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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 746/JP/2017
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, 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. 746/JP/2017 fu/kZkj.k o"kZ@Assessment Year: 2008-09 cuke Ramdas Trading Company, I.T.O., Vs. Through- Mr. Naval Kishore TDS, Alwar. Shakharwa (Partner), village- Bhakhera, Kesrpur, Jaipur Road, Opp.- Silver Oak School, Distt.- Alwar (Raj)-301001. TAN No. JPRR 06477 C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Shravan Kr. Gupta (Adv) jktLo dh vksj ls@ Revenue by : Shri J.C. Kulhari (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 08/05/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 17/05/2018 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M.:
This is an appeal filed by the assessee against the order of the ld CIT(A), Alwar dated 24/07/2017 for A.Y.2008-09, wherein the assessee has taken following revised/modified grounds of appeal: “1. The impugned order u/s 201(1)/201(1A) & 206C(6)/206C(7) dated 25.03.2015 is bad in law, illegal, invalid and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be quashed. 2. Rs.79,551/-: The ld. CIT(A) erred in law as well as on the facts of the case in sustaining the demand of Rs.79,551/- u/s 201(1)/206C(6) on account of short collection of TCS on the sale of alleged scrap, treating the sale of
ITA 746/JP/2017_ 2 Ramdas Trading Co. Vs ITO goods as scrap sales. The demand so raised/imposed by the AO and sustained by the CIT(A) is totally contrary to the provisions of law and facts on the record and hence the additions may kindly be deleted in full.
2.1 Rs.76,368/-: The Id. CIT(A) erred in law as well as on the facts of the case in sustaining the charging of interest of Rs. 76,368 u/s 201 (1A)/206C(7) on account of short collection of TCS of Rs. 79,551/- u/s 201 (1)/206C(6) on the alleged scrap sale. The interest so charged by the AO and sustained by the Id. CIT(A) is totally contrary to the provisions of law and facts on the record and hence the same may kindly be deleted in full.
Briefly stated, the facts of the case are that the assessee is engaged in the business of scrap trading. A spot verification was carried out at the business premises of the assessee on 19/3/2015 and thereafter, a notice was issued to the assessee U/s 201(1)/201(1A) and 206C(6)/206C(7) of the Income Tax Act, 1961 (in short the Act) for the financial year 2007-08 dated 20/3/2015 asking the assessee to provide the trial balance for the F.Y. 2007- 08 alongwith the sales register/ledger account of scrap sales and asking reasons as to why the assessee should not be treated as assessee in default for non collection of TCS on the sale of scrap of Rs. 79.55 lacs and interest thereon.
In response, the assessee submitted that it is in the business of trading of goods, which was sorted from the scrap which they purchased from various manufacturers and after sorting the items such as copper, iron, PVC, plastic etc., the same were sold to the persons for their personal use and some of the goods are sold to the manufacturers. It was further submitted that the items so traded were not scrap for the assessee because it was their principal traded item and not a waste and unused items which was not used for them. Further, referring to the definition of “scrap” as defined in explanation to Section 206C of the Act, it was contended that the assessee is not a manufacturer and the items in which they deal are not scrap for them because it was usable as such. Further, referring to the definition of term ‘buyer’, it was submitted that the goods sold by them was in retail sale and not by way of auction, tender or
ITA 746/JP/2017_ 3 Ramdas Trading Co. Vs ITO similar mode and therefore, the goods sold by the assessee cannot be said to have been sold to a buyer for the purposes of Section 206C of the Act. Further the assessee referred to the provisions of Section 201(3) of the Act and the amendment which has been brought in by the Finance Act (No. 2), 2014, which has extended the time limit for passing the orders to seven years from end of the financial year in which payment or credit is made. It was submitted that the said amendment is w.e.f. 01/10/2014, therefore, it is applicable for F.Y. 2014-15 onwards and in the light of that, the notice issued by the assessee is void ab initio.
The submission so filed by the assessee was considered but not found acceptable to the Assessing Officer. As per the Assessing Officer, the assessee itself agreed that it purchased scraps from manufacturers and after sorting the items from them like iron, copper, PVC, plastics etc. sold the same to various parties. As the assessee is purchasing scrap from the various parties and sorted it under various categories of scrap, the same could not change the nature of goods and the same is always be categorized as scrap. It was further held by the Assessing Officer that the assessee has not performed any value addition or manufacturing work or any process to change the nature of goods purchased, therefore, the goods purchased in the form for scrap remains scrap for the next buyer. Regarding the assessee’s contention that the goods were mainly sold for their personal use, it was stated by the Assessing Officer that from the sales bills, it can be seen that the goods are sold in lots and sales bills have been issued to a single person quite a number of times in the same financial year which clearly shows that the buyer is also a business concern and not a person buying the scrap for personal use. It was further stated by the Assessing Officer that even if a buyer in the retail sale of such goods buys it for personal consumption, he has to furnish before the seller such declaration in prescribed Form 27C, which the seller has to submit to the Revenue authorities, but it has not happened in the present case. Regarding assessee’s contention that the items traded were not scrap for them because it
ITA 746/JP/2017_ 4 Ramdas Trading Co. Vs ITO was their principal traded item and was not a waste and unused items for them, the Assessing officer held that the same has been dealt with by the CBDT vide its letter No. 275/86/2011-IT(B) dated 18/05/2012 wherein it has been clarified that the term “scrap” is clearly defined in the explanation to this section and there is no requirement that the goods to be eligible for scrap should be produced/manufactured by the seller itself. It was further clarified that the buyer is not restricted to a person who buys the specified goods in an auction or tender and thus includes a buyer in the retail sale of specified goods as well. It has been further clarified therein that if a buyer in the retail sale of such goods buys it for personal consumption and furnishes before the seller such declaration in prescribed Form 27C, then the seller is not liable to collect tax on the same. It was accordingly clarified that all sellers of scrap, within the meaning of Section 206C, including those trading in scrap are liable to collect tax at source from the buyers of such scrap. However, if the buyer declares by furnishing Form 27C before the seller its purpose for obtaining such goods being manufacturing/processing/producing articles and not trading purpose, then the seller is exempted from collecting such tax from such buyer. The Assessing Officer further placed reliance on the decision of Special Bench of the Tribunal in the case of Bharti Auto Products Vs. CIT-II, Rajkot in ITA No. 391 & 392/RJT/2011 order dated 06th Sept., 2013 reported in 37 taxmann.com 37.
Referring to the assessee’s contention that the notice U/s 201 of the Act is void an initio, the Assessing Officer stated that the spot verification has been conducted on 19/03/2015, thereafter a notice U/s 201(1)/201(1A) and 206C(6)/206C(7) of the Act has been issued on 20/3/2015, which is well in time and as per the provisions of Section 201(3) of the Act as amended by the Finance Act, 2014 w.e.f. 01/10/2014.
ITA 746/JP/2017_ 5 Ramdas Trading Co. Vs ITO
It was accordingly held by the Assessing officer that the assessee was liable to collect TCS on its entire scrap sales of Rs. 79,55,013/- for the financial year 2007-08 but he fails to collect the same. Accordingly, the TCS leviable @ 1% was determined at Rs. 79,551/- and interest @ 1% U/s 206C(7) was determined at Rs. 76,368/- thereby raising a total demand of Rs. 1,55,920/- on the assessee vide order U/s 201(1)/201(1A) and 206C(6)/206C(7) of the Act passed on 25/3/2015.
Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and reiterated the submissions as made before the Assessing Officer. The ld. CIT(T(A) observed that the assessee is a seller of scrap, who has failed to collect tax at the prescribed rate. Further during the course of income tax proceedings, the assessee did not file any declaration in Form 27BA/27C pursuant to proviso to Section 206C(6A) of the Act. The ld. CIT(A), accordingly, confirmed the findings of the Assessing officer and tax demand of Rs. 1,55,920/- so levied by the Assessing Officer.
Now the assessee is in appeal before us. The ld AR of the assessee has reiterated the submissions as made before the lower authorities. It was submitted by the ld AR that the Assessing Officer has issued notice U/s 201(1)/206C(6) & 201(1A)/206C(7) of the Act dated 19/3/2015 while the same can be issued only U/s 206C(6)/206C(7) for the reason that the default, if any was found U/s 206C(6) for non collection of TCS and not U/s 201(1) for non deduction of TDS as both are the separate and independent provisions. It was further submitted that even the order dated 19/03/2015 has been passed under 201(1)/206C(6) & 201(1A)/206C(7) of the Act and even the demand notice has been issued U/s 201(1)/201(1A) of the Act. It was accordingly submitted that the impugned order is itself illegal and void an initio and liable to be quashed. The notice itself was defective and for defective notice, no demand can be raised on the assessee. In support of this, reliance was placed
ITA 746/JP/2017_ 6 Ramdas Trading Co. Vs ITO on the decision of Hon’ble ITAT, Jaipur Bench in the case of Branch Manager of ICICI Bank, Kota Vs JCIT(I&CI) in ITA No. 204 to 208/JP/2017 order dated 10/7/2017 wherein the notice was issued under different section and penalty has been imposed under different section.
It was further submitted that the items/goods in which the assessee traded were not scrap for them because they were assessee’s principal traded item and not a waste and unused which was not in use for them.
It was further submitted that the notice issued 201(1)/206C(6) & 201(1A)/206C(7) of the Act and the order so passed thereto is barred by limitation. The ld AR referred to the provisions of Section 201(3) of the Act and the amendment which has been brought in by the Finance Act (No. 2), 2014, which has extended the time limit for passing the orders to seven years from end of the financial year in which payment or credit is made. It was submitted that the said amendment is w.e.f. 01/10/2014, therefore, it is applicable for F.Y. 2014-15 onwards and in the light of that, the notice issued by the assessee is void ab initio.
It was further submitted by the ld AR that the provisions of Section 206C would be attracted only when scrap was sold to a buyer and in the instant case, sale of goods by the assessee to a buyer in retail sale of such goods cannot be construed as sale to a buyer as such sale was not by way of auction or tender or any other mode. It was further submitted that the assessee’s case does not fall within the definition of “scrap” as per explanation (b) of Section 206C of the Act as the assessee is not a manufacturer and the items in which they deal in is not a scrap because it was usable as such. In support of this, reliance was placed on the decision of Hon’ble Ahmedabad Bench of ITAT in the case of Navine Fluorine International Vs. ACIT, TDS in ITA No. 1213, 1214/Ahd/2010 order dated 15/02/2011 and the decision of
ITA 746/JP/2017_ 7 Ramdas Trading Co. Vs ITO ITAT, Rajkot Bench in the case of Ramgopal O Maheshwari Vs. ITO in ITA No. 1169 & 1170/Rajkot/2010 order dated 17/6/2011.
It was further submitted that the Assessing Officer has ignored that the cash sales in retail to various persons on whom no TCS is applicable. It was further submitted that there are persons to whom the sales were made who have paid the taxes in their return of income and in respect of such persons, the taxes cannot be collected again from the assessee.
Per contra, the ld DR vehemently argued the matter and relied on the findings of the Assessing Officer which we already discussed above and not been repeated again for sake of brevity. Further the ld DR referred to CBDT clarification vide its letter No. 275/86/2011-IT(B) dated 18/05/2012 and the decision of Special Bench of Tribunal, Rajkot Bench in the case of Bharti Auto Products Vs. CIT-II (Supra) where all these issues as raised by the ld AR have been dealt with in detail in favour of the Revenue.
We have heard the rival contentions and perused the material available on record. Undisputedly, the assessee is a dealer and not a manufacturer. It purchases scrap from various manufacturers and then carries out sorting of the scrap in different forms like copper, iron, plastics and PVC etc. and then sell the same in retail to various persons.
Now, coming to the first contention raised by the ld AR that the Assessing Officer has issued notice U/s 201(1)/206C(6) & 201(1A)/206C(7) of the Act dated 19/3/2015 while the same can be issued only U/s 206C(6)/206C(7) for the reason that the default, if any was found U/s 206C(6) for non collection of TCS and not U/s 201(1) for non deduction of TDS as both are the separate and independent provisions and even the fact that the order dated 19/03/2015 has been passed under 201(1)/206C(6) & 201(1A)/206C(7) of the Act. We have purused the material available on record including the show-cause notice and the order passed by the Assessing officer. In
ITA 746/JP/2017_ 8 Ramdas Trading Co. Vs ITO substance, the proceedings which were initiated by the issuance of the show-cause pursuant to the spot verification relates to non-collection of TCS and thereafter, during the course of the assessment proceedings, the questioning and enquiry conducted by the Assessing officer and even the submissions made by the assessee are in context of TCS on sale of scrap. Thereafter, the discussions and findings of the Assessing officer and ultimate demand towards TCS has been determined @ 1% of value of scrap. In substance, the proceedings which have been initiated and completed are in context of TCS and not TDS. Further, it is not a case that the show-cause has been issued under section 201(1) and the final assessment order has been passed under section 201(1)/201(IA) of the Act. Rather, the AO has inadvertently made a mention of 201(1)/201(IA) in addition to section 206C(6)/206C(7) of the Act in the show-cause as well as the final order. In our view, so long as the show-cause as well as the final order states clearly the applicable provisions i.e, 206C(6)/206C(7) of the Act, merely the fact that in addition to relevant provisions, it makes a mention of additional provisions 201(1)/201(IA), the same will not make the proceedings invalid and reference can be drawn to provisions of section 292B which reads as under:
“292B. No return of income, assessment, notice, summons or other proceeding14, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.”
Now, coming to other contentions so raised by the ld AR such as the assessee is not a manufacturer but a trader in scrap, the “scrap” is principal traded item for the assessee and it is not a scrap which is generated by the
ITA 746/JP/2017_ 9 Ramdas Trading Co. Vs ITO assessee from its manufacturing or mechanical working of materials and the buyer in the retail sale is not a “buyer” as defined in Section 206C of the Act, we find that all these contentions have been dealt with in detail and the matter is squarely covered against the assessee by the decision of Special Bench of Tribunal in the case of Bharti Auto Products Vs. CIT-II (Supra) wherein it has been held as under (head Notes):
“Section 3 of the Central Excise Act mandates levy of duty on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985. It therefore follows that the Central excise duty cannot be levied on the goods including scrap which are not manufactured or produced in India. It is in the context of the aforesaid provision that the courts and Tribunal have held, in the context of levy of excise duty, that the waste and scrap not generated from the manufacture of the prime product cannot be subjected to levy of central excise duty in the hands of non-manufacturers.
This context is completely absent in the Income-tax Act and, therefore, the requirement that the waste and scrap must be generated by the assessee himself from the manufacture of the prime product as required by the Central Excise legislations cannot be read into the Income-tax Act. Section 206C fastens liability on a seller of scrap for collection of tax at source. There is no requirement that such a seller should himself generate scrap from the manufacture or mechanical working of materials undertaken by him. [Para 33]
It was contended on behalf of the assessee that section 206C applies to sale of scrap which is generated by the assessee himself from the manufacture or mechanical working of materials. The aforesaid submission cannot be accepted for several reasons. One, the head note of section 206C shows that
ITA 746/JP/2017_ 10 Ramdas Trading Co. Vs ITO the provisions of section 206C are applicable to business of trading, inter alia, in scrap.
The use of the words 'business of trading' in the said head note makes it clear that the applicability of section 206C is not restricted to sale of scrap generated from the business of manufacturing undertaken by the assessee himself but covers sale of scrap in the business of trading in scrap also.
Two, sub-section (1) of section 206C requires the 'seller' to collect tax at source. The term 'seller' is defined in Explanation (c) to section 206C according to which the term 'seller' means 'the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co- operative society and also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him' exceed the monetary limit as specified therein.
Explanation (c) to section 206C does not require that a seller of scrap must himself generate scrap from the manufacture or mechanical working of materials. Therefore, such a requirement cannot be read in section 206C for its applicability to sale of scrap.
Three, the subject matter of sale on which tax is required to be collected at source from the buyer is, inter alia, scrap, which is defined in Explanation (b) to section 206C to mean waste and scrap from the manufacture or mechanical working of materials. It does not further require that the scrap, in order to be covered by Explanation (b) to section 206C, should also be generated by the assessee from the manufacture or mechanical working of materials undertaken by the assessee himself.
"Scrap from the manufacture or mechanical working of materials" may arise
ITA 746/JP/2017_ 11 Ramdas Trading Co. Vs ITO as a result of manufacturing activity undertaken by the assessee himself or by anyone else. Similarly, scrap may also arise from the mechanical working of materials, which is different from manufacture. For the aforesaid reasons, it is held that tax is required to be collected at source from the buyer, in terms of section 206C, on sale of, inter alia, scrap being waste and scrap from the manufacture or mechanical working of materials undertaken by the assessee himself or by anyone else.
A seller of scrap is neither required to be a manufacturer himself nor the scope of 'scrap', as defined in Explanation (b), is restricted to scrap generated from the manufacture or mechanical working of materials undertaken by the seller himself. It is sufficient for the applicability of section 206C if the person sought to be fastened with liability under section 206C is a seller of scrap being waste as well as scrap from the manufacture or mechanical working of materials provided all other conditions for the applicability of section 206C are also satisfied. [Para 34]
In the instant case, the assessee himself has declared the goods imported by him as brass scrap before the Customs authorities. He is therefore bound by that declaration. Once it is declared as waste and scrap under the Customs Tariff Act, it necessarily follows that it is in the nature of waste and scrap, which is definitely not usable as such. Be that as it may, the definition of "scrap" under Explanation (b) is wider in scope than the definition of "scrap" as given in the Customs Tariff Act.
In this view of the matter, materials recovered on demolition of buildings, old machines/fixtures/fittings sold as scrap, discarded packing materials, etc., would also fall in the category of "scrap" as defined in Explanation (b) as all of them are items, which are no longer useful as such, and therefore fall in the category of waste and scrap from the manufacture or mechanical
ITA 746/JP/2017_ 12 Ramdas Trading Co. Vs ITO working of materials, which is definitely not usable as such. Resultantly, this ground taken by the assessee is dismissed. [Para 35]
It was also submitted on behalf of the assessee that the Assessing Officer has fastened the liability on the assessee under section 206C without bringing any material on record to show that the assessee has sold scrap within the meaning of Explanation (b) to section 206C. The aforesaid submission cannot be accepted for two principal reasons. One, it is the assessee himself who had declared that the materials sold by him was imported by him as scrap. The Assessing Officer is not required to prove facts admitted by the assessee himself.
Once the assessee makes a declaration to that effect before the Government and the Government also acts upon that declaration, he is precluded from pleading otherwise before the Government. Section 115 of the Evidence Act is quite apposite. Both the authorities, namely, the Assessing Officer and the Commissioner (Appeals), have taken cognizance of the aforesaid declaration made by the assessee before the Customs authorities before fixing the liability on the assessee. It cannot therefore be said that the Assessing Officer has not brought out any material on record to show that the material imported and subsequently sold by the assessee was 'scrap'.
Two, it was apparent that the material imported and subsequently sold by the assessee was 'scrap' within the meaning of Explanation (b) to section 206C. In this view of the matter, the ground taken by the assessee in both the assessment years under appeal is dismissed. [Para 37]
It was further submitted that the provisions of section 206C require a seller to collect the tax at source from the buyer (and from none else) on sale, inter alia, of scrap. Attention was drawn to the definition of 'buyer' as given in sub- clause (i) of clause (aa) of Explanation to section 206C, which defines a
ITA 746/JP/2017_ 13 Ramdas Trading Co. Vs ITO 'buyer' as 'a person who obtains in any sale, by way of auction, tender, or any other mode, goods of the nature specified in the Table in sub-section (1) ……'
It was submitted that the buyer from whom tax is required to be collected at source should be one who obtains in any sale, by way of auction, tender or any other mode, goods of the specified nature. Placing reliance on the interpretative tools of noscitur a sociis and ejusdem generis, it was submitted that the phrase 'any other mode' in the expression 'a person who obtains in any sale, by way of auction, tender or any other mode …..' in Explanation (aa)(i) would get its meaning from the words preceding it, namely, 'by way of auction, tender' and, therefore, the said phrase, namely, 'any other mode' would have to be construed narrowly and in the same sense as something akin to auction or tender.
It was further submitted that sale of scrap in retail sale/trade could not be construed as sale by way of auction, tender or any other similar mode and, therefore, such a purchaser of scrap in retail sale could not be treated as buyer within the meaning of Explanation (aa)(i) to section 206C.
It was contended that the assessee has sold the scrap in retail trade and not by way of auction or tender or any similar mode or mode akin to auction or tender and, therefore, it was not required to collect tax at source from them under section 206C as such purchasers in retail trade were not buyers within the meaning of Explanation (aa)(i) to section 206C. [Para 38]
The principle underlying the doctrine of 'noscitur a sociis' is that he who cannot be known from himself may be known from his associates. Under the said doctrine, the meaning of questionable or doubtful words or phrases in a statute may be ascertained by reference to the meaning of other words or phrases associated with it.
ITA 746/JP/2017_ 14 Ramdas Trading Co. Vs ITO
Under "ejusdem generis" canon of statutory construction, where general words follow the enumeration of particular classes of things, the general words will be construed as applying only to things of the same general class as those enumerated. The aforesaid principle however does not necessarily require that the general provision be limited in its scope to the identical things specially named. Nor does it apply when the context manifests a contrary intention.
For the ejusdem generis rule to apply, the specific words must constitute a category, class or genus, then only things which belong to that category, class or genus fall within the general words'. [Para 39]
The ejusdem generis rule is not a rule of law but is merely a rule of construction to aid the courts to find out the true intention of the legislature. Like all other linguistic canons of construction, the ejusdem generis principle applies only when a contrary intention does not appear or meaning of questionable or doubtful words or phrases in a statute is required to be ascertained.
If a given provision is plain and unambiguous and the legislative intent is clear, there is no occasion to call in aid that rule. Similarly, a phrase cannot be construed ejusdem generis unless it is susceptible of meaning analogous to the preceding words. [Para 41]
As already stated earlier, section 206C seeks to prevent mischief, i.e., evasion of taxes in certain types of businesses. The words defining a buyer as 'a person who obtains in any sale, by way of auction, tender or any other mode …..' in Explanation (aa)(i) are plain and simple in their meaning and content. The buyer is one who obtains specified goods 'in any sale' which could be by way of auction, tender 'or any other mode'.
ITA 746/JP/2017_ 15 Ramdas Trading Co. Vs ITO
The use of the word 'or' in the aforesaid expression shows that all the three phrases (namely, auction, tender or any other mode) are intended to carry independent meaning without being controlled by each other. The use of the words 'any other mode' in the said expression further shows that the mode of sale need not be by way of auction or tender alone but could be by any other mode.
The words "any other mode" are words of wide amplitude and, therefore, cover all possible modes of sales in addition to specific modes of sales by way of auction or tender. Hence, they cannot be construed ejusdem generis or as referring to similar sales as those by way of auction or tender.
The Legislature has been cautious and thorough-going enough to bar all avenues of escape by using the words 'or any other mode'. These words (i.e., 'any other mode') are not words of limitation but of extension so as to cover all possible ways in which a person (i.e., a buyer) could obtain specified goods in sale.
The words 'or any other mode' in Explanation (aa)(i) in section 206C are intended to cover all other modes of sales which may not come within the meaning of the preceding words, namely, auction or tender. Hence, far from using those words (i.e., 'any other mode') ejusdem generis with the preceding words of the Explanation (aa)(i), the legislature has used those words in an all inclusive sense.
No decided case of any court holding that the words 'or any other mode' have ever been used in the sense contended on behalf of the assessee. In the context of the object sought to be achieved, mischief sought to be avoided, the language used in Explanation (aa)(i) of section 206C, and the clarity with which the legislative intent has been expressed, there is no room
ITA 746/JP/2017_ 16 Ramdas Trading Co. Vs ITO to construe the words "or any other mode" ejusdem generis the preceding words in Explanation (aa)(i).
Therefore it is held that a person who obtains specified goods in retail sale or by any other mode of sale would also be a buyer within the meaning of Explanation (aa)(i) as such sale would fall in the category of sale by "any other mode". In this view of the matter, all the submissions made in this behalf by the assessee are rejected. [Para 41]
Now coming to the contention of the ld AR regarding the limitation for issuance of notice U/s 201 of the Act and subsequent passing of the impunged order, the assessee has referred to the provisions of Section 201(3) of the Act, and the amendment which has been brought in by the Finance Act (No. 2), 2014, which has extended the time limit for passing the orders to seven years from end of the financial year in which payment or credit is made. It was submitted that the said amendment is w.e.f. 01/10/2014, therefore, it is applicable for F.Y. 2014-15 onwards and in the light of that, the notice issued by the assessee is void ab initio. Per contra, it has been stated by the Assessing officer that the notice so issued is in due compliance to the said provisions of section 201(3) of the Act.
The question is whether the limitation provisions provided under section 201(3) can be reasonably applied in the present case even though the proceedings are initiated in context of section 206C relating to default in collection of TCS in absence of specific limitation provisions provided under section 206C of the Act.
Even though the provisions of section 201 and section 206C are separate and independent provisions, the nature of TCS is exactly identical to the TDS and it is in the nature of tax on income which has been collected at source. In this regard, useful reference can be drawn to the decision of the
ITA 746/JP/2017_ 17 Ramdas Trading Co. Vs ITO Coordinate Bench in case of M/s Jai Ambey Wines vs ACIT (ITA No. 676/JP/15 dated 11.01.2017) where, speaking through one of us, it was held as under:
“2.7 The essence of the above stated provisions and corresponding rules is that the tax deducted at source (TDS) is nothing but tax, and credit for TDS should go to the person in whose hands the income is rightfully and finally assessed to tax in accordance with law irrespective of the person in whose hands the TDS has been deducted and TDS certificate has been issued at first place. If we look at the provisions of section 206C read with section 190 of the Act, the nature of tax collection at source (TCS) is exactly identical to TDS and it is in the nature of tax on income which has been collected at source in respect of specified business and the nature of goods as specified in section 206C of the Act. In light of above, the credit for TCS should be given to the assessee which is finally and lawfully assessed to tax in respect of the corresponding income on which TCS has been collected. The fact that there are no specific rules which have been provided in the Income tax Rules in respect of credit of TCS in such situations on the lines of Rule 37BA, in our view, doesn’t disentitle the assessee to claim credit of TCS in whose hands the income is finally assessed to tax. The reason for the same is that the nature of TCS is nothing but tax which has been statutorily recognised in the Income tax Act, and the Rules are enabling and procedural in nature and absence thereof cannot result in denial of credit of TCS. This issue also find supports from the decision of the Coordinate Bench in case of ACIT, Circle-2, Udaipur vs. Shri Krishnalal Meel & party (supra).”
An identical matter has come up in the case of M/s Id. Mohd. Nizamuddin vs ITO (ITA No. 394/JP/2016 dated 27/10/2016) wherein the Coordinate Bench (consisting of one of us) had an occasion to examine the issue relevant to limitation for taking action U/s 206C of the Act. Referring to the decision of Hon’ble Delhi High Court in case of
ITA 746/JP/2017_ 18 Ramdas Trading Co. Vs ITO Vodafone Essar Mobile Services reported in 385 ITR 436, decision of the Hon’ble Gujarat High Court in the case of Tata Teleservices Vs. UOI & Anr reported in 385 ITR 497 and various other decisions, it was held that the Assessing Officer has to initiate action within a reasonable time period and the order passed in that case beyond six years was quashed and set-aside. The relevant findings are contained at para 6.2 of its order, which is reproduced as under:
“6.2 We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. The undisputed facts arise are that the impugned order declaring the assessee as assessee in default was passed on 31.03.2015 in respect of the tax not collected pertaining to financial year 2007-08. The contention of the assessee is that the Act does not give unfettered power to the AO for taking action under section 206C of the Act. The AO has to initiate action within a reasonable time. Merely because no limitation is prescribed that does not mean that the action can be taken at any point of time. Reliance is placed on the decision of Coordinate Bench in the case of State Bank of India vs. ITO in ITA Nos. 438, 437 & 439/LKW/2012 wherein the Coordinate Bench after considering the various decisions in para 10 to 11 has decided the issue in favour of the assessee holding that the orders under section 201(1), 201(1A) and 206C(7) of the Act are to be passed within a reasonable time i.e. at least within 6 years from the end of the assessment year. Further reliance is placed upon the judgment of the Hon'ble Andhra Pradesh High Court wherein the Hon'ble High Court after considering the various case laws held that the revenue authorities are bound to exercise the powers within a reasonable time. It was held that a period of four years constitute a reasonable time. After taking into account the various periods of limitations which ranges from 2 to 4 years except in exceptional case, it was held that intention of the Parliament not to prescribe limitation has not given license to the AO to hold the assessee to ransom for all time to come but to ensure that all pre-assessment taxes are collected promptly and such proceedings are finalized much before taking up the regular assessment proceedings. Reliance is also placed on the judgment of Hon'ble Delhi High Court in the case of Vodafone Essar Mobile Services Ltd. vs. UOI & Ors (supra). The Hon'ble
ITA 746/JP/2017_ 19 Ramdas Trading Co. Vs ITO High Court after considering the judgment in the case of CIT vs. Calcutta Knitwears (2014) 362 UR 673 of the Hon'ble Supreme court and also the judgment rendered in the case of CU vs. NHK Japan Broadcasting Corporation, (2008) 305 UR 137 (Delhi) held that the aforementioned decisions settled the position whether to declare an assessee to be an assessee in default under section 201 of the Act could be initiated for a period earlier than four years prior to March 31, 2011. Reliance is also placed by the assessee on the judgment of the Hon'ble Delhi High Court rendered in the case of Tata Teleservices vs. UOI & Anr. (2016) 385 UR 497 (Del.). We find that Id. CIT (A) also has decided the issue in para 4.3 of his order by observing as under”
" 4.3. I have carefully considered the submissions of the appellant and the case laws cited. The provisions contained u/s 206C of the Act do not prescribe any time-limit for the initiation of the proceedings or for passing any order there under. The case law cited by the Id. AR, have been rendered under different context and acts and hence the same are not found applicable on the facts of the present case. Therefore, the grounds of appeal raised by the appellant is not acceptable and the same is dismissed." From the above finding of the Id. CIT (A), it is clear that Id. CTT (A) has not considered the case laws and has merely rejected the ground by observing that the provisions contained in section 206C of the Act do not prescribe any time limit for initiating the proceedings or for passing the order thereunder. The above finding of Id. CIT (A) is contrary to the case laws as relied by the Id. Counsel for the assessee. In the present case the order has been passed beyond 6 years from the date of assessment is under challenge. Therefore, respectfully following the decision of the Coordinate Bench rendered in the case of State Bank of India vs. ITO (supra) wherein the Hon'ble Coordinate Bench has considered the conflicting view and applied the judgment of the Hon'ble Apex Court in the case of CIT vs. Vegetable Products, 88 ITR 192 (SC), we hereby quash the order declaring assessee in default on the ground that action taken by AO suffers from delay and latches and the Revenue has not explained the cause of such delay.”
Now, coming to the amendment brought in by the Finance Act, 2014 which has been relied upon by the assessee and said to be complied with by the AO,
ITA 746/JP/2017_ 20 Ramdas Trading Co. Vs ITO the Hon’ble Gujarat High Court in the case of Tata Teleservices Vs. UOI & Anr. (supra) has held that Section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(1) could be passed for which limitation had already expired prior to amended section 201(3) as amended by Finance Act No. 2 of 2014 came into force. The relevant findings are reproduced as under: “15. Considering the law laid down by the Hon'ble Supreme Court in the aforesaid decisions, to the facts of the case on hand and more particularly considering the fact that while amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable w.e.f. 1/10/2014 and even considering the fact that proceedings for F.Y. 2007-08 and 2008-09 had become time barred and/or for the aforesaid financial years, limitation under section 201(3)(i) of the Act had already expired on 31/3/2011 and 31/3/2012, respectively, much prior to the amendment in section 201 as amended by Finance Act, 2014 and therefore, as such a right has been accrued in favour of the assessee and considering the fact that wherever legislature wanted to give retrospective effect so specifically provided while amending section 201(3) (ii) of the Act as was amended by Finance Act, 2012 with retrospective effect from 1/4/2010, it is to be held that section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(i) of the Act can be passed for which limitation had already expired prior to amended section 201(3) as amended by Finance Act No.2 of 2014. Under the circumstances, the impugned notices / summonses cannot be sustained and the same deserve to be quashed and set aside and writ of prohibition, as prayed for, deserves to be granted.”
In light of above legal proposition, even though there are no specific limitation provisions prescribed in Section 206C of the Act, however, the present proceedings under section 206C can be reasonably guided by the limitation provisions as contained in Section 201(3) of the Act. Admittedly, the Revenue has also not disputed the applicability of Section 201(3) of the Act as apparent from the assessment order. Given that there is no specific finding of
ITA 746/JP/2017_ 21 Ramdas Trading Co. Vs ITO the AO or the ld CIT(A) on the aspect of limitation, the matter is set-aside to the file of the ld CIT(A) for the limited purposes of determination whether the present proceedings are barred by limitation as prescribed under section 201(3) of the Act in light of above discussions and the legal propositions so laid down in the decisions referred supra.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 17/05/2018.
Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur fnukad@Dated:- 17th May, 2018 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Ramdas Trading Company, Alwar. 2. izR;FkhZ@ The Respondent- The ITO, TDS, Alwar. 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. 746/JP/2017) vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत