2006 (5) TMI 74 - HC - Income Tax

Levy of surcharge undisclosed income - search - Whether Tribunal was right in law in confirming the Commissioner of Income-tax (Appeals) order directing not to levy surcharge on the tax worked out on the undisclosed income, as the case pertains to search conducted prior to June 1, 2002? - Since the search in the present case was conducted on June 1, 2000, i.e., before the insertion of the proviso in section 113 of the Act, with effect from June 1, 2002. The levy of surcharge envisaged under this proviso will not be attracted in the present case no any substantial question of law arises

Summary

Issues:
Levy of surcharge on undisclosed income for a block period before June 1, 2002.

Analysis:
The appeal raised the issue of whether the Income-tax Appellate Tribunal was correct in confirming the Commissioner of Income-tax (Appeals)' order directing not to levy surcharge on the tax worked out on the undisclosed income for a block period from April 1, 1990, to April 6, 2000. The search and seizure operations were conducted before June 1, 2002, and the Assessing Officer had determined the tax liability along with surcharge. However, the Commissioner of Income-tax (Appeals) deleted the surcharge addition based on previous Tribunal orders citing that the proviso for surcharge was added to the statute book effective from June 1, 2002, and not applicable to searches conducted before that date. The Tribunal dismissed the Revenue's appeal and upheld the decision regarding the non-levy of surcharge on undisclosed income.

The Tribunal's order highlighted that the proviso to section 113 of the Income-tax Act, which allows for the levy of surcharge on undisclosed income, was inserted with effect from June 1, 2002. Since the search in the present case was conducted before this date, the surcharge provision did not apply. The Tribunal relied on various judgments supporting this interpretation, emphasizing that the levy of surcharge was not applicable to cases where searches were carried out before June 1, 2002. The Tribunal concluded that no substantial question of law arose for consideration in the case, leading to the dismissal of the appeal.

In summary, the judgment revolved around the interpretation of the proviso to section 113 of the Income-tax Act and its applicability to the levy of surcharge on undisclosed income for a block period before June 1, 2002. The decision was based on the timeline of the search and seizure operations, with the Tribunal affirming that the surcharge provision introduced in 2002 did not retroactively apply to searches conducted prior to its enactment. The Tribunal's reliance on previous judgments and the lack of distinction pointed out by the Revenue led to the dismissal of the appeal, as no substantial question of law was found to be present in the case.