High Court Of Madras
CIT vs. S. Palanivel
Section 113, proviso
Block period 1st April, 1990 to 15th July, 1999
P.D. Dinakaran & Mrs. Chitra Venkataraman, JJ.
Tax Case (Appeal) No. 72 of 2007
13th February, 2007
Counsel Appeared
J. Narayanaswamy, for the Appellant
JUDGMENT
P.D.DINAKARAN, J. :
The above tax case appeal is directed against the order of the Tribunal made in IT(SS)A No. 78/Mds/2002, dt. 8th Sept., 2006.
2. The brief facts are : A search was conducted by the Revenue officials under s. 132 of the IT Act, 1961 in the residence and in the office premises of the assessee on 15th July, 1999 and based on the materials found during the search, a block assessment was framed for the block period 1st April, 1990 to 15th July, 1999 and an order was passed for the said block period on 19th June, 2001 levying a surcharge at 17 per cent on the tax payable on the block assessment. Aggrieved by the said order of block assessment, the assessee filed an appeal before the CIT(A), who upheld the order of the AO levying surcharge by order dt. 26th Feb., 2002. The Tribunal, on further appeal by the assessee, held that prior to introduction of proviso to s. 113 w.e.f. 1st June, 2002, whereby it was clarified that surcharge as applicable would be leviable in cases of block assessments, the levy would fail, since the search in the present case was prior to 1st June, 2002 and hence, surcharge is not imposable. Aggrieved by the said order of the Tribunal, the Revenue has preferred the above appeal raising the following substantial questions of law :
“1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that surcharge is not applicable to block period 1st April, 1990 to 15th July, 1999 ?
Whether in the facts and circumstances of the case, the Tribunal was right in holding that surcharge is not applicable to block assessments if the search took place prior to introduction of the proviso to s. 113 w.e.f. 1st June, 2002, even though Finance Acts of different years falling within the block period prescribed levy of surcharge ?
Whether in the facts and circumstances of the case, the Tribunal was right in holding that surcharge is not leviable on block assessments during the relevant period, on the ground that the calculation is complex ?”
Heard Mr. J. Narayanaswamy, learned standing counsel appearing for the Revenue. The Punjab & Haryana High Court in CIT vs. Roshan Singh Makker (2006) 203 CTR (P&H) 125 : (2006) 287 ITR 160 (P&H), has already decided the issue raised in the first and second questions against the Revenue. In the said case, the Punjab & Haryana High Court, after referring to s. 113 and the relevant proviso levying surcharge, held that since the search was conducted on 1st June, 2000, i.e., before the insertion of the proviso in s. 113 of the Act, w.e.f. 1st June, 2002, the levy of surcharge envisaged under this proviso will not be attracted. The relevant portion of the said judgment of the Punjab & Haryana High Court in the case cited supra reads as follows :
5. We have perused the order passed by the Tribunal and s. 113 of the Act in which new proviso was inserted w.e.f. 1st June, 2002, by the Finance Act, 2002. The provisions of s. 113 of the Act are as under : ‘113. Tax in the case of block assessment of search cases.—The total undisclosed income of the block period, determined under s. 158BC, shall be chargeable to tax at the rate of sixty per cent : Provided that the tax chargeable under this section shall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated under s. 132 or the requisition is made under s. 132A.’
6. The relevant clause of the Notes on Clauses is extracted below [see (2002) 254 ITR (St) 118, 149] : ‘Clause 41 seeks to amend s. 113 of the IT Act relating to tax in the case of block assessment of search cases. Under the existing provision of the said section, the total undisclosed income of the block period, determined under s. 158BC, shall be chargeable to tax at the rate of sixty per cent. It is proposed to insert a proviso in the said section to provide that the tax chargeable under that section shall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search was initiated under s. 132 or requisition was made under s. 132A. This amendment will take effect from 1st June, 2002.’ We have perused s. 113 of the Act, especially the proviso added on 1st June, 2002, which provides for levy of surcharge. Counsel could not dispute that the same has not been given retrospective effect on the language of cl. 41 of the Notes on Clauses is in clear terms. Since the search in the present case was conducted on 1st June, 2000, i.e., before the insertion of the proviso in s. 113 of the Act, w.e.f. 1st June, 2002, the levy of surcharge envisaged under this proviso will not be attracted in the present case.”
5. Following the above view of the Punjab & Haryana High Court in the case cited supra, a Division Bench of this Court, in which one of us was a party (P.D. Dinakaran, J.), in Tax Case (Appeal) No. 46 of 2007 [between CIT vs. Neotech Company (Firm)], by order dt. 7th Feb., 2007 [reported at (2007) 210 CTR (Mad) ???—Ed.], held that surcharge is not applicable to block assessments in respect of the search conducted prior to the introduction of proviso to s. 113. Admittedly, in the instant case also, the search was conducted on 15th July, 1999, which is prior to the introduction of proviso to s. 113, i.e., 1st June, 2002. Hence, following the abovesaid decisions, the issues raised in the first and second questions are decided in the affirmative, against the Revenue and in favour of the assessee. In that view of the matter, the issue raised in the third question need not be gone into. Accordingly, finding no substantial question of law arises for consideration, the appeal stands dismissed.
[Citation : 291 ITR 33]
