Form 26AS can fix taxable value for service tax, while bona fide taxability dispute defeats penalty.

Entries in Form 26AS may be relied on to determine the taxable value of renting of immovable property where the assessee produces no evidence to show that the reflected amounts are incorrect, inflated, or unreliable, and the assessable value was upheld on that basis. Penalty under Section 78 of the Finance Act, 1994 was not warranted where non-payment arose in a period when taxability of renting of immovable property was itself under bona fide dispute and litigation, so the penalty was deleted. The result was sustenance of the service tax demand with deletion of the penalty, granting partial relief to the assessee.

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Issues: (i) whether the amounts reflected in Form 26AS could be adopted as the correct value of taxable services for the purpose of service tax on renting of immovable property; (ii) whether penalty was leviable under Section 78 of the Finance Act, 1994.

Issue (i): whether the amounts reflected in Form 26AS could be adopted as the correct value of taxable services for the purpose of service tax on renting of immovable property.

Analysis: Form 26AS was treated as a reliable record of tax deducted at source and, therefore, of the payments actually made to the assessee. The assessee did not produce evidence to show that the amounts reflected therein were incorrect, inflated, or otherwise unreliable, nor was any material produced to displace the revenue's reliance on that document. In the absence of contrary proof, the amounts shown in Form 26AS were held to represent the correct value of the services.

Conclusion: The adoption of the Form 26AS figures as the assessable value was upheld, against the assessee.

Issue (ii): whether penalty was leviable under Section 78 of the Finance Act, 1994.

Analysis: The liability to tax on renting of immovable property was under dispute during the relevant period and had been the subject of litigation. In that situation, non-payment of tax was not treated as indicative of mala fide intent so as to justify penal action.

Conclusion: Penalty under Section 78 was set aside in favour of the assessee.

Final Conclusion: The demand of differential service tax was sustained on the basis of the value reflected in Form 26AS, but the penalty was deleted, resulting in partial relief to the assessee.

Ratio Decidendi: In the absence of rebuttal evidence, entries in Form 26AS may be relied upon to determine the taxable value, while penalty is not warranted where the taxability itself was a bona fide subject of dispute.

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