Service Tax cannot be Demanded on Sole basis of Information from ITR and Form 26AS: CESTAT [Read Order]

Top Stories Service Tax cannot be Demanded on Sole basis of Information from ITR and Form 26AS: CESTAT [Read Order] Service tax cannot be demanded on sole basis of information from ITR and Form 26AS, rules CESTAT By Kalyani B. Nair – On March 5, 2024 4:05 pm – 3 mins read The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that service tax cannot be demanded on sole basis of information from income tax returns (ITR) and Form 26AS. The Department has raised a demand on the basis of the income from sale of service shown in the Balance Sheet and the ITR Returns.

The Appellants pleaded that there was a mistake in reflecting of cash deposits under the head ‘Sale of service’ and the same has been corrected by filing a revised ITR. A Show Cause Notice seeking service tax of Rs.5,47,402/- was confirmed by Original Authority and was confirmed by Commissioner ( Appeals ). In the appeal filed by M/s SIS Teleservices Pvt Ltd., are that there is a difference between statement 26AS and the ITRs/ST3 Returns filed by the Appellant. Accordingly, a Show Cause Notice seeking demand of service tax of Rs.14,33,413/- along with interest and penalty was issued to the Appellants and was confirmed and was upheld by the Commissioner (Appeals). Raghavendra Rao, Counsel appearing for the Appellants submitted in respect of appeal filed by M/s GopiChenna that the Appellant is engaged in training interested candidates in the art of movie making, which is exempt by S.No.8 of Mega Exemption Notification No. 25/2012 dt.20.06.2012.

Though the Commissioner (Appeals) has given relief on account of exempted turnover for Rs.9,85,322/-, he confirmed demand on turnover of Rs.26,64,021/- and that they have taken loans and cash deposits for personal use and the same were erroneously shown in the ITR. The counsel also submitted that though the figure indicated in Income Tax Returns and ST3 Returns are tallying, the Department has raised demand on the basis of statement 26AS; the submission that the statement in 26AS include the payments received for the services rendered in the previous year were ignored by the Adjudicating Authority as well as the Appellate Authority.

The AR for Revenue reiterated the findings of the Impugned Order and submits that the Appellants could not explain the cash deposits so claimed by them in spite of giving them a number of opportunities. No proof of acceptance of the revised ITR filed by them has also been given. Under the circumstances, the Adjudicating and the Appellate Authorities had no option but to confirm the demand raised. In Indian Machine Tools Manufacturers Association Vs. CCE, Panchkula, it was held that “We are of the considered opinion that it is not open for the Department to raise demands on the basis of other statutory returns like Income Tax Returns or balance sheets without proving that such service has been rendered by the assessee and consideration thereof has been received. Similarly, no service tax demand can be raised and confirmed on the basis of notional income.”

A Single Member Bench of P Anjani Kumar, Technical Member observed that “Revenue takes the stand that in the Negative List regime, Department is not obliged to prove the provision of a particular service to demand service tax and further, the Appellants could not explain that the difference satisfactorily. I find that this is not the correct approach; exigibility to service tax depends on the service provider, service rendered, service recipient and the consideration thereof. Unless these four elements have been connected logically, demand of service tax cannot be confirmed merely on the basis of figures reflected in other statutory records.”

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