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TMI Blog2003 (8) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... e are presumed to be retrospective unless such a construction is textually inadmissible. If the new Act affects matters of procedure only, then, prima facie, it applies to all actions pending as well as future. In stating the principle that a change in the law of procedure operates retrospectively and unlike the law relating to vested right is not only prospective and legislation imposing liability is generally governed by the normal presumption that it is not retrospective and it is a cardinal principle of the tax law that the law to be applied is that in force unless otherwise provided expressly or by necessary implication. So far as fiscal statutes are concerned, the position is not different and imposition of liability is generally governed by the normal presumption that it is not retrospective and it is a cardinal principle of the tax law that the law to be applied is that in force unless otherwise provided expressly or by necessary implication. The above rule applies to the charging section and other substantive provisions and does not apply to machinery or procedural provisions of a taxing Act which are generally retrospective and apply even to pending proceedings. A taxing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written submissions against levy of surcharge. But the learned CIT(A), while considering and not accepting the plea of the assessee, has concluded to confirm the action of the AO as per para 2.3 to 2.6 of his order as under: "Facts of the case were duly considered. The concept of block assessment was introduced by Finance Act, 1995. Circular No. 717 dt. 14th Aug., 1995, gives explanatory notes of various amendments. Coming to the block assessment, it clearly says that surcharge has to be levied. Further it is noted that amendment to s. 113 brought in by Finance Act, 2002, is classificatory in nature since there were some problem in adopting the rate of surcharge as applicable when the order was passed as if posed unintended tax liability depending the date when the order was passed. The proviso to s. 113 merely clarifies this issue and says that surcharge rate applicable will be the rate as applicable when the search was carried out. Further it is noted that second proviso to s. 2(7) both under Finance Act, 1995, and Finance (No. 20) Act, 1996 provided for surcharge on tax leviable under s. 113 by making a specific cross reference to s. 113 and this will vindicate the doubt aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gest it to be clarificatory in nature and moreover, other amendments in s. 158BC and 158BC though made by the same Finance Act, 2002, yet these were made effective from 1st July, 1995, whereas the proviso to s. 113 was inserted by Finance Act, 2002, w.e.f. 1st June, 2002. Therefore, the said amendment neither can be said to be clarificatory in nature nor can retrospective effect be given to the same. It was also submitted that the learned CIT(A) is banking upon the Board's Circular and while finding the arguments of the assessee to be logical, he did not accept the same. Since all the Board's circulars are not binding and there is a proviso inserted w.e.f. 1st June, 2002, therefore, no retrospectivity can be given to the same and as per the said proviso, no doubt, surcharge is leviable but not from retrospective date, that means, for the searches conducted on or after 1st June, 2002, and not before. Even the Boards Circular No. 717 states about domestic company and not individuals. Therefore, the plea of the learned CIT(A) in this regard is also of no consequence. It was thus finally concluded to plead for deletion of the surcharge levied/confirmed. 5. The learned Departmental Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y clear that tax to be increased by surcharge in the cases of search and amendment has been given effect from 1st June, 2002, specifically in the said clause also. Therefore, surcharge cannot be imposed and moreover, it is not the beneficial provision as such, the said circular, which otherwise is not relevant also, cannot be given any credence. As such, the orders of the authorities below are unjustified and are liable to be quashed. It was thus pleaded for quashment of surcharge charged/confirmed. 7. After having heard both the sides and considering the material on record as well as case law cited, the point for consideration is whether proviso to s. 113 inserted by Finance Act, 2002, w.e.f. 1st June, 2002, is to be made applicable retrospectively or prospectively. Before considering the same, it is imperative to look into the fundamental principles of interpretation. The essential idea of legal system is that current law should govern current activities. Retrospectivity is artificial deeming a thing to be what it is not. It is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atute does not apply to an enactment affecting procedure or practice such as the CPC. The reason is that no person has a vested right in any course of procedure. The general principle indeed seems to be that alternations in the procedure are always retrospective, unless there be some good reason against it." 9. Considering the language of the relevant provisions in the light of elucidation and discussion as held above, the insertion of proviso to s. 113, which is a part of charging provision as it imposes additional liability upon the assessee for payment of surcharge in addition to tax chargeable on the undisclosed income, the same, being not a beneficial provision nor meant to remedy any unintended consequences and having been made effective from a particular date i.e., 1st June, 2002, cannot be held to be either procedural, declaratory or clarificatory in nature. Therefore, in my considered view, it is prospectively effective. Since search in this case was conducted prior to 1st June, 2002, therefore, charging of surcharge by the AO and its confirmation by the learned CIT(A) is found to be not legally correct. As such, levy of surcharge in the case of the assessee is quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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