The CESTAT, Ahmedabad bench has held that service tax cannot be levied merely on the basis of the income declared under the Income Declaration Scheme, 2016.
The appellant is engaged in providing Construction of Residential Complex & Construction of Commercial Complex Service and Real Estate services. On the basis of information that the assessee has sold many properties in cash after the demonetization of old currency notes and deposited the said cash in the bank account an enquiry was initiated. Revenue directed the appellant to produce documents/ details and information related to the financial statements and documents regarding disclosure of income before the income-tax authority under the Income Tax Disclosure Scheme (IDS) 2016.
The appellant argued before the Tribunal that the department has calculated the demand on the basis of alleged amount declared under IDS. The amount declared under IDS is neither the amount of taxable services nor the amount of income/ profit earned by the Appellant and, therefore, the computation of demand arrived by the revenue department is totally baseless.
(Judicial), Mr. Ramesh Nair and Member (Technical), Mr. Raju observed that the Circular No. 25/2016 dated 30.06.2016 and 27/2016 dated 14.07.2016 issued by the CBDT clarified that declared income will not be shared with any other law enforcement agency.
Quashing the impugned order, the Tribunal observed that in absence of concrete evidence on record, the service tax cannot be demanded on the basis of assumption and presumption.
“The department has not been able to support their allegation with evidence that the said disclosed income under IDS scheme were collected for providing services of construction Service. There is merit in the contention of the appellant that it is settled principal of law that the burden of proving a fact is on the person who alleges the same but the department did not produce any evidence on record to prove that the disclosed Income under Income Tax Disclosure Scheme, 2016 pertained to construction activity and that the charges of income were generated out of taxable activity without any evidence was not sustainable in the absence of cogent, convincing and tangible evidences. Income tax and service tax are two different/ separate and independent special Act and their provisions operating in two different fields. Therefore by relying the income disclosed in income tax provision, without undertaking any independent investigation under the Service Tax Act, demand of service tax cannot be made,” the Tribunal said.
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