2020 (2) TMI 463 - HC - Income Tax

Levy of surcharge in the case of block assessment - HELD THAT - In view of this, the matter deserves to be sent back to the learned Tribunal for deciding the appeal again, in the light of the latest decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Bangalore Vs. K.Raheja Hotels Estate (P.) Ltd. 2014 (11) TMI 357 - SUPREME COURT . In view of this, the matter deserves to be sent back to the learned Tribunal for deciding the appeal again, in the light of the latest decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Bangalore Vs. K.Raheja Hotels Estate (P.) Ltd .

Summary

Issues involved:
1. Levy of surcharge in block assessment
2. Interpretation of the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Suresh N.Gupta
3. Reversal of judgment by the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Bangalore Vs. K.Raheja Hotels & Estate (P.) Ltd.
4. Prospective application of amendments in the Finance Act
5. Remanding the case to the Income Tax Appellate Tribunal

Levy of Surcharge in Block Assessment:
The appeal was filed against the order of the Income Tax Appellate Tribunal regarding the levy of surcharge in block assessment. The Tribunal had decided against the Assessee based on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Suresh N.Gupta. However, the Hon'ble Supreme Court later reversed its decision in the case of Commissioner of Income Tax, Bangalore Vs. K.Raheja Hotels & Estate (P.) Ltd., making the levy of surcharge prospective.

Interpretation of Judgments:
The Supreme Court's decision in the case of K.Raheja Hotels & Estate (P.) Ltd. clarified that the amendment to Section 113 of the Income Tax Act, which introduced the provision for surcharge in block assessments, was intended to be prospective. The Court emphasized that the amendment was a conscious decision of the legislature and not merely clarificatory, as evidenced by the language used in the Finance Act and relevant circulars issued by the CBDT.

Prospective Application of Amendments:
The Finance Act, 2003, explicitly stated that the surcharge in respect of block assessments of undisclosed income would be prospective. The addition of a proviso in the Finance Act further reinforced the prospective nature of the provision, as it was necessary to provide for surcharge in block assessments. The Court highlighted that the amendment aimed to alleviate hardships faced by the assessee and was not intended to impose undue hardship by imposing a retrospective levy.

Remand to the Income Tax Appellate Tribunal:
Given the reversal of the earlier judgment by the Supreme Court and the clarification on the prospective application of the surcharge provisions, the High Court remanded the case back to the Income Tax Appellate Tribunal for a fresh decision in line with the latest Supreme Court decision in the case of Commissioner of Income Tax, Bangalore Vs. K.Raheja Hotels & Estate (P.) Ltd. The appeal filed by the Income Tax Department was dismissed, while the appeals of the assessees were allowed, deleting the surcharge levied for block assessments before 1st June 2002.

This comprehensive analysis of the judgment addresses the issues of levy of surcharge in block assessment, interpretation of relevant judgments, prospective application of amendments, and the remand of the case to the Income Tax Appellate Tribunal for further consideration.