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2018 (4) TMI 595 - AT - Service TaxVoluntary Compliance Encouragement Scheme - rejection of declaration under VCES Scheme - time limitation - case of appellant is that the denial of declaration owing to proceedings initiated against them following a search conducted in November 2013 is not consistent with the statute as their declarations had been filed in August 2013. Held that - the show cause notice was issued on 14th August 2014 whereas the declaration was filed on the 20th August 2013 - circular No. 174/9/2013-ST dated 25th September 2013 prescribes a time-limit of thirty days from the date of filing of declaration for placing the declarant on notice that their declaration was liable to rejected. Having failed to initiate the action within the prescribed time-limit, the proceedings for rejection stand vitiated. Appeal allowed - decided in favor of appellant.
Issues:
1. Rejection of declaration under Voluntary Compliance Encouragement Scheme. 2. Tax liability on renting of property computation. 3. Compliance with statutory conditions for declaration rejection. 4. Reliance on statements by income tax authorities for determination of taxable value. Issue 1: Rejection of declaration under Voluntary Compliance Encouragement Scheme The appellant, a provider of 'commercial training and coaching service,' filed declarations under the Voluntary Compliance Encouragement Scheme, 2013. The declarations were rejected due to tax dues admitted before other statutory agencies, leading to a differential tax being confirmed along with penalties. The appellant contended that the denial of declaration post a search in November 2013 was inconsistent with the statute, as their declarations were filed in August 2013. They argued that reliance on declarations before income tax authorities did not establish taxable activity. The Tribunal referred to relevant case laws and circulars to emphasize that declarations should not be rejected without proper justification, especially if the issue or period differs from ongoing inquiries or audits. Issue 2: Tax liability on renting of property computation The appellant challenged the erroneous computation of tax liability on renting of immovable property under section 65(105)(zzzz), citing specific exclusion. They argued that the tax liability was inaccurately determined. The Tribunal considered the appellant's contentions and found merit in their argument regarding the incorrect computation of tax liability on renting of property. The Tribunal examined relevant legal provisions and held that the tax liability was erroneously calculated, supporting the appellant's position. Issue 3: Compliance with statutory conditions for declaration rejection The Tribunal noted that the show cause notice was issued after the circular's prescribed time limit for placing the declarant on notice of rejection. As the action was not initiated within the stipulated time frame, the proceedings for rejection were deemed vitiated. The Tribunal emphasized the importance of adhering to statutory timelines and procedures for the rejection of declarations under the scheme. Issue 4: Reliance on statements by income tax authorities for determination of taxable value The Authorized Representative relied on statements recorded by income tax authorities and Form no. 3CD filed under the Income Tax Act, stating that the appellant's activities were limited to tuition classes. The Tribunal considered the reliance on income tax authorities' statements insufficient for determining the taxable value without proper scrutiny and specific findings. Citing relevant case laws, the Tribunal highlighted the need for a thorough examination before determining the taxable value based solely on statements provided to income tax authorities. In conclusion, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the importance of proper justification and scrutiny in tax assessments and declaration rejections under statutory schemes.
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