SCNs based on the difference in ITR-TDS data and service tax returns to be issued only after proper verification

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The CBIC issued Instructions dated October 26, 2021 directed that the show cause notices (“SCNs”) based on the difference in ITR-TDS data and service tax returns to be issued only after proper verification.

Representations have been received from various trade bodies and associations regarding instances of indiscriminate issuance of demand notices by the field formations on the basis of ITR-TDS data received from Income Tax Department.

In this regard, the undersigned is directed to inform that CBIC vide instructions dated April 01, 2021 and April 23, 2021 issued vide F.No.137/472020-ST, has directed the field formations that while analysing ITR-TDS data received from Income Tax, a reconciliation statement has to be sought from the taxpayer for the difference and whether the service income earned by them for the corresponding period is attributable to any of the negative list services specified in Section 66D of the Finance Act, 1994 or exempt from payment of Service Tax, due to any reason. It was further reiterated that demand notices may not be issued indiscriminately based on the difference between the ITR-TDS taxable value and the taxable value in Service Tax Returns.

It is once again reiterated that instructions of the Board to issue show cause notices based on the difference in ITR-TDS data and service tax returns only after proper verification of facts, may be followed diligently. Pr. Chief Commissioner /Chief Commissioner (s) may devise a suitable mechanism to monitor and prevent issue of indiscriminate show cause notices. Needless to mention that in all such cases where the notices have already been issued, adjudicating authorities are expected to pass a judicious order after proper appreciation of facts and submission of the noticee.

The Instructions can be accessed at: http://www.a2ztaxcorp.com/wp-content/uploads/2021/10/CBIC-issued-Instructions-dated-October-26-2021.pdf

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