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2024 (7) TMI 773 - AT - Income TaxTCS u/s 206C on sale of scrap - revenue has treated as assessee in default for non-collecting of TCS u/s 206C - HELD THAT - We can categorize the sale in three components. The sale to scrap which is covered Rule 37J and the Form 27BA is duly filed, also the list of purchase providing declaration that they have shown purchases from the assessee in their books of account, and also list of purchased providing declaration that they have shown purchased their assessee in the books of account along with the copy of declaration. On perusal of the orders the issue was never be discussed or material was never placed related to the nature of goods sold by the assessee the amount for sale of firewood and amount for sale of iron material. There is no doubt the assessee had sold the goods covered U/s 206C of the Act. But the assessee is claiming immunity by Provision of Section 206C(6A) of the Act. AO has considered the sale on the basis of the spot verification. However, now the assessee has also claimed other sales are not covered U/s 206C of the Act like sales of fire woods and iron materials. Also, the issue U/R 37J read with Form 27BA isremainedun-touched by the revenue authorities. Since, this is a factual aspect of the matter and needs proper a verification. We remit back the matter to the file of the ld. AO to verify the issues under purview of section 206C and in the light of above discussion. Needless to say, the assessee should get a reasonable opportunity of hearing in the set aside proceeding and should allow to file the evidence if required during the proceeding. Assessee appeal allowed for statistical purposes.
Issues Involved:
1. Validity of the CIT(A)'s order. 2. Assessee's status as "assessee in default". 3. Applicability of Section 206C to the entire sales. 4. Liability under Section 206C. 5. Quashing of AO's order under Sections 206C(6A) and 206C(7). 6. Direction regarding non-collection of TCS for certain buyers. 7. Permission to raise additional grounds. Detailed Analysis: 1. Validity of the CIT(A)'s Order: The assessee contended that the order passed by the CIT(A) was "bad in law and bad in facts" and against the principle of natural justice. The Tribunal did not specifically address this contention in isolation but considered the overall merits of the case in its entirety. 2. Assessee's Status as "Assessee in Default": The CIT(A) upheld the AO's decision to treat the assessee as "assessee in default" for not collecting TCS on the sale of scrap, resulting in a demand of Rs. 13,36,475/- under Sections 206C(6) and 206C(7) of the Act. The Tribunal examined whether the assessee's sales were indeed subject to TCS under Section 206C, considering the nature of the goods sold and the compliance with Rule 37J and Form 27BA. 3. Applicability of Section 206C to the Entire Sales: The Tribunal noted that the assessee sold scrap, firewood, and iron material. The AO treated the entire turnover as the sale of scrap subject to TCS. The assessee argued that sales of firewood and iron material were not covered under Section 206C. The Tribunal referenced previous judicial pronouncements, including the case of Sh. Nemi Chand Jain vs. ACIT, which clarified that materials not arising from manufacturing or mechanical working do not constitute "scrap" under Section 206C. 4. Liability under Section 206C: The CIT(A) and AO argued that even traders of scrap are liable to collect TCS. The Tribunal considered the Special Bench decision in Bharti Auto Products Vs. CIT and the CBDT Circular, which clarified that traders of scrap are liable for TCS. However, the Tribunal also noted that if the buyer has paid taxes on the income from such purchases, the seller (assessee) should not be held liable for TCS under Section 206C(6A), supported by the Supreme Court's decision in Hindustan Coca Cola Beverages P. Ltd. v. CIT. 5. Quashing of AO's Order under Sections 206C(6A) and 206C(7): The Tribunal found merit in the assessee's claim that sales covered by Form 27BA should not attract TCS liability. The Tribunal directed the AO to verify the certificates and declarations provided by the assessee and reassess the liability accordingly. 6. Direction Regarding Non-Collection of TCS for Certain Buyers: The Tribunal acknowledged that the assessee had collected certificates in Form 27BA under Rule 37J, indicating that buyers had paid taxes on the income from the purchases. The Tribunal directed the AO to consider these certificates and provide relief to the assessee for such sales. 7. Permission to Raise Additional Grounds: The Tribunal did not specifically address this issue, as the primary grounds of appeal were sufficient to decide the case. Conclusion: The Tribunal allowed the appeals for statistical purposes, remitting the matter back to the AO for verification. The AO was directed to consider the nature of the goods sold, the compliance with Rule 37J and Form 27BA, and the judicial precedents cited. The assessee was to be given a reasonable opportunity to present evidence during the reassessment proceedings. The Tribunal's decision applied mutatis mutandis to all the appeals for the assessment years 2008-09 to 2010-11.
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