No Evidence Linking IT Disclosure to Taxable Services: CESTAT sets aside Service Tax Demand Based on Assumptions [Read Order]
The bench observed that mere disclosure of income to the IT Department did not automatically establish a connection to taxable services
![No Evidence Linking IT Disclosure to Taxable Services: CESTAT sets aside Service Tax Demand Based on Assumptions [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/05/no-evidence-1.jpg "No Evidence Linking IT Disclosure to Taxable Services: CESTAT sets aside Service Tax Demand Based on Assumptions [Read Order]")
The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) dismissed an appeal filed by the department challenging the dropping of a service tax demand of Rs.74,16,000 on M/s. Lotus Cons Build Technocrate Pvt. Ltd. The department was of the contention that the respondent had evaded service tax on miscellaneous income of Rs. 6 crore disclosed to the...
The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) dismissed an appeal filed by the department challenging the dropping of a service tax demand of Rs.74,16,000 on M/s. Lotus Cons Build Technocrate Pvt. Ltd.
The department was of the contention that the respondent had evaded service tax on miscellaneous income of Rs. 6 crore disclosed to the Income Tax (IT) Department during a survey.
Coming to the facts of the present case, a Show Cause Notice was issued on 1-11- 2017, proposing the recovery of service tax amounting to Rs. 4,09,89,255, including Rs. 74,16,000 on the Rs. 6 crore disclosed as miscellaneous income during an IT survey. The department alleged that this income was earned by the respondent as a real estate agent, rendering taxable services under the Finance Act, 1994.
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The original adjudicating authority dropped the demand, citing a lack of evidence to prove that the income was derived from taxable services. The department appealed this decision, arguing that the respondent's admission of unaccounted income implied tax liability.
The tribunal noted that the department had failed to produce any documentary evidence to substantiate its claim.
The bench observed that mere disclosure of income to the IT Department did not automatically establish a connection to taxable services.
The tribunal cited the case of Kipps Education Centre, Bathinda v. CCE, Chandigarh reported in 2009(13) S.T.R. 422 (Tri. Del..), where it was ruled that income voluntarily disclosed to IT authorities could not be added to taxable value without evidence.
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CESTAT, comprising Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) upheld the original order and dismissed the department's appeal. The bench concluded that the demand of Rs. 74,16,000 was unsustainable, as there was no evidence to prove that the Rs. 6 crore disclosed income was linked to real estate agent services or any other taxable activity.
To Read the full text of the Order CLICK HERE
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