2011 (2) TMI 365 - HC - Income Tax

Surcharge on income - Undisclosed income - Search - Block assessment - Whether the surcharge on income tax in terms of Section 113 of the Act would be leviable where search and seizure had taken place prior to 1.6.2002 - The similar issue came up for consideration before the Hon ble Supreme Court of India in Suresh N. Gupta s case , wherein it was held that the proviso to Section 113 which was inserted by Finance Act, 2002 was curative in nature - The proviso to Section 113, inserted vide Finance Act, 2002, with effect from June 1, 2002, was applicable to block assessments under Chapter XIV-B of the Act and surcharge on income tax would be imposable even in those cases where search had taken place prior to 1.6.2002 of the particular year in which search had taken place - Therefore, question of its retrospective effect did not arise - Hence, the appeal is allowed in favour of the Revenue.

Summary

Issues Involved:
Interpretation of Section 113 of the Income-Tax Act regarding the levy of surcharge on undisclosed income for block assessments conducted before and after June 1, 2002.

Analysis:

1. Issue: Levy of Surcharge on Undisclosed Income

The appeal under Section 260A of the Income-Tax Act, 1961 was filed by the Revenue against the order of the Income Tax Appellate Tribunal regarding the levy of surcharge on undisclosed income for the block period from 1.4.1989 to 4.2.2000. The main issue raised was whether surcharge on income tax would be leviable where search and seizure had taken place prior to 1.6.2002.

2. Legal Interpretation and Precedent:

The Revenue argued that the proviso to Section 113, inserted by the Finance Act 2002, clarified that surcharge was applicable in cases of search and seizure, and the present case should be governed by this provision. The court referred to a similar case before the Supreme Court where it was held that the proviso was curative in nature and clarified the ambiguity regarding the applicability of surcharge based on the year of the Finance Act in which the search was initiated.

3. Conclusion:

Based on the precedent and legal interpretation, the court concluded that the proviso to Section 113, inserted by the Finance Act 2002, was applicable to block assessments under Chapter XIV-B of the Act. The court held that surcharge on income tax would be imposable even in cases where search had taken place prior to 1.6.2002, according to the Finance Act of the particular year in which the search occurred. The court ruled in favor of the Revenue, allowing the appeal and answering the substantial question of law in their favor.

This judgment provides clarity on the levy of surcharge on undisclosed income for block assessments conducted before and after June 1, 2002, based on the interpretation of Section 113 of the Income-Tax Act and relevant precedents set by the Supreme Court.