By TIOL News Service

MUMBAI, JAN, 06, 2017: THE appellant (since deceased), a proprietorship Chartered Accountant, declared Rs.4,33,584/- as tax on undisclosed receipts on rendering of taxable service [Period 1 st April 2008 to 31 st December 2012]but had allegedly not included Rs.1,50,066/- which was claimed to be discharged tax liability during the declaration period.

This claim was not found acceptable leading to issuance of SCN on 1st October 2014 and confirmation of tax of Rs.5,83,650/- [4,33,584 + 1,50,066], interest of Rs.67,055/- and penalty of Rs.5,83,650/- u/s 78 of FA, 1994. Incidentally, before the matter was adjudicated, the declarant-proprietor, expired on 11th November 2014.

The impugned order mentions that the VCES, 2013 applicant was informed of short-declaration in letter dated 21 st January 2014 calling for challans evidencing tax payment and that the shortfall of Rs.1,50,067/- was remitted by challan dated 8th January 2014. The order also notes the demise of the declarant. Apparently, the matter was subsequently handled by the legal heirs of the deceased.

This appeal is against the impugned order dated 22.01.2016.

None appeared for appellant.

The Bench noted that though the appellant had declared Rs.4,33,584/- and discharged half this amount on 31 st December 2013 with the remaining half in December 2014, the amount allegedly short-declared was also paid up well before the date for final amounts under the scheme.

The AR submitted that the declarant had attempted to avoid full disclosure which was mandated under the VCES and, therefore, the penalty has been rightly imposed.

The Bench observed -

"7. The declarant has paid the full amount that was computed by the adjudicating authority. The second and final installment pertaining to the original declaration was made by legal heirs of the declarant. Penalty under section 78 of Finance Act, 1994, like all other penalties in tax statutes, is personal to the alleged offender. It is well-settled that penalties cannot be visited upon a person who has ceased to exist. The declarant had expired when the adjudicating authority decided the matter and penalty was not liable to be imposed at that stage. That can be remedied now."

In fine, the appeal was allowed by setting aside the penalty imposed u/s 78 of the Finance Act, 1994.

(See 2017-TIOL-55-CESTAT-MUM)