2005 (11) TMI 485 - AT - Income Tax

Summary

Issues:
1. Allowance of claim of loss against undisclosed income for the block period.
2. Charging of surcharge under section 113 of the Income-tax Act.

Analysis:

Issue 1: Allowance of claim of loss against undisclosed income for the block period
The appeal by the Revenue was directed against the order of the CIT(A) regarding the allowance of the assessee's claim of loss of later years against the undisclosed income determined for an earlier year of the block period. The search and seizure operation under section 132 was conducted at the assessee's business premises on 16-1-2001. The Assessing Officer initially denied the claim of loss for the block period. However, the CIT(A) referred to the decision of the ITAT Mumbai Bench in the case of B.D.A. Ltd. v. Asstt. CIT [1998] 65 ITD 501 and allowed the set off of losses against the undisclosed income. The ITAT, in this case, upheld the CIT(A)'s decision, citing precedents where losses computed in block assessments were allowed to be set off against undisclosed income from other previous years within the block period. Therefore, the appeal on this ground was dismissed.

Issue 2: Charging of surcharge under section 113 of the Income-tax Act
Another ground of appeal was related to the charging of surcharge under section 113 of the Income-tax Act. The Assessing Officer had levied surcharge, but the CIT(A) deleted the surcharge based on the provision inserted in the Income-tax Act prospectively from 1-6-2002. The ITAT concurred with the CIT(A) and held that the surcharge could not be charged for searches conducted under section 132A before 1-6-2002. The ITAT relied on the decision in the case of Dy. CIT v. Sai Metal Works, Jalandhar, etc. and concluded that the amendment regarding surcharge was not applicable retrospectively. Consequently, the appeal by the Revenue on this ground was also dismissed.

In conclusion, the ITAT upheld the CIT(A)'s decision on both issues, emphasizing the applicability of precedents and the prospective nature of the relevant amendments to dismiss the Revenue's appeal comprehensively.