirement to involve the AO. In this case, the evidence presented by the assessee was considered conclusive, and forwarding it to the AO would not have served any purpose. Consequently, the court dismissed the appeal, finding no legal infirmity in the Tribunal's order and rejecting the need for further intervention based on the issues raised.

This comprehensive analysis of the judgment from the Gujarat High Court provides a detailed breakdown of the issues involved, the arguments presented, and the court's reasoning behind the decision, ensuring a thorough understanding of the legal complexities and interpretations involved in the case.