2024 (5) TMI 1545 - AT - Income Tax

Levy of surcharge - total income earned is less than Rs. 50 lakhs - HELD THAT - As the income of the assessee did not exceed the monetary limit of Rs. 50 lakhs and therefore levy of surcharge is not warranted as per First schedule introduced vide Finance Act 2021 hence the surcharge levied by the CPC and affirmed by the Ld. Commissioner is deleted. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the levy of surcharge on the assessee's income is warranted under the provisions of the Income Tax Act, 1961, as amended by the Finance Act, 2021.
The correctness of the rectification order passed by the Centralized Processing Center (CPC) which increased the total income of the assessee and levied a surcharge.

ISSUE-WISE DETAILED ANALYSIS

1. Levy of Surcharge on Assessee's Income

Relevant legal framework and precedents: The legal framework revolves around the provisions of the Income Tax Act, 1961, specifically section 2(29C) and the First Schedule introduced via the Finance Act, 2021. The Finance Act, 2021 prescribes that a surcharge is applicable only if the total income exceeds Rs. 50 lakhs.
Court's interpretation and reasoning: The Tribunal noted that the assessee's total income did not exceed the Rs. 50 lakh threshold. Therefore, as per the provisions of the First Schedule of the Finance Act, 2021, the levy of surcharge was not applicable.
Key evidence and findings: The assessee's total income was computed at Rs. 16,24,880/- after rectification, which is below the Rs. 50 lakh threshold required for surcharge imposition.
Application of law to facts: The Tribunal applied the provisions of the Finance Act, 2021, and determined that the surcharge levied by the CPC and affirmed by the Commissioner was not justified as the income did not meet the threshold for surcharge applicability.
Treatment of competing arguments: The Tribunal acknowledged that the Commissioner considered the additional ground regarding the surcharge but failed to decide on it. The Tribunal, therefore, addressed this oversight by applying the relevant legal provisions to the facts.
Conclusions: The surcharge of Rs. 1,73,278/- levied by the CPC and affirmed by the Commissioner was deleted as it was not warranted under the applicable legal provisions.

2. Rectification Order by CPC

Relevant legal framework and precedents: The rectification process is governed by section 154 of the Income Tax Act, 1961, which allows for correction of any mistake apparent from the record.
Court's interpretation and reasoning: The Tribunal did not specifically delve into the procedural correctness of the rectification order but focused on the substantive issue of surcharge applicability.
Key evidence and findings: The rectification order resulted in an increased total income of Rs. 16,24,880/- from the originally declared income of Rs. 14,33,440/-.
Application of law to facts: The Tribunal's decision to delete the surcharge implicitly affirmed the rectification in terms of the revised income but rejected the surcharge component.
Treatment of competing arguments: The Tribunal did not address any specific arguments regarding the rectification process itself, focusing instead on the surcharge issue.
Conclusions: The rectification of income was not contested beyond the surcharge issue, which was resolved in favor of the assessee.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "Considering the peculiar facts and circumstances, as the income of the assessee did not exceed the monetary limit of Rs. 50 lakhs and therefore levy of surcharge is not warranted as per First schedule introduced vide Finance Act, 2021, hence the surcharge levied to the tune of Rs. 1,73,278/- by the CPC and affirmed by the Ld. Commissioner is deleted."
Core principles established: The applicability of surcharge is contingent upon the total income exceeding specified thresholds as per the Finance Act, 2021. The Tribunal emphasized adherence to these statutory limits.
Final determinations on each issue: The Tribunal allowed the appeal of the assessee, concluding that the surcharge was incorrectly levied and should be deleted.