Petitioner's challenge to show cause notice succeeds but authorities retain right to issue fresh notices

The HC disposed of the petition challenging a show cause notice issued based on information from the Income Tax Department regarding taxable services. The court held that while the impugned notice was quashed, the respondents retained liberty to pursue verification of the petitioner's income from other sources and issue fresh show cause notices if circumstances warrant, in accordance with law.

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Issues:
Challenge to show cause-cum-demand notice based on jurisdiction and service tax liability.

Analysis:
The petitioner, a Chartered Accountant and partner in a firm, challenged a show cause-cum-demand notice issued by respondent No.3, alleging service tax liability on the remuneration received by the petitioner from the firm. The petitioner contended that the notice was issued without jurisdiction, citing a decision by the Central Excise and Service Tax Appellate Tribunal that service tax cannot be recovered based on income tax returns. The respondents, based on information from the Income Tax Department, initially issued the notice but later concluded that the petitioner's activities were not liable to service tax under the Finance Act, 1994. The respondents sought clarifications regarding income from other sources. The petitioner requested the withdrawal or quashing of the notice, and if necessary, issuance of a fresh notice specifically addressing income from other sources. The respondents sought the withdrawal of the stay order to proceed with the matter.

The High Court, after considering the arguments, set aside and quashed the impugned show cause-cum-demand notice dated 30.12.2020. The court clarified that the respondents were free to continue verifying the petitioner's income from other sources and could issue a fresh show cause notice if required by the circumstances. The petitioner's request for withdrawal or quashing of the notice was granted, with the possibility of a fresh notice specifically addressing income from other sources. The writ petition was disposed of accordingly.

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