SHRI PRAMOD KUMAR JAIN,AJMER vs. INCOME TAX OFFICER, TDS, AJMER

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1023/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2017-18 cuke Shri Pramod Kumar Jain The ITO, Vs. Prop. M/s JKMK Steel, TDS, 400/23, Lal Kothi, Kaiser Ganj, Ajmer. Ajmer. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AARPJ5142P/JDHPO6656G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : None jktLo dh vksj ls@ Revenue by : Miss. Chanchal Meena (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 01/07/2020 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 03/07/2020 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 13.05.2019 of ld. CIT(A), Ajmer arising from the order of the Assessing Officer passed U/s 206C(6A)/206C(7) of the IT Act for the assessment year 2017-18. The assessee has raised the following ground:-

“1. The Commissioner of Income Tax (Appeals) grossly erred in law and on facts in confirming the order passed U/s 206C(6A)/206C(7) by Income Tax Officer TDS, Ajmer.

ITA No.1023/JP/2019 Shri Pramod Kumar Jain vs. ITO ,TDS

has submitted a letter dated 22.01.2020 which is on record along with

written submission and requested that the appeal of the assessee may

be decided by considering the written submission of the assessee.

conference in view of the prevailing situation of COVId-19 pandemic.

The assessee is dealing in scraped material and has purchased railway

scrap in auction which was subjected to TCS U/s 206C(1) of the Act.

The Railway while receiving the payment from the assessee has also

collected tax at source. The assessee sold the scrap to various buyers

without collecting tax at source as required U/s 206C of the Income Tax

Act. The Assessing Officer initiated the proceedings for holding the

assessee as default in respect of non collection of tax in terms of

Section 206C(6A)/(7) of the Act. Accordingly, the AO passed the

impugned order dated 23.03.2018 whereby the assessee was hold as

assessee in default and liability U/s 206C(6A) of the Act was determined

at Rs. 2,55,540/- and interest as per Section 206C(7) of the Act of Rs

97,651/- was also charged. The assessee challenged the action of the

AO before the ld. CIT(A) and contended that the provisions of Section

206C are not applicable in the case of the assessee as the material

ITA No.1023/JP/2019 Shri Pramod Kumar Jain vs. ITO ,TDS

purchased by the assessee from the railways in auction which was

subsequently sold to various parties does not fall in the ambit of

definition of scrap as provided in clause-(b) of Explanation to Section

206C of the Act. The assessee also disputed the correct amount of old

material sold by the assessee during the year under consideration and

contended that a some of the goods sold by the assessee which was

considered by the AO as scrap were not the old iron goods but it is new

iron goods. The ld. CIT(A) confirmed the order of the Assessing Officer

passed U/s 206C(6A)/( 7) of the Act holding the assessee in default for

not collect tax at source.

contentions that the assessee is a trader of old iron goods as well as

new iron goods. The trading in all iron goods mainly consist of old

material purchased from the railway. The sales have been made by the

assessee to other traders and sellers. The assessee has contended that

since the material purchased by the assessee from the railway in the

auction is not generated in the manufacturer or mechanical working

process and therefore, does not fall in the definition of scrape as in

provided clause-(b) of explanation to Section 206C of the Act. Hence,

the assessee has contended that the provisions of Section 206C are not

ITA No.1023/JP/2019 Shri Pramod Kumar Jain vs. ITO ,TDS

applicable. In support of his contention, he has relied upon the decision

of Hon’ble Gujarat High Court in case of Priya Blue Industries (P) Ltd

381 ITR 210 as well as decision of Ahmedabad Bench of the Tribunal in

case of Navine Fluorine International Limit vs. ACIT, TDS in ITA No.

1213 and 1214/Ahd/2010 . Reliance was also placed on the decision of

Rajkot Bench of the Tribunal in case of Nathulal P. Lavati vs ITO 65

DTR 133. Alternatively, the assessee has submitted that the AO while

passing the impugned order has not excluded the sale of new iron

goods to the extent of Rs. 1,88,60,145/- and therefore, to that extent

the liability of the assessee is not justified. The assessee has filed

certain sales bills in support of the contention that some of the sales

which were considered by the AO as scrap sale in fact is sale of new

goods.

Officer has clearly given the details of the old goods as well as new

goods in the assessment order itself. The Assessing Officer has also

pointed out that during the spot verification the assessee himself has

identified the sale of new goods and marked with “N” in the ledger

account. The entire ledger has been reproduced by the AO in the

assessment order. Thus the claim of the assessee that the AO has

ITA No.1023/JP/2019 Shri Pramod Kumar Jain vs. ITO ,TDS

considered the sale of new goods as sale of scrap while passing the

impugned order U/s 206C(6A)/(7) of the Act is contrary to the fact of

assessee’s own admission during the spot verification. The ld. DR has

further contended that when the railway itself sold this material as

scrap material and collected the tax at source while accepting the

payment from the assessee then the assessee cannot reclassify goods

at the time of sale of the said scrap purchase from the railway. She has

relied upon the order of the authorities below.

assessee and arguments of ld. DR. We have also carefully perused the

order passed U/s 206C(6A)/(7) of the IT Act. There is no dispute that

the assessee purchased scrap material from the railways which was

subjected to TCS and the said material was again sold by the assessee

to various parties who were stated to be traders as well as consumers

of the scraped without collecting the tax at source by the assessee.

Therefore, the AO initiated the proceedings for holding the assessee in

default U/s 206C(6A)/(7) of the Act. The First contention of the

assessee is that the material sold by the assessee which was purchased

from the railways in the auction does not fall in the definition of scrap

ITA No.1023/JP/2019 Shri Pramod Kumar Jain vs. ITO ,TDS

as provided in clause (b) of Section 206C of the Act. For ready

reference we quote clause (b) of explanation to Section 206C as under:-

“"scrap" means 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;” For the purpose of Section 206C of the Act the scrap has been defined

as waste and scrap from the manufacture or mechanical working of

material which is definitely not usable because of the reason of

breakage, cutting, wear and other reasons. The scrap sold by the

railway was certainly not usable due to its breakage or wear and tear

and it was also subjected to TCS for which the assessee has not raised

any objection. Once the assessee has accepted the goods purchased

from the railway as scrap and allowed the TCS then the resale of the

same goods by the assessee will not part take a different character.

Therefore, in view of the undisputed fact that what was purchased by

the assessee is scarp subjected to TCS then the resale of the same

material is also be treated as scrap and there is no scope of re-

classification of the these goods at the time of sale. Therefore, we do

not find any merits or substance in the contention of the assessee. The

decisions relied upon by the assessee are on specific facts of those

cases and therefore, would not help the case of the assessee. 6

ITA No.1023/JP/2019 Shri Pramod Kumar Jain vs. ITO ,TDS

considered by the AO as scrap was actually sale of new goods. We note

that the Assessing Officer has considered the sale on the basis of the

spot verification. However, now the assessee has also placed certain

sale bills in support of his contention that the sales to the extent of Rs.

1,88,60,145/- is sale of new iron goods and not scrap. Since, this is a

factual aspect of the matter and needs proper a verification. Therefore,

we set aside on this issue to the record of the Assessing Officer for

verification of the same by considering the evidence filed by the

assessee and then decide the same. Needless to say the assessee be

given an appropriate opportunity of hearing before passing the fresh

order on this issue.

In the result, the appeal of the assessee is partly allowed for

statistical purposes.

Order pronounced in the open court on 03/07/2020. Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 03/07/2020. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 7

ITA No.1023/JP/2019 Shri Pramod Kumar Jain vs. ITO ,TDS 1. vihykFkhZ@The Appellant- Shri Pramod Kumar Jain, Ajmer. 2. izR;FkhZ@ The Respondent- ITO,TDS, Ajmer. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 1023/JP/2019} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत