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S.H. Kapadia & B. Sudershan Reddy
Commissioner of Income Central II - PETITIONER
Versus
Suresh N. Gupta - RESPONDENT
JUDGMENT
Appeal (civil) 32 of 2008
(Arising out of S.L.P. (C) No.4617 of 2007)
Decided On: 07/01/2008
Constitution of India - Articles 271 , 269 and 270 - Income- tax Act, 1961 – Sections 115A , 115AB , 115AC , 115ACA , 115AD , 115B , 115BB , 115BBA , 115E , 115JB , 112 , 113 , 167B , 164 , 161 , 142 , 68, 69, 69A, 69B , 69C , 32 , 245D , 143 , 144 , 147 , 139 , 132 , 158B , 158BA , 158BB , 158BC , 158BH , 158 and 4 - Finance Act, 2001 - Section 2 - On a search Act was carried out at premises of respondent-assessee, an individual - Search unearthed an unexplained investment of Rs. 65,000/- being value of household valuables and Rs. 97,427/- on account of unexplained marriage expenses - Accordingly, in block assessment, A.O. determined assessee s undisclosed income at Rs. 1,62,427/-. He computed tax thereon at 60% in terms amounting to Rs. 97,456/- on which surcharge was levied at 17%, i.e., Rs.16,504/-- Levy of surcharge was challenged by assessee in appeal before CIT - Decision of CIT has been confirmed by Tribunal and High Court - Hence, this civil appeal - Points for determination - Two points arise for determination: Whether on facts and circumstances of this case, was applicable to block assessment in respect of search carried out secondly, whether proviso inserted was applicable to block assessment - According to assessee, scheme of assessment of undisclosed income is different from scheme of assessment of total income of any person in terms assessment is made of undisclosed income as against assessment of total income that, assessment is made for block period as against assessment of income of previous year under that, undisclosed income is assessed at 60% in terms of against taxation of normal income at rates prescribed in relevant Finance Act that, provisions of Finance Act are not found in block assessment scheme and, therefore, according to assessee, was not applicable - According to assessee, proviso to Act carves out an exception to normal rule and provides that, where under any provision, tax is to be charged in respect of income of a period other than previous year , such tax shall be levied as may be specifically provided under special provision - According to assessee, is such special provision as it concerns assessment of undisclosed income for block period which is period other than previous year referred - Therefore, according to assessee, block assessment falls not but it falls under aforesaid proviso - Consequently, it is urged that since there is no reference to Finance Act under which only looks at a fixed rate of 60% stipulated it was not open to AO to impose surcharge at 17% prior – Held , In view of our findings on first point, strictly speaking, we are not required to examine this question - However, it has been vehemently urged on behalf of assessee that said proviso cannot operate retrospectively - This argument is founded on basis that until amendment there was inconsistency with regard to levy of surcharge - According to assessee, question which usually bothered both assessee and Department was whether surcharge was leviable with reference to rates provided for in FA of year in which search was initiated or year in which search was concluded or year in which block assessment proceedings were initiated or year in which block assessment order was passed - According to assessee, there was a conference of Chief Commissioners which had suggested to Central Government to amend with retrospective effect - However, despite such recommendations, Central Government inserted proviso in only with effect - Therefore, according to assessee, proviso cannot be interpreted as retrospective - Court find no merit in above arguments. Both, indicated that a substantive charge was created in respect of income-tax to be levied - Both these Acts prescribed rates of surcharge - Said surcharge did not depend for its leviability on assessee s liability to pay income- tax but on assessed tax - Assessee has relied upon above anomalies in support of their contention that such anomalies made charge ineffective - In our view, such submission amounts to begging question - According to assessee, prior, position was ambiguous as it was not clear even to Department as to which year s FA would be applicable - To clear this doubt precisely, proviso has been inserted by which it is indicated that FA of year in which search was initiated would apply - Therefore, in our view, said proviso was clarificatory in nature. In taxation, Legislation of type indicated by proviso has to be read strictly - There is no question of retrospective effect - Proviso only clarifies that out of four dates, Parliament has opted for date, namely year in which search is initiated, which date would be relevant for applicability of a particular FA - Therefore, Court have to read proviso as it stands – Petition Allowed
KAPADIA, J.
Leave granted.
2. Whether the AO had erred in imposing surcharge at 17% on the tax amount of Rs. 97,456/- under Section 113 of the Income- tax Act, 1961 ( 1961 Act ) for the block period comprising of previous years relevant to 10 assessment years, i.e., 1991-92 to 2000-01, including the period from 1.4.2000 to 17.1.2001. FACTS
2. On 17.1.2001 a search under Section 132 of the 1961 Act was carried out at the premises of the respondent-assessee, an individual. The search unearthed an unexplained investment of Rs. 65,000/- being the value of household valuables and Rs. 97,427/- on account of unexplained marriage expenses (undisclosed income). Accordingly, in the block assessment, the A.O. determined the assessee s undisclosed income at Rs. 1,62,427/-. He computed tax thereon at 60% in terms of Section 113 of the 1961 Act amounting to Rs. 97,456/- on which surcharge was levied at 17%, i.e., Rs.16,504/-. The levy of surcharge was challenged by the assessee in appeal before the CIT(A). The said appeal was allowed. The decision of CIT(A) has been confirmed by the Tribunal and the High Court. Hence, this civil appeal. Points for determination:
3. Two points arise for determination: Whether on the facts and circumstances of this case, the Finance Act, 2001 ( FA for short) was applicable to block assessment under Chapter XIV-B in respect of the search carried out on 17.1.2001; secondly, whether the proviso inserted in Section 113 by the Finance Act, 2002 is clarificatory? Whether Finance Act, 2001 was applicable to block assessment under Chapter XIV-B up to 1.06.2002:
4. Chapter XIV-B was inserted by the Finance Act, 1995, w.e.f. 1.7.1995. According to the assessee, the said Chapter is a self- contained chapter as it lays down a special procedure for assessment of undisclosed income found during search for the block period , containing a charging section (158BA), a computation section (158BB), a procedural section for block assessment (158BC), limitation provision for completion of block assessment (158BE) and the provisions for imposition of interest and penalty (158BFA).
5. According to the assessee, the scheme of assessment of undisclosed income under Chapter XIV B is different from scheme of assessment of total income of any person in terms of Section 4(1) of the 1961 Act inasmuch as under Chapter XIV-B assessment is made of undisclosed income as against assessment of total income under Section 4(1) of the Act; that, assessment under Chapter XIV-B is made for the block period as against assessment of income of the previous year under Section 4(1) of the Act; that, under Chapter XIV-B undisclosed income is assessed at 60% in terms of Section 158BA(2) read with Section 113 as against taxation of normal income at the rates prescribed in the relevant Finance Act; that, the provisions of the Finance Act are not found in the block assessment scheme under Chapter XIV-B up to 1.06.2002 and, therefore, according to the assessee, Finance Act, 2001 was not applicable to Chapter XIV-B. According to the assessee, proviso to Section 4(1) of the 1961 Act carves out an exception to the normal rule in Section 4(1) and provides that, where under any provision of the 1961 Act, tax is to be charged in respect of income of a period other than the previous year , such tax shall be levied as may be specifically provided under special provision of the 1961 Act. According to the assessee, Chapter XIV-B is such special provision as it concerns assessment of undisclosed income for the block period which is the period other than the previous year referred to in Section 4(1). Therefore, according to the assessee, block assessment falls not in Section 4(1) but it falls under the aforesaid proviso to Section 4(1) of the 1961 Act. Consequently, it is urged that since th
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