2012 (6) TMI 202 - HC - Income Tax

Surcharge - Whether proviso to Section 113 which was inserted by the Finance Act, 2002 with effect from 1-6-2002 have retrospective application Held that - such a proviso is curative in nature and it merely clarifies that for a relevant date for of the financial year would be the year in which the search is initiated under Section 158-BC. in the case of CIT v. Vatika Township (P.) Ltd. (2009 (1) TMI 217 (SC) ) after referring to the aforesaid Supreme Court Judgment, have referred the said matter to a Larger Bench. Accordingly, the matter is referred to the Larger Bench. order of the Tribunal set aside and matter remanded to the assessing authority with a direction to await the Judgment of the Apex Court consequent to the order to be passed by the Larger Bench to that effect. appeal is allowed.

Issues:
1. Retrospective application of proviso to Section 113 inserted by Finance Act, 2002.
2. Interpretation of the proviso by the Tribunal.
3. Conflict between the Tribunal's decision and the judgment of the Apex Court.
4. Referral of the matter to a Larger Bench by the Apex Court.
5. Decision on surcharge liability pending the Larger Bench's judgment.

Analysis:

1. The primary issue in this case revolves around the retrospective application of the proviso to Section 113, inserted by the Finance Act, 2002. The Tribunal held that the proviso does not have retrospective application, leading to the non-leviability of surcharge on the assessee.

2. The Tribunal's interpretation of the proviso was challenged by the Revenue in this appeal. The Revenue argued that the proviso is clarificatory in nature, as highlighted in the judgment of the Apex Court in CIT v. Suresh N. Gupta. The Apex Court emphasized that the proviso clarifies that the relevant financial year for applicability would be the year in which the search is initiated under Section 158-BC.

3. The conflict arises between the decision of the Tribunal and the judgment of the Apex Court. The Tribunal's order was deemed contrary to the Apex Court's ruling, necessitating the setting aside of the Tribunal's decision. However, it was noted that the matter was referred to a Larger Bench by the Apex Court in the case of CIT v. Vatika Township (P.) Ltd., indicating a need for further clarification.

4. Given the referral of the matter to a Larger Bench by the Apex Court, the High Court decided to await the decision of the Larger Bench before making a final determination on the surcharge liability. The High Court directed the assessing authority to await the judgment of the Apex Court's Larger Bench and act accordingly based on the outcome.

5. Consequently, the appeal was allowed, setting aside the impugned order of the Tribunal. The order passed by the assessing authority and the Commissioner was restored, with a directive to await the decision of the Larger Bench of the Apex Court. The final decision on the surcharge liability would be dependent on the judgment to be rendered by the Apex Court's Larger Bench, ensuring compliance with the legal process and hierarchy of judicial review.

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