The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that tax liability under section 206 C of the Income Tax Act,1961 will arise when the assessee failed to file Form 27C and Tax Collect at Source(TCS)exempted on the sale of scrap.
The appellant was represented by Shri Jinesh Shah and the respondent was represented by Shri Dr Mukesh Jain.
Umeshkuamr Harilal Shah, the assessee is engaged in the business of supply of Iron Bara, MS Steel, Building Materials, MS Plate and other Ferrous and Nonferrous Metals. The assessee filed a return of income which was finalized under Section 143(3) of the Income Tax Act on 30.03.2015 determining total income at Rs. 6,71,263/-.
A show-cause notice was issued to the assessee on 04.01.2018 and 23.01.2018 thereby asking the assessee to show cause why an order under Section 206C(1)/206C(7) of the Income Tax Act, 1961 should not be passed in respect of non-collection of TCS on the sales of scrap income under the head of income from operation amounting to Rs. 2,68,24,875/-, and penalty under Section 271CA should not be levied for the said default.
The assessee replied that TCS does not apply to the sale of scrap as it is not a result due to any manufacturing activity. The assessee has just acted as a trader and argued that TCS does not apply to the trading of scrap. The Assessing Officer held that the assessee has a tax liability in respect of 206C(1) and interest under Section 206C(7). The CIT(A) dismissed the appeal of the assessee.
As per Section 206C of the Income Tax Act the person is liable to collect tax at source to inform the person only if last year his accounts are audited under Section 44AB in the immediately preceding financial year in which goods are sold.
The Audit Report of the assessee has not been mentioned in detail for the preceding year as the assessee is not liable for the audit in any other previous years. It was stated by the assessee that the CIT(A) has rejected the appeal merely on the ground that the Audit Report Point 11 has not mentioned any change in the method of accounting. The Point 11 of the Audit Report is for the disclosure when the assessee has changed the method from the mercantile system of cash or vice-versa. It is nothing to disclose for any audit liability was there in the previous year or not.
It was viewed that as per the Circular No. 18 dated 21.05.2012 the applicability of TCS on scrap traders have been clarified and if the buyer declares by furnishing Form 27C before the seller it is to obtain such goods manufacturer/processing/producing articles and not trading purpose than the seller is exempted from collecting such tax from such buyer.
The ITAT bench of Ms Suchitra Kamble, a judicial member observed that the assessee has not filed prescribed Form 27C thereby exempting the seller to collect tax under Section 206C of the Income Tax Act and held that “the Assessing Officer, as well as CIT(A), has rightly made tax liability including interest under Section 206C of the Act.” The appeal of the assessee was dismissed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanPremium. Follow us on Telegram for quick updates.
