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TMI Blog2024 (7) TMI 773X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, 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. - DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER For the Appellant : Smt. Raksha Birla, CA. For the Respondent : Sh. Laxman Singh Gurjar, Sr. DR ORDER Per:Bench: A batch of three (03) appeals of the same assessee were filed against the order of the ld. Commissioner of Income Tax (Appeals) -1, Jodhpur, [in brevity the CIT (A) ] order passed u/s 250(6) of the Income Tax Act 1961, [in brevity the Act ] for A.Ys. 2008-09 to 2010-11. The impugned orders were emanated from the order of the ld. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 206C (7) of the Act. The assessee claimed that the assessee had collected the certificates in Form 27BA under Rule 37J of the Income Tax Rules 1962 aginst the sales covered U/s 206C r.w.s. 206C(6A) of the Act. The other sales related to firewood and iron material are not attracted the TCS u/s 206C of the Act as per the assessee. Being aggrieved assessee filed an appeal before the ld. CIT(A). But remained unsuccessful. Being aggrieved assessee filed an appeal before us for judicious consideration. 5. The ld. AR vehemently argued and filed written submission which are kept in the record. The ld. AR first invited our attention in sale report for the year 2007- 08 which is reproduced as below: 6. The ld. AR further invited our attention in judicial pronouncement of the coordinate bench of the ITAT, Jodhpur in case of Sh. Nemi Chand Jain vs. ACIT, (TDS) ITA No. 08/Jodh/2017 to 13/Jodh/2017 date of pronouncement 13/09/2017. The ld. AR has drawn our attention in relevant paragraph 9 of the order, the relevant para is reproduced as below: 9. On due consideration of the facts and submissions and on consideration of the relevant provisions, it emerges that the expression of scrap is define ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated in Circular No. 275/20l/95-IT(B) dated January 29,1997, issued by the Central Board of Direct Taxes, which states that no demand visuali2ed under section 201(1) of the Income-tax Act should be enforced after the tax deductor has satisfied the office-in-charge of TDS, that taxes due have been paid by the deductee-assessee. Similar view has been expressed by Hon ble Rajasthan High Court in the case of CIT v. Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (2006) 287 ITR 354 (Raj.) and CIT V/s Eli Lilly Company (India) (P) Ltd. Ors. (2009) 223 CTR (SC) 20, Thus in view of such facts, we hold that the assessee cannot be held to liable for collection of tax at source u/s 206C in relation to the trading activity carried on by them and the demand raised against the assessee u/s 206C and interest thereon is directed to be deleted. 10. The issue being identical in all the appeals for A.Y. 2009-10 to A.Y. 2013-14, and therefore in view of above, the same demand so raised against the assessee. 11. All the appeals of the assessee are therefore treated as allowed. 6.1 The ld. AR argued that the assessee is not assessee in default so, assessee is not eligible for collecting TCS u/s 206C related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier. The liability of a seller to collect tax at source in terms of section 206C is absolute unless requisite declaration from the buyer is obtained and a copy thereof is delivered to the Chief Commissioner or Commissioner in terms of the provisions of sub-section (1A) and (IB) of section 206C. [Para 19] The provisions of section 206C have been enacted to ensure collection of taxes from persons carrying on particular trades in view of peculiar difficulties experienced by the revenue in the past in collecting taxes from them. Section 206C thus seeks to prevent evasion of taxes. It therefore, needs to be construed strictly and in a manner that seeks to achieve the purpose for which it has been enacted. [Para 21] Explanation (b) to section 206C defines 'scrap' as 'waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons'. It is evident that the word 'scrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to scrap from the manufacture or mechanical working of materials alone. While 'waste' covers everything that is unusable or has been discarded as no longer useful as such, 'scrap' covers everything that arises from the manufacture or mechanical working of materials. By its very nature, 'waste' is a term of wider import while 'scrap' is narrower in its scope. [Para 25] The first part of the definition of 'scrap' in Explanation (b) refers not only to scrap from the 'manufacture' but also to 'mechanical working of materials'. Both the phrases, namely, manufacture and mechanical working of materials differ in their meaning and content. [Para 26] 'Mechanical working of materials' refers to physical operations on materials. It signifies physical operations to bring about physical change to which the material is subjected in order to change its shape, properties or structure. In order to fall in the definition of 'scrap', it is not necessary that the same should occur in the course of manufacture; it can also occur in the course of mechanical working of materials, i.e., in the course of physical operations on mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition. However, the word 'and' in the said phrase has been used to enlarge the scope of 'scrap', which is sought to be defined by Explanation (b) to section 206C, so as to cover both, i.e., waste as well as scrap from the manufacture or mechanical working of materials. If the legislative intent was to exclude waste from the definition of 'scrap', it could have easily done so by not including the 'waste' in the definition of 'scrap'. [Para 27] The Hon ble CBDT has clarified this issue vide circular in F. No. 275/86/2011 -IT(B) dated 18.05.2012, the relevant portion of the said circular is reproduced as below: Representations were received from certain Associations of Old Iron Scrap Dealers cum Traders alleging wrong interpretation of law regarding applicability of provisions of Section 206C of the Income Tax Act 1961 in their case. The Income Tax Act, 1961 as per Section 206C requires a seller of goods of specified nature (defined in the Act and includes scrap) to collect Tax at source at specified percentage of the receipt from the buyer and deposit the same in the Government account. The term scrap is clearly defined in the explanation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the contract has been executed. Persons have also been found to have taken contracts in 'benami' names by floating undertakings or associations for short periods. Since tax is payable in the assessment years on the incomes of the previous years, the time by which the incomes from such sources become assessable, such persons become untraceable. Moreover, at the time of assessment years in these cases, either the accounts are not available or they are mostly incorrect or incomplete. Thus, even if assessments could be made on exparte basis, it becomes almost impossible to collect the tax found due, either because it becomes difficult to establish the identity of the persons and trace them or because of the fact the persons in whose names contracts were taken are men of no means. With a view to combating large scale tax evasion by persons deriving incomes from such business, the Finance Act, 1988 has inserted a new section 44AC to provide for determination of income in such cases. Further, with a view to facilitating collection of taxes from such assessees, the Finance Act, 1988 has inserted a new section 206C to provide for collection of such tax at source. Considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6C shall be furnished in Form No. 27BA. The application of Rule 37J of the Rule r.w.s. 206C(6A) of the Act is curative in nature and is applicable to this impugned assessment year. We relied on the order of Coordinate Bench of ITAT Jodhpur which is respectfully covered the order of Hon ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. vs. CIT (2007) 293 ITR 0226 (SC). The purchaser already declared the sale in their turnover so this sale amount of Rs. 1,87,65,664.8/- as per the certificates enclosed. So, the assessee can get the immunity as per Provision U/s 206C(6A) of the Act by providing the prescribed from 27BA. 8.1 In argument the assessee filed the balance sheet and tax audit report which are from APB page 2 to 57. On perused the said documents the assessee has divergent business activities. The ld. DR relied on the order of the Sh. Kamal Kumar Vs. ITO In ITA 1023/JP/2019 date of pronouncement 23.07.2020 the character of the material is not devoid of TCS. The ld. DR placed that the sale of iron material is the part of scrap and which is purely covered u/s 206C of the Act. The ld. DR has drawn our attention in relevant paragraph of the order of ITAT- Jaip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Rs. 5,48,70,235.30/- 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. We respectfully consider all the orders of the Hon ble Apex Court and the High Court which is already covered by the Coordinate Bench of ITAT Jodhpur in the case of Nemi Chand Jain (supra). But the character of the material was not ascertained by any of the authorities as claimed by the assessee. 8.3 We note that the ld. 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. 8.4 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 ..... 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