2026 (2) TMI 671 - AT - Service Tax

Reliance on Income tax records alone cannot sustain service tax demands; absence of corroborative evidence invalidates extended limitation invocation.

A service tax demand based solely on Income tax returns/Form 26AS entries is unsustainable where there is no independent verification or corroborative ... Reliance on Form 26AS/Income Tax returns as sole basis for service tax demand - requirement of independent corroborative evidence to establish rendition of taxable service - invocation of extended period of limitation without independent verification - exigibility of service tax in Negative List regime requires connection of provider, recipient, service and consideration - HELD THAT:- The Show Cause Notice has been issued purely based on the Income Tax Returns for which the Appellant has filed the Returns in 2014-15. There is nothing on record to suggest from the Show Cause Notice that any investigation or verification was taken up to know the details of services rendered by the Appellant. If proper investigation was taken up, the appellant could have given the details of the Works Contract undertaken by them to defend their stand that the same is covered by exemption notification. The appellant being a proprietorship firm, part of the Service Tax liability, if any, is required to be discharged by the recipient of the service. Without undertaking such detailed verification, the SCN has been issued by invoking the extended period provisions. This issue is no more res integra. This fact in the case of Tabassum Enterprises vs. C, CGST & CX [2025 (9) TMI 1275 - CESTAT KOLKATA]. Thus, set aside the impugned order and allow the Appeal. The Appellant would be eligible for consequential relief, if any, as per law. Issues: Whether a service tax demand raised and confirmed solely on the basis of Income-tax returns/Form 26AS data, without independent verification or corroborative evidence of provision of taxable services, and by invoking the extended period of limitation, is sustainable.Analysis: The demand under challenge was issued on the basis of figures from Income-tax records (Form 26AS) relating to earlier financial years without any contemporaneous verification of the nature of receipts, identification of service recipients, or proof of taxable services rendered. Multiple precedents were applied which hold that entries in income-tax returns or Form 26AS, maintained for income-tax/TDS purposes, do not by themselves establish liability under the service tax provisions; independent or corroborative evidence linking service provider, service rendered, recipient and consideration is required. Where such verification or corroboration is absent, reliance on third-party income-tax data to invoke extended limitation provisions and confirm a service tax demand is impermissible.Conclusion: The demand confirmed solely on the basis of Income-tax/Form 26AS data without independent corroborative evidence or verification is not sustainable; the impugned demand and confirmation are set aside in favour of the assessee.Final Conclusion: The appeal is allowed and the impugned order confirming the service tax demand on the stated basis is set aside; consequential relief, if any, shall follow as per law.Ratio Decidendi: Service tax demands cannot be sustained solely on the basis of entries in Income-tax returns or Form 26AS; independent corroborative evidence connecting service provider, service rendered, recipient and consideration is essential, and in absence of such verification the extended period of limitation cannot be invoked.