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2009 (2) TMI 12 - SC - Income TaxLeviability of surcharge relevant time/date - search took place on 6.4.2000 which was prior to the date of amendment made in Section 113 - Whether ITAT was right in law in confirming the CIT (A) s order directing not to levy surcharge on the tax worked out on the undisclosed income as the case pertains to a search conducted prior to 1.6.2002 held that search surcharge was leviable in present case HC was not justified in dismissing revenue s appeal against tribunal s decision
Issues:
Challenge to judgment of Punjab and Haryana High Court under Section 260(A) of Income Tax Act, 1961 regarding surcharge on undisclosed income before 1.6.2002. Detailed Analysis: 1. Challenge to High Court Judgment: The appeal challenged the judgment of the Punjab and Haryana High Court dismissing the appeal filed under Section 260(A) of the Income Tax Act, 1961. The dispute revolved around the order passed by the Income Tax Appellate Tribunal Amritsar Bench related to the block period from 1.4.1990 to 3.7.2000. The main question was whether the ITAT was correct in not levying surcharge on the tax calculated on the undisclosed income due to a search conducted before 1.6.2002. 2. Factual Background and Tribunal's Decision: A search was conducted on 6.4.2000, and the Assessing Officer imposed surcharge in 2002. The CIT (A) reversed this decision, stating surcharge was not applicable for searches before 1.6.2002. The Tribunal upheld this decision, citing an amendment in Section 113 from 1.6.2002 for surcharge on disclosed income. The High Court relied on previous judgments and dismissed the appeal. 3. Legal Framework and Interpretation: The power to levy surcharge on income tax is derived from the Constitution and the Finance Act, not directly from the Income Tax Act. The Income Tax Act provides for different rates of income tax under the Finance Act. The purpose of Chapter XIV is to assess undisclosed income detected through search separately from normal income assessment. The block period is crucial for such assessments, and Section 158-BB explains the computation of undisclosed income. 4. Applicability of Surcharge and Finance Act: The case highlighted that surcharge is a separate item from income tax, and the rate of tax for block assessment is fixed by Parliament under Section 113. Even without the proviso inserted in 2002, the Finance Act of 2001 applied to block assessments initiated before 1.6.2002, making surcharge leviable on tax. 5. Clarificatory Nature of Proviso to Section 113: The proviso to Section 113, inserted in 2002, clarified that the Finance Act of the year in which the search was initiated would apply for surcharge. This proviso was seen as clarificatory and not retrospective, resolving ambiguity regarding the applicability of surcharge rates. 6. Decision and Conclusion: The Supreme Court allowed the appeal, setting aside the High Court's order and directing in favor of the departmental civil appeal. The Court's decision aligned with the interpretation of the law provided in previous cases, emphasizing the legal framework and applicability of surcharge in block assessments before 1.6.2002.
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