SUBHASH KHUSHALCHAND SHAH,KOLHAPUR vs. INCOME-TAX OFFICER, (TDS), KOLHAPUR

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ITA 686/PUN/2018Status: DisposedITAT Pune02 July 2021AY 2005-066 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the definition of 'scrap' in Section 206C implies it must be from manufacturing. Since the applicability of Section 206C was not fully examined by the AO, the matter was remitted back for fresh adjudication.

What were the facts?

The assessee, a proprietor of a metal trading business, sold specified goods but did not collect tax at source as required by Section 206C. The Assessing Officer determined the tax liability, and the CIT(A) upheld this, stating the assessee failed to prove the scrap was not generated from manufacturing.

What were the issues?

Whether the provisions of Section 206C are applicable to a business engaged solely in trading of metals and scrap, and whether the scrap sold was generated from a manufacturing process.

Which sections of the Income-tax Act were involved?

Section 206C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH, ‘B’ PUNE – VIRTUAL COURT

Before: SHRI R.S. SYAL & SHRI PARTHA SARATHI CHAUDHURY

For Appellant: Shri M.K. Kulkarni
For Respondent: Shri Sudhedu Das

Heard together (3 matters)

ITA No.685/PUN/2018
ITA No.686/PUN/2018
ITA No.687/PUN/2018

Read from the judgment's own cause title. This page is filed under one of them.

आदेश / ORDER PER R.S.SYAL, VP : These three appeals by the related but different assessees arise from the orders passed by the ld. CIT(A) on 15.01.2018 and 16.01.2018 in relation to Financial Year 2005-06. Since a common issue is raised in these appeals, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience. 2. There is delay of 26, 8 and 8 days in presenting these appeals before the Tribunal. Necessary condonation applications have been filed. We are satisfied with the reasons for the delay. The delay is condoned and the appeals are admitted for disposal on merits. 3. The only issue raised through all the appeals is against determining certain liability u/s 206C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). 4. The facts relating to are that the assessee is an individual and proprietor of M/s. Ramsina Metal Corporation, engaged in the business of trading in ferrous and on- ferrous metal and scrap materials. A survey action u/s 133A was taken on the business premises of assessee. During the course of assessment proceedings, the AO observed that certain `specified goods’ were sold by the assessee during the year but no collection of tax was made from the buyers/purchasers in terms of section 206C of the Act. The assessee agreed that no tax at source was collected. From the details filed by the assessee, the AO worked out the amount of sales made to various parties without collection of tax u/s 206C. Resultantly, a sum of Rs.1,33,427 was determined as amount of tax liable for collection at source u/s 206C of the Act. Aggrieved thereby, the assessee carried the matter before the ld. first appellate authority urging that the provisions of section 206C were not applicable in his case. The assessee relied on the definition of the term `scrap’ as given in the Explanation to section 206C for contending that his case does not fall within the ambit of this section as it was engaged in trading and no scrap was generated from the manufacture of materials. The ld. CIT(A) rejected the assessee’s contention on the ground that he failed to prove that the scrap was not generated out of manufacturing activity. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.

5.

We have heard the rival submissions through the Virtual court and gone through the relevant material on record. The AO took the action u/s 206C of the Act by opining that the assessee sold scrap and did not collect tax at source. On the other hand, the case of the assessee is that it was engaged only in the trading business and the scrap, as referred to in section 206C, must be generated from the manufacture so as to magnetize the collection of tax at source. Explanation to section 206C, inter alia, contains the definition of the term `scrap’ to mean: `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’. From the above definition, it is manifest that the term `scrap’ referred to herein means scrap from manufacture of materials. If the assessee did not carry out any manufacturing activity, obviously, he will not fall within the ambit of this provision.

6.

It is observed that no contention as to the non-applicability of section 206C of the Act was raised before the AO. The ld. AR fairly admitted that the matter be sent back to the AO for examining the assessee’s contention afresh and then decide the issue as per law. The ld. DR also did not raise any objection to the same. In view of the rival, but common submission, we set aside the impugned order and remit the matter to the file of the AO for deciding this issue afresh as per law after providing reasonable opportunity of hearing to the assessee.

7.

Both the sides are in agreement that the facts and circumstances of the other two appeals are mutatis mutandis similar. Following the view taken hereinabove, we set aside the impugned orders passed in these two appeals as well and remit the matter to the file of AO for fresh decision in the terms stated above.

8.

In the result, the appeals are allowed for statistical purposes.

Order pronounced in the Open Court on 2nd July, 2021.

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