The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that a service tax demand raised solely on the basis of Form-26AS statements and Income Tax Return (ITR) data, without independent departmental verification or investigation, is not sustainable in law.
The bench of Justice P.K. Choudhary (Judicial Member) has observed that the entire case of the department was built merely on the figures reflected in the ITRs and Form-26AS statements.
The dispute arose after the department received third-party information from the Income Tax Department for the financial year 2016-17 indicating that the assessee had not filed ST-3 returns. Based on the gross receipts reflected in the ITRs amounting to Rs.19,75,400, the department computed alleged service tax liability at 15%, resulting in a proposed demand of Rs.2,96,310. A show cause notice dated 22 October 2021 was thereafter issued invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994.
The show cause notice also proposed recovery of interest under Section 75, equal penalty under Section 78, penalty under Section 77(1)(c), and late filing penalty under Section 70 read with Rule 7C of the Service Tax Rules, 1994.
The adjudicating authority confirmed the entire demand along with applicable interest and penalties through an Order-in-Original dated 12 December 2022. Subsequently, the Commissioner (Appeals) upheld the tax demand, interest, and penalties under Sections 78 and 70, though the penalty under Section 77(1)(c) was set aside.
Before the Tribunal, the appellant contended that she was engaged both in sale of goods and provision of interior designing services, and that the taxable value of services during the relevant period remained below the exemption threshold of Rs.10 lakh. It was submitted that the total receipts shown in the ITR included sale of goods amounting to Rs.9,93,856 and services amounting to Rs.9,81,560, thereby keeping the taxable service component below the threshold exemption limit.
The appellant further argued that although a service tax registration existed in the department’s records against her PAN, the same was allegedly never applied for by her and she became aware of it only upon receipt of the show cause notice. This issue was also communicated to the adjudicating authority through a letter dated 23 November 2021.
The Tribunal noted that Form-26AS statements are prepared by the Income Tax Department and there could be errors or discrepancies in such data. It also noted that the figures reflected in Form-26AS differed from the turnover declared in the profit and loss account, yet no departmental enquiry was conducted to ascertain the reasons for such differences.
The Tribunal further held that reliance solely on Profit & Loss Accounts and Form-26AS statements for confirming service tax liability had consistently been disapproved in judicial precedents. The Bench referred to the Madras High Court decision in Firm Foundation and Housing Pvt. Ltd. vs. Principal Commissioner of Service Tax and the Tribunal ruling in Sigma Trade Wings vs. Commissioner of Central Excise, Lucknow, wherein it was held that Profit & Loss Accounts alone cannot form the basis for tax confirmation.
The Tribunal observed that the extended period of limitation had been invoked entirely on the basis of such income tax documents without any corroborative evidence or independent investigation. Holding that the impugned order was unsustainable on the ground of limitation itself, the Tribunal set aside the order passed by the Commissioner (Appeals) and allowed the appeal with consequential relief to the assessee.
Case Details
Case Title: M/s Anjana Builders & Developers Versus Commissioner of Central Excise & CGST, Ghaziabad
Citation: JURISHOUR-1165-CES-2026(ALL)
Case No.: Service Tax Appeal No.70755 of 2024
Date: 07.05.2026
Counsel For Appellant: Abhinav Kalra, Advocate
Counsel For Respondent: Santosh Kumar, Authorized Representative
