2015 (2) TMI 588 - HC - Income Tax

Surcharge u/s 113 - Tribunal held surcharge not applicable to block period 1989-1990 to 1998-1999 - Held that - The charge in respect of the surcharge, having been created for the first time by the insertion of the proviso to Section 113, is clearly a substantive provision and hence is to be construed prospective in operation. The amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by Parliament. Furthermore, an amendment made to a taxing statute can be said to be intended to remove 'hardships' only of the assessee, not of the Department. On the contrary, imposing a retrospective levy on the assessee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from 1.6.2002. See Commissioner of Income Tax (Central)-I v. Vatika Township Private Limited 2014 (9) TMI 576 - SUPREME COURT - Decided in favour of the assessee.

Summary

Issues:
1. Applicability of surcharge to block assessment for the period 1989-1999.
2. Interpretation of the proviso to Section 113 of the Income Tax Act.
3. Levy of surcharge on block assessments during the relevant period.

Analysis:
1. The appeal challenged the order of the Income Tax Appellate Tribunal regarding the applicability of surcharge to the block assessment for the years 1989-1999. The assessee, a broker, had a search conducted in their premises, leading to a block assessment. The Assessing Officer levied surcharge on the tax payable for the block assessment. The Commissioner of Income Tax (Appeals) upheld the levy, but the Tribunal ruled that since the search occurred before 1.6.2002, surcharge was not applicable. The Revenue appealed this decision.

2. The issue of interpreting the proviso to Section 113 of the Income Tax Act was crucial in this case. The High Court's view that the proviso was prospective in nature was challenged before the Supreme Court. The Constitution Bench, in the case of Commissioner of Income Tax (Central)-I v. Vatika Township Private Limited, clarified that the proviso was intended to be prospective. The amendment creating the surcharge was considered substantive and hence prospective. The amendment aimed to remove hardships for the assessee and was effective from 1.6.2002. Therefore, the surcharge was not applicable to block assessments for the relevant period.

3. The Tribunal's decision was in line with the interpretation provided by the Constitution Bench of the Supreme Court. The intention of the legislature in making the proviso to Section 113 prospective was clear. The amendment was not clarificatory but substantive, aimed at relieving hardships for the assessee. As a result, the appeal was dismissed, and the questions of law were answered against the revenue and in favor of the assessee. No costs were awarded in this matter.