Taxability of amount surrendered to IT Deptt - Appeal rejected as Revenue not knowing about the relied upon judgment

PJ/Case Laws/2011-12/1158

Case: Commissioner of C. Ex., Ludhiana Vs. Mayfair Resorts

Citation: 2011 (22) S.T.R. 263 (P&H)

Issue:- Taxability of amount surrendered to Income Tax Deptt – demand set aside by following judgment of the Tribunal - appeal before High Court – dismissed on the ground that Revenue not knowing anything about relied upon order and hence their case not responsible representation.

Brief Facts:- Respondent-assessee is registered with the service tax department under the category “Mandap Keeper”. Department noticed during the audit conducted for the period 2004-05 that the respondent had surrendered Rs. 35 Lacs to the Income Tax Department as additional taxable income upon the said amount being found cash at respondent’s premises and respondent being unable to explain the source of income.

According to the Department since the only business of the respondent was providing service of Mandap keeper the amount represented proceeds of services provided by the respondent. The Adjudicating Authority confirmed the demand of service tax. Respondents filed appeal against the said order before Commissioner (Appeals).

The Commissioner (Appeals) set aside the impugned order on the grounds that without making any enquiry and in absence of any statutory presumption, the department could not treat the amount as representing proceeds of services provided by the assessee. Aggrieved by the said order, Department filed appeal before Tribunal but the Tribunal has affirmed the order of the Commissioner (Appeal) by following the judgment given in the case of Kipps Education Centre, Bathinda v/s CCE, Chandigarh [2009 (13) STR 422].

Hence, Department filed appeal before the High Court.

Reasoning of Judgment:- The High Court held that it was for the department to show the evasion of service tax and that the money found with the assessee represented proceeds of services provided by it, the Commissioner and Tribunal have followed an earlier order of the Tribunal. On being asked, learned counsel for the Revenue stated to have no knowledge about the status of the order relied upon. It was observed that when an appeal is filed by the department, the least expected from counsel for the department is to know the status of the order followed in the impugned order. In the absence thereof, the representation by the department can hardly be responsible representation.

Decision: - Appeal dismissed.

Comment:- This is also very good decision. Many times the department raises the demand on the basis that the Income Tax department has recovered certain amount from an assessee and he does not have any other business. Thus, this income is earned by evading duty or service tax. Thus, it is not established cases and hence the demand is not sustainable. The decision is rightly given by Hon’ble High Court.

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PJ/Case Laws/2011-12/1158

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