2004 (2) TMI 321 - AT - Income Tax

Summary

Issues Involved:
1. Levy of surcharge over and above the rate of tax prescribed under section 113 of the Income-tax Act, 1961.

Detailed Analysis:

1. Levy of Surcharge Over and Above the Rate of Tax Prescribed Under Section 113 of the Income-tax Act, 1961:

Background and Assessee's Argument:
The appeal concerns the block assessment years 1991-92 to 2001-02, focusing on whether a surcharge can be levied beyond the 60% tax rate specified under section 113 of the Income-tax Act. The assessee's counsel argued that section 113 provides a fixed tax rate for undisclosed income without referencing any Central enactment for additional surcharge. He emphasized that the amended proviso to section 113, introduced by the Finance Act, 2002, effective from 1-6-2002, should not apply retroactively to searches conducted before this date (8-2-2001 in this case).

Department's Argument:
The Departmental Representative (D.R.) countered that successive Finance Acts (1999, 2000, 2001) explicitly provided for surcharge over the tax rates prescribed under sections 112 and 113. He argued that the Finance Act, 2001, which specified a 17% surcharge, applies irrespective of the search date, thus justifying the levy of surcharge even for searches conducted before 1-6-2002.

Tribunal's Analysis:
The Tribunal examined the concept of "surcharge" as an additional imposition enhancing the tax, citing Supreme Court rulings (Sarojini Tea Co. (P.) Ltd. v. Collector of Dibrugarh and CIT v. K. Srinivasan). It affirmed that surcharge is part of the tax and retains its characteristics.

Constitutional and Legislative Context:
The Tribunal reviewed sections 4 and 113 of the Income-tax Act. Section 4 mandates that tax rates be prescribed by a Central Act, while section 113 sets a 60% tax rate for undisclosed income. The Tribunal highlighted that the power to levy taxes and surcharges stems from Articles 265, 270, and 271 of the Constitution of India, not merely from section 4(1) of the Income-tax Act. Therefore, the Parliament's enactment of Finance Acts prescribing surcharge rates is constitutionally valid.

Rejection of Assessee's Objections:
- The Tribunal dismissed the assessee's argument that the absence of a Central Act reference in section 113 invalidates the surcharge levy. It clarified that the Finance Act, 2001, a Central enactment, lawfully prescribed the surcharge.
- It rejected the contention that resolutions by Chief Commissioners of Income-tax questioning the surcharge's legality hold no statutory force and do not bind the Tribunal.
- The Tribunal also refuted the claim that Finance Acts, referring to assessment years, do not apply to block assessments. It maintained that the Finance Act, 2001, explicitly levied surcharge on income-tax determined under section 113, applicable to block assessments.

Reliance on Previous Tribunal Decisions:
The Tribunal noted that earlier decisions (Microland Ltd. and IT(SS)A. No. 28 (Mds.)/2003) did not consider constitutional provisions or the Finance Act, 2001, thereby limiting their applicability to the present case.

Conclusion:
The Tribunal concluded that the Parliament, under Article 271 of the Constitution, validly enacted the Finance Act, 2001, prescribing a 17% surcharge over the tax levied under section 113. Thus, the assessing authority's surcharge imposition was upheld, and the appeal was dismissed.