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Issues: Whether the demand of service tax could be sustained when it was founded only on figures from the Profit and Loss Account and Form 26AS, and whether invocation of the extended period of limitation was justified.
Analysis: The demand was held to rest substantially on data reflected in the income-tax records, without any independent enquiry to explain the difference between the turnover shown in the Profit and Loss Account and the figures in Form 26AS. It was noted that Form 26AS is prepared by the income-tax authorities and may contain errors, and that such figures by themselves do not conclusively establish taxable receipt of service consideration. The Tribunal also relied on the view that Profit and Loss Account entries and Form 26AS material, without further verification, are not sufficient for confirmation of tax. On that basis, the finding of suppression and the consequent use of the longer limitation period were found unsustainable.
Conclusion: The invocation of the extended period of limitation was not justified, and the impugned order was liable to be set aside.
Final Conclusion: The appeal succeeded and the tax demand, penalties, and related consequences did not survive.
Ratio Decidendi: A tax demand cannot be confirmed merely on the basis of Profit and Loss Account entries and Form 26AS figures without independent verification, and the extended period of limitation cannot be invoked in the absence of proper material establishing suppression or evasion.
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