2018 (12) TMI 676 - AT - Income Tax

Addition on account of non deduction of TCS as goods sold is other than scrap - Held that - The contention so raised by the assessee before the CIT(A) cannot be accepted. Further it is noted that the lower authorities have already allowed the credit in respect of the scrap purchasers who have provided the necessary declaration regarding receipt of such items and the fact that the same have been taken into account while filing the return of income and the taxes have been duly paid on them. There is nothing on record in respect of any declarations which has been filed and not considered by the lower authorities. In light of the same we do not find any infirmity in the order of ld. CIT(A) which is hereby confirmed. - Decided against assessee.

Issues Involved:
1. Addition of sale amount due to non-deduction of TCS on goods sold as other than scrap.
2. Maintenance of interest charged by the Income Tax Officer.

Issue-wise Detailed Analysis:

1. Addition of sale amount due to non-deduction of TCS on goods sold as other than scrap:

The assessee, dealing in the purchase/sale of old/waste iron and steel items, was subject to a spot verification by the Revenue regarding TDS/TCS compliance. The Assessing Officer observed that the assessee sold scrap amounting to ?1,98,65,861/- during the FY 2012-13, but did not collect TCS on sales worth ?1,27,10,775/-. After considering declarations from scrap purchasers, the balance sales subject to TCS were ?58,85,800/-, resulting in a demand under Section 206C(6A) and interest under Section 206C(7).

The assessee contended before the CIT(A) that the sold iron and steel items were usable assets, not scrap arising from manufacturing activities, and thus not subject to TCS. Additional declarations amounting to ?16,11,964/- were submitted, which the CIT(A) accepted, reducing the demand but maintaining the addition of ?42,73,836/-.

The Tribunal referred to the Special Bench decision in Bharti Auto Products Vs. CIT-II, Rajkot, which clarified that Section 206C applies to the business of trading in scrap, not limited to scrap generated from manufacturing by the seller. The Tribunal emphasized that the definition of "scrap" under the Income-tax Act is broader and includes waste and scrap from the manufacture or mechanical working of materials, regardless of whether the seller generated it. Thus, the assessee's contention that TCS was not applicable was rejected, and the order of the CIT(A) was upheld.

2. Maintenance of interest charged by the Income Tax Officer:

The interest of ?26,026/- charged by the Income Tax Officer under Section 206C(7) was also contested by the assessee. The CIT(A) confirmed the interest liability, and the Tribunal found no infirmity in this decision. The Tribunal noted that the lower authorities had already allowed credit for the declarations received from scrap purchasers, ensuring that taxes were duly paid. Since the assessee did not provide any additional declarations that were not considered by the lower authorities, the interest charge was upheld.

Conclusion:

The Tribunal dismissed the appeal by the assessee, confirming the addition of ?42,73,836/- due to non-deduction of TCS and the interest charge of ?26,026/-. The Tribunal's decision was based on the interpretation that the sale of scrap, whether generated by the seller or not, falls under the purview of Section 206C, and the seller is liable to collect TCS. The order of the CIT(A) was found to be in accordance with the legal provisions and previous judicial pronouncements.

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