Commissioner of Income-TaxCent.-I, Chennai v. Dr.K.Senthilnathan

IN THE HIGH COURT OF JUDICATURE AT MADRASDated: 07.02.2007CoramThe Honourable Mr.Justice P.D.DINAKARANandThe Honourable Mrs. Justice CHITRA VENKATARAMANTax Case (Appeal) No.523 of 2004 Commissioner of Income-TaxCent.-I, Chennai....Appellant Vs.Dr.K.Senthilnathan...RespondentThe above T.C.(Appeal) is preferred under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax AppellateTribunal, Madras ‘A’ Bench, dated 6.1.2004 made in IT(SS)ANo.211/Mds/2003 for the block period 1.4.90 to 22.11.2000 against the order of the Commissioner of Income tax (Appeal) Central-I, Chennai-34in ITA No. 3/2003-2004, dt. 23.7.2003 against the order of the Assistant Commissioner of Income Tax Central Circle IV(2), Chennai inPA/G1 No.AAD PK. 0449A/713-S, dt. 28.3.2003.For Appellant: Mr.J.NareshkumarFor Respondent: Mr.Philip George----------J U D G M E N T(Judgment of the Court was made by P.D.DINAKARAN, J.)The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal made in IT(SS)A No.211/Mds/2003, dated6.1.2004.

The facts in brief are: There was a search conducted by the Revenue officials under Section 132 of the Income-tax Act, 1961 in the residence as well as in the business premises of the assessee on23.11.2000 and it was concluded on 14.3.2001 and a block assessment was framed for the block period 1.4.1990 to 22.11.2000 and an order was passed for the said block period on 28.3.2003 levying a surcharge at 17% on the tax payable on the block assessment. Aggrieved by the said order of block assessment, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), who by order dated10.11.2000, upheld the levy of surcharge. On further appeal by the https://hcservices.ecourts.gov.in/hcservices/ assessee, the Tribunal held that the proviso to Section 113, whereby it was clarified that surcharge as applicable would be leviable incases of block assessments, was introduced only with effect from1.6.2002 and as such, would be applicable only if the search took place after that date. Aggrieved by the said order of the Tribunal, the Revenue has preferred the above appeal raising the following substantial question of law: " Whether in the facts and circumstances of the case, the tribunal was right in holding that surcharge is not applicable to block assessments if the search took place prior to introduction of the proviso to sec.113 with effect from 1.6.2002 ?"

Heard both sides.

With regard to the issue raised, viz., whether surcharge could be levied for the block assessments if the search was conducted prior to the introduction of proviso to Section 113 of the Act, the Punjab & Haryana High Court in COMMISSIONER OF INCOME-TAX v. ROSHANSINGH MAKKER, [(2006) 287 I.T.R. 160], after referring to Section 113and the relevant proviso levying surcharge, held that since the search 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. The relevant portion of the said judgment of the Punjab and HaryanaHigh Court in the case cited supra reads as follows:-"

We have perused the order passed by the Tribunal and section 113 of the Act in which new proviso was inserted with effect from June 1, 2002, by the Finance Act, 2002. Theprovisions of section 113 of the Act are as under :

113. Tax in the case of block assessment of search cases.— The total undisclosed income of the block period, determined under section158BC, shall be chargeable to tax at the rate of sixty per cent. : Provided that the tax chargeable under this sectionshall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated under section 132 or the requisition is made under section 132A.

The relevant clause of the Notes on Clauses is extracted below (see [2002] 254 ITR (St.) 118, 149) :

Clause 41 seeks to amend section 113 of the Income-tax Act relating to tax in the case of block assessment of search cases. https://hcservices.ecourts.gov.in/hcservices/ Under the existing provision of the said section, thetotal undisclosed income of the block period, determined under section 158BC, shall be chargeable to tax at the rate of sixty per cent. It is proposed to insert a proviso in the said section to provide that the tax chargeable under that sectionshall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search was initiated under section 132 or requisition was made under section 132A. This amendment will take effect from June 1, 2002.

(emphasis supplied)"

We have perused section 113 of the Act, especially the proviso added on June 1, 2002, which provides for levy of surcharge. Counsel could not dispute that the same has not been given retrospective effect on the language of clause 41of the Notes on Clauses is in clear terms.