COMMISSIONER OF INCOME TAX V. M/S BANSAL SWEET HOUSE

ITA/126/2004

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax (Central), Ludhiana against M/s. Bansal Sweet House, Amritsar concerning the levy of surcharge on undisclosed income identified during a search operation. The search was conducted on February 4, 2000, and the subsequent block assessment identified undisclosed income. Initially, the surcharge was deleted by the CIT(A), but was later reinstated, leading to appeals by both the Revenue and the assessee. The Tribunal's decision favored the assessee, prompting the Revenue's appeal to the High Court. The central legal issue was the applicability of the surcharge under Section 113 of the Income Tax Act, 1961, in relation to the timing of the search and the legislative changes introduced by the Finance Act, 2002.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 740919 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 22-02-2011
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Suresh N. Gupta
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: RAJIV SHARMA
• Assessee Lawyers: DENESH GOYAL
• Keywords: Block assessment; Search and seizure; Surcharge; Undisclosed income
• Section: 132; 113; 158BC; 260A

Judgement Text

" Income Tax Appeal No. 126 of 2004 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 126 of 2004 Date of decision: 22.2.2011 Commissioner of Income Tax (Central) Ludhiana --- Appellant Versus M/s. Bansal Sweet House, Amritsar --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Denesh Goyal, Standing Counsel for the appellant-Revenue. Mr. Rajiv Sharma, Advocate for the respondent-assessee. --- AJAY KUMAR MITTAL, J. 1. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the Revenue against the order dated 28.11.2003, passed by the Income Tax Appellate Tribunal Amritsar Bench, Amritsar (in short “the Tribunal”) in IT(SS) A No. 24(ASR)/2002 and 27(ASR)/2002, for the block period from 1.4.1989 to 4.2.2000. Income Tax Appeal No. 126 of 2004 2 2. The Revenue has claimed the following substantial question of law for determination by this Court: “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing not to levy surcharge on the tax worked out on undisclosed income as income pertains to search prior to 1.6.2002.” 3. The facts, in brief, necessary for adjudication as narrated in the appeal, are that search under Section 132 of the Act was conducted at the premises of the assessee on 4.2.2000. The respondent-assessee filed return on 7.3.2001 declaring undisclosed income of Rs. 30,00,000/- for the block period from 1.4.1989 to 4.2.2000. However, during the course of assessment proceedings, the assessing officer by order dated 28.2.2002 made certain additions and ultimately, the block assessment under Section 158BC of the Act was completed on 28.2.2002 at the total undisclosed income of Rs. 38,77,900/- and surcharge of Rs. 2,32,674/- was levied on the tax worked on that undisclosed income. The appeal carried by the assessee met with partial success before the Commissioner of Income-tax (Appeals) {in short “the CIT(A)”}, inasmuch as the surcharge was deleted by the CIT(A), vide order dated 18.7.2002. 4. Feeling not satisfied with the order dated 18.7.2002 passed by the CIT(A), the Revenue preferred appeal before the Tribunal. The order dated 18.7.2002 was, however later on rectified by the CIT(A) vide order dated 27.9.2002 and surcharge at the rate of 10% was held leviable for Assessment year 2000-2001. The assessee raised a grievance against the same by filing appeal to the Tribunal. The Tribunal allowed the appeal of the assessee and dismissed that of the Revenue vide order dated 28.11.2003 giving rise to the instant appeal. Income Tax Appeal No. 126 of 2004 3 5. We have heard learned counsel for the parties and have perused the record. 6. The point for consideration in this appeal is, whether the surcharge on income tax in terms of Section 113 of the Act would be leviable where search and seizure had taken place prior to 1.6.2002. 7. Learned counsel for the Revenue relied upon a decision of the apex Court in Commissioner of Income Tax vs. Suresh N. Gupta, (2009) 297 ITR 322 and submitted that proviso to Section 113 which was inserted by Finance Act 2002 whereby surcharge was made leviable in cases of search, was clarificatory in nature and the present case shall be governed by the said provision. 8. The matter is no longer res integra. The similar issue came up for consideration before the Hon’ble Supreme Court of India in Suresh N. Gupta’s case (supra), wherein it was held that the proviso to Section 113 which was inserted by Finance Act, 2002 was curative in nature. The relevant observations of the Apex Court in the context are as under: “There is one more reason for rejecting the above submission. Prior to June 1,2002, in several cases, tax was prescribed sometimes in the 1961 Act and sometimes in the Finance Act and after in both. This made liability uncertain. In the present case, however, the rate of tax in case of block assessment at 60 per cent was prescribed by section 113 but the year of the Finance Act imposing surcharge was not stipulated. This resulted in the above four ambiguities. Therefore, clarification was needed. The proviso was curative in nature. Hence, the proviso inserted in section 113 merely clarifies that out of the above four dates, the relevant date for applicability of the Income Tax Appeal No. 126 of 2004 4 Finance Act would be the year in which the search stood initiated under section 158BC.” 9. Accordingly, the issue stands concluded by the aforesaid decision of the Supreme Court wherein it has been laid down that the proviso to Section 113, inserted vide Finance Act, 2002, with effect from June 1, 2002, was applicable to block assessments under Chapter XIV-B of the Act and surcharge on income tax would be imposable even in those cases where search had taken place prior to 1.6.2002 according to the Finance Act of the particular year in which search had taken place. It has further been held that the proviso was only clarificatory and, therefore, question of its retrospective effect did not arise. 10. In view of the above, the appeal is allowed and the substantial question of law is answered in favour of the Revenue. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) February 22, 2011 JUDGE *rkmalik* "