TMI Blog2020 (1) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of scrap business was not fully substantiated by the assessee so as to bring it out of mischief of section 206C(1) of the Act. - Restore the matter back to the file of the AO for deciding the issue afresh in the light of judicial pronouncement discussed hereinabove and also assessee is required to file the nature of scrap sold by him whether it is to be utilized by manufacturer or producer of articles and not for trading purposes. Both the appeals of the assessee are allowed for statistical purposes. - ITA No. 60 & 61/JP/2018 - - - Dated:- 3-1-2020 - Shri Ramesh C Sharma, Accountant Member For the Assessee : Shri Siddarth Ranka And Shri Saurabh Harsh (Advs) For the Revenue : Shri Rajendra Jha (Addl.CIT) ORDER PER: R.C. SHARMA, A.M. These are the appeals filed by the assessee against the separate orders of ld.CIT(A), Kota dated 12/10/2017 and 13/10/2017 respectively for the A.Y. 2010-11 in the matter of imposition of penalty U/s 271CA r.w.s. 274 and for treating the assessee in default U/s 201(1)/201(1A) of the Income Tax Act, 1961 (in short, the Act). 2. There is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and therefore, would not fall within the definition of scrap as envisaged in the Explanation to section 206C(1). The assessee has also contended that it was engaged in the sale of MS pipe, iron which were obtained from ship breaking industries. The assessee himself has not generated any scrap in manufacturing activity, as contemplated in the Explanation. He was a trader. Therefore, the assessee has not sold scrap as such. He has sold the products resulted from ship breaking activity, which are re-usable. Thus, the assessee was not supposed to collect tax under section 206C of the Act. The Id.AO has erred in raising the demand. I allow all appeals and delete additions. 7. The Hon ble Jurisdictional High Court of Gujarat in the case of Priya Blue Industries (P.) Ltd. (supra) was seized with the following substantial questions of law:- (A) Whether the Appellate Tribunal has substantially erred in law in interpreting the term Scrap as defined in clause (b) to Explanation to section 206C of the Income Tax Act by holding that the words 'waste and scrap' is a singular item and not distinct? B) Whether the Appellate Tribunal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) is scrap, and the percentage provided is 1%. The expression of scrap is defined under clause (b) to the Explanation to section 206 of the Act, to mean waste and scrap from manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons. On a plain reading of the said expression, it is evident that any material which is usable as such would not fall within the ambit of the expression scrap as envisaged under clause (b) of the Explanation to section 206C of the Act. 8. The Tribunal, in the impugned order, has recorded that the items/products in question obtained from the activity of ship breaking are usable as such and, therefore, do not fall within the definition of scrap. However, since the assessee had not collected tax at source on items other than items obtained out of the manufacturing activity in the course of ship breaking, the Tribunal has remitted the matter to the Assessing Officer for the purpose granting relief to the assessee under the provisions of section 206C(1) of the Act with regard to only sale of scrap arising out of manufacturing activity in the course of ship bre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 With regard to levy of penalty U/s 271CA of the Act for default in collecting tax at source U/s 206CA, it was contended by the ld.AR that there is consistent view by the various Benches of the Tribunal that no penalty is imposable in the case. The assessee is engaged in trading of scrap as provided in Explanation of Section 206C of the Act. The Chandigarh Bench of the ITAT in the case of ITO(TDS) Vs Sh. Tarsem Lal in ITA No. 1311/Chd/2016 order dated 19/05/2017 has held as under: The Tribunal in the case of ITO(TDS), Patiala Vs. Shri Om Prakash Gupta(HUF) in ITA Nos.341 342/Chd/2016 dated 20.6.2016 is as under: 11. We find that the belief harboured by the assessee, considering the f acts narrated above constituted a reasonable belief which an ordinary person in the prevailing circumstances would have harboured. It is not the case that the assessee was found liable to collect tax at source on the goods sold by it since the goods were categorically found to qualify as scrap as such, as provided in the definition of the same in the Explanation to section 206C. In f act the 6 assessee was found liable to collect tax at source since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Woodward Governor India Pvt. Ltd. Vs. CIT 253 ITR 745 has held as under: Levy of penalty under section 271C of the Income tax Act, 1961, for failure to deduct tax at source, is not automatic. In order to bring in application of Section 271C, in the backdrop of the overriding non obstante clause in section 273B, absence of reasonable cause, existence of which has to be established, is A sine qua non. Before levying penalty, the concerned officer is required to find out that even if there was any failure to deduct tax at source, the same was without reasonable cause. The initial burden is on the assessee to show that there exists reasonable cause which was the reason for the failure. There- after, the officer has to consider whether the explanation offered by the assessee or other person as regards the reason for failure, was on account of reasonable cause . 8. As per ld.AR , in view of the above facts and circumstances, there is no merit in the penalty so imposed U/s 271CA of the Act. 9. On the other hand, the ld. DR relied on the orders of the lower authorities and contended that the assessee was only dealer of Scrap and h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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