I only trade in scrap — I do not manufacture anything, and I sell in retail. Can s.206C still be fastened on me, and is there any time limit on the TCS order?
Yes, it can. The Tribunal held that the contentions that the assessee is a trader and not a manufacturer, that the scrap was not generated by his own manufacturing or mechanical working of materials, and that a purchaser in retail sale is not a 'buyer', are all squarely covered against the assessee by the Special Bench decision in Bharti Auto Products. But it also held that although s.206C prescribes no limitation, proceedings under it can reasonably be guided by the limitation in s.201(3), and it sent the matter back to the Commissioner (Appeals) to decide that question.
Decided by the ITAT (Shri Vijay Pal Rao, Judicial Member and Shri Vikram Singh Yadav, Accountant Member (ITAT Jaipur Benches, Jaipur)) on 2018-05-17, reported as ITA No. 746/JP/2017, assessment year 2008-09. It bears on section 206C, section 206C(1), section 206C(6), section 206C(7), section 201(1), section 201(1A), section 201(3), section 292B of the Income Tax Act 1961, in TDS Defaults, How Tax Law Is Read and Demand, Recovery & Stay matters.
This is the Revenue side of the scrap line and it must be carried, because a taxpayer who argues that he cannot be a collector unless he is a manufacturer is arguing a point that a Tribunal will treat as concluded against him. The route out of a scrap TCS demand is the second limb of Explanation (b) — that the material is usable as such — not the identity of the seller. The order is also useful for two procedural points a practitioner meets constantly. First, an officer who cites s.201(1) and s.201(1A) alongside s.206C(6) and s.206C(7) in the show-cause and in the order has not thereby invalidated the proceeding: s.292B saves it so long as the applicable provisions are stated and the proceeding is in substance a TCS proceeding. Second, the absence of a limitation period in s.206C does not mean an officer may act at any time; the Tribunal drew s.201(3) across, following coordinate-bench decisions and the High Court decisions on s.201(3) not operating retrospectively.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee is engaged in the business of scrap trading. It is a dealer and not a manufacturer: it purchases scrap from various manufacturers, sorts it into forms such as copper, iron, plastics and PVC, and sells it in retail to various persons. Following a spot verification, a show-cause was issued and an order dated 19 March 2015 was passed under s.201(1)/206C(6) and s.201(1A)/206C(7) for assessment year 2008-09, raising a demand of tax at one per cent of the value of the scrap together with interest. Before the Tribunal the assessee argued that the notice and order should have been under s.206C(6) and s.206C(7) alone and were void for citing s.201; that the goods traded were not scrap; that it was a trader and not a manufacturer and the scrap was not generated by its own manufacturing or mechanical working of materials; that a purchaser in a retail cash sale was not a 'buyer' as defined in s.206C; and that the notice was barred by limitation, the extended seven-year period introduced with effect from 1 October 2014 not applying to financial year 2007-08.
The appeal was allowed for statistical purposes. On the merits the Tribunal held against the assessee: the contentions that it is a trader and not a manufacturer, that the scrap was not generated by its own manufacturing or mechanical working of materials, and that a retail purchaser is not a 'buyer', are squarely covered against the assessee by the Special Bench decision in Bharti Auto Products (para 16). The objection to the order citing s.201(1) and s.201(1A) in addition to s.206C(6) and s.206C(7) was rejected: the proceedings were in substance and effect TCS proceedings, and s.292B saves them (para 15). On limitation, the Tribunal held that although no specific limitation is prescribed in s.206C, proceedings under it can reasonably be guided by the limitation in s.201(3), and since neither the Assessing Officer nor the Commissioner (Appeals) had given a finding on limitation, the matter was set aside to the Commissioner (Appeals) for that limited purpose.
On the citation objection the Tribunal examined the show-cause and the order and found that the enquiry, the submissions, the findings and the demand — computed at one per cent of the value of scrap — were all in the context of TCS; the reference to s.201(1)/201(1A) was an inadvertent addition, and s.292B provides that a proceeding is not invalid by reason of a mistake, defect or omission if it is in substance and effect in conformity with the intent and purpose of the Act (para 15). On the scrap contentions the Tribunal did not reason afresh but recorded that the matter was covered against the assessee by the Special Bench in Bharti Auto Products, which it reproduced (para 16). On limitation it reasoned that the nature of TCS is exactly identical to TDS and is tax on income collected at source, following the coordinate bench in Jai Ambey Wines; that the coordinate bench in Mohd. Nizamuddin had held, on the strength of the Delhi High Court in Vodafone Essar Mobile Services and the Gujarat High Court in Tata Teleservices, that an officer must act within a reasonable time even where no limitation is prescribed; and that the Gujarat High Court had held the amended s.201(3) not to operate retrospectively so as to revive a limitation that had already expired. Since the Revenue had not disputed the applicability of s.201(3) and no finding on limitation existed below, the issue was remitted.
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.
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Handle my notice → Ask a CA on WhatsAppYes, it can. The Tribunal held that the contentions that the assessee is a trader and not a manufacturer, that the scrap was not generated by his own manufacturing or mechanical working of materials, and that a purchaser in retail sale is not a 'buyer', are all squarely covered against the assessee by the Special Bench decision in Bharti Auto Products. But it also held that although s.206C prescribes no limitation, proceedings under it can reasonably be guided by the limitation in s.201(3), and it sent the matter back to the Commissioner (Appeals) to decide that question. This was decided by the ITAT (Shri Vijay Pal Rao, Judicial Member and Shri Vikram Singh Yadav, Accountant Member (ITAT Jaipur Benches, Jaipur)) and bears on section 206C, section 206C(1), section 206C(6), section 206C(7), section 201(1), section 201(1A), section 201(3), section 292B of the Income Tax Act 1961. It is reported as ITA No. 746/JP/2017, assessment year 2008-09. This is the Revenue side of the scrap line and it must be carried, because a taxpayer who argues that he cannot be a collector unless he is a manufacturer is arguing a point that a Tribunal will treat as concluded against him. The route out of a scrap TCS demand is the second limb of Explanation (b) — that the material is usable as such — not the identity of the seller. The order is also useful for two procedural points a practitioner meets constantly. First, an officer who cites s.201(1) and s.201(1A) alongside s.206C(6) and s.206C(7) in the show-cause and in the order has not thereby invalidated the proceeding: s.292B saves it so long as the applicable provisions are stated and the proceeding is in substance a TCS proceeding. Second, the absence of a limitation period in s.206C does not mean an officer may act at any time; the Tribunal drew s.201(3) across, following coordinate-bench decisions and the High Court decisions on s.201(3) not operating retrospectively. If it applies to you, the first step is this: Do not run the 'I am a trader, not a manufacturer' argument as your main ground — put your weight on whether the material was usable as such in the buyer's hands.
The assessee is engaged in the business of scrap trading. It is a dealer and not a manufacturer: it purchases scrap from various manufacturers, sorts it into forms such as copper, iron, plastics and PVC, and sells it in retail to various persons. Following a spot verification, a show-cause was issued and an order dated 19 March 2015 was passed under s.201(1)/206C(6) and s.201(1A)/206C(7) for assessment year 2008-09, raising a demand of tax at one per cent of the value of the scrap together with interest. Before the Tribunal the assessee argued that the notice and order should have been under s.206C(6) and s.206C(7) alone and were void for citing s.201; that the goods traded were not scrap; that it was a trader and not a manufacturer and the scrap was not generated by its own manufacturing or mechanical working of materials; that a purchaser in a retail cash sale was not a 'buyer' as defined in s.206C; and that the notice was barred by limitation, the extended seven-year period introduced with effect from 1 October 2014 not applying to financial year 2007-08. The matter was decided on 2018-05-17 by the ITAT (Shri Vijay Pal Rao, Judicial Member and Shri Vikram Singh Yadav, Accountant Member (ITAT Jaipur Benches, Jaipur)). On those facts the ITAT held as follows. The appeal was allowed for statistical purposes. On the merits the Tribunal held against the assessee: the contentions that it is a trader and not a manufacturer, that the scrap was not generated by its own manufacturing or mechanical working of materials, and that a retail purchaser is not a 'buyer', are squarely covered against the assessee by the Special Bench decision in Bharti Auto Products (para 16). The objection to the order citing s.201(1) and s.201(1A) in addition to s.206C(6) and s.206C(7) was rejected: the proceedings were in substance and effect TCS proceedings, and s.292B saves them (para 15). On limitation, the Tribunal held that although no specific limitation is prescribed in s.206C, proceedings under it can reasonably be guided by the limitation in s.201(3), and since neither the Assessing Officer nor the Commissioner (Appeals) had given a finding on limitation, the matter was set aside to the Commissioner (Appeals) for that limited purpose.
On the citation objection the Tribunal examined the show-cause and the order and found that the enquiry, the submissions, the findings and the demand — computed at one per cent of the value of scrap — were all in the context of TCS; the reference to s.201(1)/201(1A) was an inadvertent addition, and s.292B provides that a proceeding is not invalid by reason of a mistake, defect or omission if it is in substance and effect in conformity with the intent and purpose of the Act (para 15). On the scrap contentions the Tribunal did not reason afresh but recorded that the matter was covered against the assessee by the Special Bench in Bharti Auto Products, which it reproduced (para 16). On limitation it reasoned that the nature of TCS is exactly identical to TDS and is tax on income collected at source, following the coordinate bench in Jai Ambey Wines; that the coordinate bench in Mohd. Nizamuddin had held, on the strength of the Delhi High Court in Vodafone Essar Mobile Services and the Gujarat High Court in Tata Teleservices, that an officer must act within a reasonable time even where no limitation is prescribed; and that the Gujarat High Court had held the amended s.201(3) not to operate retrospectively so as to revive a limitation that had already expired. Since the Revenue had not disputed the applicability of s.201(3) and no finding on limitation existed below, the issue was remitted. In the words reproduced by the source cited on this page: "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." The decision followed or applied Bharti Auto Products v. CIT-II (Special Bench, ITAT) — applied as covering the scrap and 'buyer' contentions against the assessee; Jai Ambey Wines v. ACIT (ITA No. 676/JP/15, order dated 11 January 2017) — coordinate bench, on TCS being identical in nature to TDS; Mohd. Nizamuddin v. ITO (ITA No. 394/JP/2016, order dated 27 October 2016) — coordinate bench, on reasonable time for action under s.206C; Tata Teleservices v. Union of India (Gujarat High Court) — applied, s.201(3) as amended not retrospective; Vodafone Essar Mobile Services Ltd. v. Union of India (Delhi High Court) — relied on through the coordinate bench decision.
It was decided by the ITAT on 2018-05-17 and is reported as ITA No. 746/JP/2017, assessment year 2008-09. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 206C, section 206C(1), section 206C(6), section 206C(7), section 201(1), section 201(1A), section 201(3), section 292B, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The appeal was allowed for statistical purposes. On the merits the Tribunal held against the assessee: the contentions that it is a trader and not a manufacturer, that the scrap was not generated by its own manufacturing or mechanical working of materials, and that a retail purchaser is not a 'buyer', are squarely covered against the assessee by the Special Bench decision in Bharti Auto Products (para 16). The objection to the order citing s.201(1) and s.201(1A) in addition to s.206C(6) and s.206C(7) was rejected: the proceedings were in substance and effect TCS proceedings, and s.292B saves them (para 15). On limitation, the Tribunal held that although no specific limitation is prescribed in s.206C, proceedings under it can reasonably be guided by the limitation in s.201(3), and since neither the Assessing Officer nor the Commissioner (Appeals) had given a finding on limitation, the matter was set aside to the Commissioner (Appeals) for that limited purpose. It arises in TDS Defaults, How Tax Law Is Read and Demand, Recovery & Stay matters, on section 206C, section 206C(1), section 206C(6), section 206C(7), section 201(1), section 201(1A), section 201(3), section 292B of the Income Tax Act 1961, and was decided by Shri Vijay Pal Rao, Judicial Member and Shri Vikram Singh Yadav, Accountant Member (ITAT Jaipur Benches, Jaipur). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not run the argument that a retail purchaser is not a 'buyer' because the sale was not by auction or tender; the exclusion that works is the one for a buyer in retail sale purchasing for his own personal consumption. Take the limitation point first and plead it properly: identify the financial year of the receipt or debit, and measure the date of the order against the s.201(3) period as it stood, remembering the High Court authority that the extended period does not revive a limitation that had already expired. Do not expect a mis-citation of s.201(1)/201(1A) in the order to win the appeal — s.292B answers it where the substance is a s.206C proceeding. If limitation is not decided by the Commissioner (Appeals), ask for a specific finding on it rather than arguing it for the first time before the Tribunal — that is what this order remitted.
Searched for later treatment; none was found. That is not the same as a source affirming it. No later decision citing this order on a trader's liability to collect tax at source on scrap has been found, and no Rajasthan High Court appeal from it has been traced. A count of citing documents against this order is misleading and must not be reported as support. Every one examined concerns Aravali Trading Co v ITO and the discharge of the onus on cash credits, an entirely different subject, and none of them mentions s.206C or scrap. The only other record under the party name is an unrelated Jaipur Bench order. Two things limit what the order is worth. It is a Tribunal order, and on the merits it decides nothing of its own: the contentions that the assessee is a trader and not a manufacturer, that the scrap was not generated by its own manufacturing or mechanical working of materials, and that a retail purchaser is not a 'buyer', are held covered against the assessee by the Special Bench decision in Bharti Auto Products, which the Tribunal reproduced rather than reasoned from. The authority on those points is the Special Bench, not this order. What the order adds is the limitation reasoning, and even that is not a decision. The Tribunal held that although s.206C prescribes no limitation, proceedings under it can reasonably be guided by the limitation in s.201(3), and it then set the matter aside to the Commissioner (Appeals) because neither he nor the Assessing Officer had given any finding on limitation. So the appeal was allowed for statistical purposes and nothing was finally decided even between these parties. For a year governed by the Income-tax Act 2025 the successors of s.206C and s.201 should be identified before the point is taken; that correspondence has not been established here. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
ON THE STRUCTURE. The paragraphs run 1 to 22 continuously, and the disposal follows paragraph 22 unnumbered. The limitation discussion occupies paragraphs 18 to 22, the s.292B point is at paragraph 15 and the scrap contentions are at paragraph 16. THE MOST IMPORTANT CAUTION ON THIS PAGE. The long passage inside paragraph 16 is expressly introduced by the Tribunal as the 'head Notes' of the Special Bench decision in Bharti Auto Products, and the bracketed markers inside it - '[Para 33]', '[Para 34]', '[Para 35]', '[Para 37]', '[Para 38]', '[Para 39]' and '[Para 41]' - are that reproduction's own locators and not paragraphs of this order. Nothing from that block is quoted on this page, either as the Tribunal's words or as the Special Bench's, because a headnote is editorial writing and not the deciding body speaking. If the Special Bench reasoning is needed, read that decision. ON BHARTI AUTO PRODUCTS ITSELF. The Special Bench decision has not been read for this entry. A Gujarat High Court oral order in Bharti Auto Products v Income Tax Officer (TDS)-3, Tax Appeal No. 1018 of 2014, dated 23 September 2014, records substantial questions of law lettered A to D; it does not decide them, and the final outcome of that appeal has not been traced. So the proposition treated as concluded in this order rests on a Special Bench decision that was itself under appeal. ON DEFECTS IN PARAGRAPH 15. The text carries what appear to be optical errors - '201(1)/201(IA)' and 'purused' - and the reproduction of s.292B inside it drops a word ('other proceeding14, furnished'). No quotation has been taken from that paragraph. ON THE LIMITATION REASONING, which is the order's own contribution. The Tribunal reasoned that the nature of collection at source is identical to deduction at source and is tax on income collected at source, following the coordinate bench in Jai Ambey Wines; that the coordinate bench in Mohd. Nizamuddin had held, on the strength of the Delhi High Court in Vodafone Essar Mobile Services and the Gujarat High Court in Tata Teleservices, that an officer must act within a reasonable time even where no period is prescribed; and that s.201(3) therefore supplies the guide. It did not apply that to the facts; it remitted the question. WHERE THE REAL ARGUMENT IS. Not in the identity of the seller. The route out of a scrap demand is the second limb of Explanation (b) to s.206C - whether the material is usable as such - and the exclusion that works on the buyer side is the one for a buyer in retail sale purchasing for his own personal consumption, not an argument that the sale was neither by auction nor by tender. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed for statistical purposes. On the merits the Tribunal held against the assessee: the contentions that it is a trader and not a manufacturer, that the scrap was not generated by its own manufacturing or mechanical working of materials, and that a retail purchaser is not a 'buyer', are squarely covered against the assessee by the Special Bench decision in Bharti Auto Products (para 16). The objection to the order citing s.201(1) and s.201(1A) in addition to s.206C(6) and s.206C(7) was rejected: the proceedings were in substance and effect TCS proceedings, and s.292B saves them (para 15). On limitation, the Tribunal held that although no specific limitation is prescribed in s.206C, proceedings under it can reasonably be guided by the limitation in s.201(3), and since neither the Assessing Officer nor the Commissioner (Appeals) had given a finding on limitation, the matter was set aside to the Commissioner (Appeals) for that limited purpose.
TaxSphere, “Ramdas Trading Company v ITO (TDS), Alwar”, https://taxnotice.vittsphere.com/caselaw/case/ramdas-trading-v-ito-tds-scrap-trader-liable-and-206c-limitation/ (validity last checked 2026-09-08)
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I sold scrap without collecting TCS and only got the buyers' Form 27C declarations years later. Has the officer any answer to that, and what about buyers who have already paid tax?
I did not collect TCS because I did not think what I sold was 'scrap'. The officer has levied penalty at a hundred per cent. Is a wrong but honest view a defence?
How far back can the department go to treat you as an assessee in default for a TDS lapse?
The TDS officer has passed an order under section 201 treating me as an assessee in default and has added interest under section 201(1A). Who exactly is in default, what gets me out of it, which interest rate runs for which period, and how far back can he go?
