1. M/s XYZ was served a show cause notice dated XX December 20XX, for the period 2014-15 to 2016-17, alleging the non-registration of the Noticee, where revenue considered the value appearing in data available with the income tax department pertaining to the Noticee as taxable value and proposed the demand of Service Tax .

2. On the verification of the same, it was found that the allegations against the Noticee are based on the information received from the Income Tax Department, meaning thereby the said information is on the basis of Form 26AS/ ITR filed by the Noticee, which cannot be used to determine the Service Tax liability.

 

NOTICEE’S SUBMISSIONS

DATA OBATINED FROM INCOME TAX DEPARTMENT/PORTAL CANNOT FORM A BASIS FOR DEMAND OF SERVICE TAX ON AN ASSUMPTION THAT NOTICEE WAS RENDERING TAXABLE SERVICES

1. That it is prima facie clear that no liability of Service tax falls upon the Noticee and thus, entire present case has been made out against the Noticee merely on assumptions and surmises that entire receipts as shown in the ITRs of the Noticee pertains to taxable services rendered by the Noticee. Hence, the Department is not justified in proposing the demand considering the values as taxable value merely on an assumption for confirming & seeking the demand of Service Tax from the Noticee.

2. Further, it is submitted that value as per Form 26AS cannot be adopted for the purposes of computing Service tax demand since Form 26AS is a TDS statement containing actual amounts received by the party during the said period whereas the books/financial statements are prepared and revenue is recognized on accrual basis and Service tax demand arises on any service provided or agreed to be provided as per Point of Taxation Rules, 2011, which briefly put attracts either on provision of service or issuance of invoice or receipt of advance, whichever is earlier.

3. Thus, it is submitted that there cannot be any comparison between income booked and reflected under Income tax returns and TDS Certificates which is on receipt basis and Service tax liability which arises on accrual basis or receipt basis, whichever is earlier. Whereas there maybe multiple reasons for mismatch between Form 26AS and income booked in financial or the income in Service tax. Therefore, it is submitted that ITRs must not form basis for confirming tax demand of the Noticee.

4. The various judicial pronouncements affirming the said proposition is mentioned for your reference as under–

• Alpa Management Consultants Pvt. Ltd. v. The Commissioner of Service Tax, reported in 2016 Taxo.online 62 (Tri. – Bang.) –
• Lord Krishna Real Infra Pvt. Ltd. Vs. Commissioner of Customs, C.E. & S.T., Noida [Appeal No. ST/70274/2018 – CU[DB] – cited in 2018 Taxo.online 644
• Forward Resources Private Limited v. C.C.E. & S.T.- Surat-I bearing Service Tax Appeal No. 10024 of 2020 cited in 2022 Taxo.online 1422

5. Therefore, on perusal of the judgements & submissions made supra, it is clear that the issue that Service Tax demand cannot be confirmed on the basis of values appearing in Income Tax data and Form 26AS is no longer res integra and hence, the same cannot sustain.

It is a well settled principle of law that extended period cannot be invoked when revenue is appropriately reflected in Form 26AS and/or financial statement of the taxpayer

6. It is submitted that, the allegations against the Noticee are based on the information received from the Income Tax Department, meaning thereby the said information is on the basis of Form 26AS/ ITR filed by the Noticee, which cannot be used to determine the Service Tax liability.

7. In this regard, the Noticee places reliance on the judgement of the Hon’ble CESTAT, Calcutta in the case of M/S Luit Developers Private Limited v. Commissioner Of CGST & Central Excise, Dibrugarh [Service Tax Appeal No. 75792 of 2021 dated 23 February 2022] cited in 2022 Taxo.online 1423 wherein, it has been held that, figures reflected in Form 26AS are already included in Revenue from operations in the profit/loss account of balance sheet, which is a public document, and therefore no suppression can be alleged. Thus, the figures shown to Income Tax authorities cannot be used to determine Service Tax

8. Further, in support of the above contentions, reliance is placed on the decision of Hon’ble CESTAT, Allahabad in the case of Pappu Crane Service v. Commissioner [Final Order No. 71246/2019 dated 2 July 2019] cited in 2019 Taxo.online 1006 wherein, the Tribunal while allowing the appeal of the assessee has rejected the invocation of the extended period where the revenue’s case was solely based on the figures in Form 26AS and Profit & Loss account in the balance sheet.

9. Thus, the figures reflected in Form 26AS were already available with the department during the Impugned period itself as the same were based on the filings done under Income Tax Act, 1961 (“the Income Tax Act”).

Conclusion

10. Thus, based on the submissions made above it is evident that no information was suppressed from the department and hence, extended period cannot be invoked and the demand proposed vide SCN dated XX December 20XX on basis of 26AS/ITR is unsustainable & liable to be set aside.