SVLDRS- DEMAND BASED ON 26 AS STATEMENT AND ABATEMENT OF AMOUNT DEPOSITED PRIOR TO ISSUE OF SHOW CAUSE NOTICE By G.Jayaprakash Advocate

 “I pride myself on being a good

                           judge of character”

                        “Is that something to be

                          Proud of?” said the Master.

                        “Isn’t it?”

                        “No. There’s one defect a good

                        Judge has in common with a bad

                         Judge: He judges”.

This paper is all about the judgment being made on the deposit of amounts prior to issue of SCN and its eligibility for abatement under SVLDRS by the competent authority.

The above quote came to my mind when heard about a SVLDRS-2A notice received proposing to deny the abatement of tax payable based on a challan payment made prior to issuance of a show cause Notice (SCN) but during the period of the SCN which is issued based on 26AS statements of the Income Tax Department. The SCN is issued after due verification of records by the proper officers, alleging non payment of Service Tax as computed based on the total value received as per 26AS for services provided by the assessee. The taxable value in the SCN & O-I-O also included the difference in value between the P&L and 26AS for the period. During the course of verification of records, the assessee paid certain amount as deposit and such amount is not taken into account while issuing the SCN and in the absence of any reference in SCN, the same is not appropriated. In certain cases, the O-I-O failed to appropriate the amount deposited even if such reference is there in the SCN.

            Being aggrieved by the O-I-O, the assessee filed an appeal against the said order and the pre deposit requirement was evidenced by producing copy of the amount deposited earlier. When SVLDRS is introduced, the assessee opted for the scheme and indicated payment made prior to issuance of SCN as eligible amount under pre deposit column.

As stated above, the taxable value was computed in the SCN based on 26AS/P&L for the period of SCN and any amount deposited during the period of SCN becomes an eligible amount for deduction while making demand under a SCN or while issuing a quasi judicial order. Quite often such deductions are not made to inflate the amount of penalty. The amounts deposited during the period of SCN/O-I-O which cannot be proved as a payment towards dues earlier to the period of SCN are eligible deposits for abatement under SVLDRS, if the proposed/confirmed demand is made without deducting such deposits from the total demand computed based on the 26AS/P&L value. Any deposits made during the period of relevant SCN/O-I-O can only be denied on the basis of proof that the amount is deposited against dues relating to issues outside the period/ issue of the SCN/O-I-O. When the SCN proposes penalty for non filing of ST-3 returns, it can be reasonably presumed that the amount deposited during the period of SCN relates to dues computed in the SCN and hence an amount eligible for abatement as pre-deposit.   In the absence of any entry of such amount in ST-3 towards discharge of tax liability for a different period, the amount deposited prior to issue of SCN but during the period of SCN is an eligible amount for abatement as pre deposit and authorities may refrain from asking proof that the same is not utilised elsewhere.  An assessee should not be forced to enter on a historical research of his tax payments especially where the assessee is penalised for non filing of ST-3 returns that indicates non utilisation of the deposits towards any other dues.