M/s. Gujarat Minechem, Bhavnagar V. The ACIT, Circle-1, Bhavnagar

MA 178/AHD/2014

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 2654 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-01-2015
• Assessment Year: misc
• Appeal Filed On: 20-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: MUKESH PATEL
• Keywords: Search and seizure; Retrospective amendment; Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI ACCOUNTANT MEMBER MA NO . 174, 175, 176, 177, 178 /AHD/20 1 4 ( ARISING OUT OF CO NO. 177, 178, 179, 202 & 203 /AHD/20 0 9 ) BLOCK PERIOD 0 1.04.1989 TO 16.11.1999 1. DASHRATHBHAI V. PATEL 2. GUJARAT MULTI GAS BASE CHEMICALS PVT. LTD. 3. MANEK CHEMICALS PVT. LTD. 4. KIRIT V. PATEL 5. GUJARAT MINECHEM VS DCIT, CENTRAL CIRCLE - 2(2), AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI V .K. SINGH , SR. D.R. , ASSESSEE(S) BY : SHRI MUKESH PATEL , A.R. / DATE OF HEARING : 16 / 01 /201 5 / DATE OF PRONOUNCEMENT: 23 / 01 /201 5 O R D E R PER MUKUL KUMAR SHRAWA T, JUDICIAL MEMBER ALL THESE APPLICATIONS HAVE BEEN FILED BY THE APPLICANTS ON 20 TH OF OCTOBER, 2014 EMANATING FROM A COMMON ORDER OF THE TRIBUNAL DATED 28.02.2013. THE TRIBUNAL HAS DECIDED THE CROSS OBJECTIONS OF THE ASSESSEE VIDE ITS ORDER IN THE FOLL OWING MANNER: 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE APPELLATE PROCEEDINGS BEFORE LD. CIT(A) ASSESSEE TOOK AN ADDITIONAL GROUND CHALLENGING THE LEVY OF SURCHARGE U/S 113 OF THE ACT. THE CONTENTION OF THE ASSESSEE BEFORE ID. CIT(A) WAS THAT WHILE F INALIZING THE BLOCK ASSESSMENT THE A.O. HAS COMPUTED THE TAX PAYABLE ON THE TOTAL UNDISCLOSED INCOME ASSESSED U/S - 15SBC AT THE RATE OF 67.2 PERCENT, WORKING OUT A CHARGE OF INCOME TAX AT 60 PERCENT AND LEVYING SURCHARGE THEREON AT 12 PERCENT OF THE INCOME TAX U/S 113 OF THE ACT. IT WAS MA NO S174, 175, 176, 177 & 178 /A/14 IN CO NO S177, 178, 179, 202 & 203 /A/1 0 DASHRATHBHAI V. PATEL, GUJARAT MULTI GAS BASE, MANEK CHEMICALS PVT. LTD., KIRIT V. PATEL & GUJARAT MINECHEM VS. DCIT, CENTRAL CIRCLE - 2(2), AHMEDABAD BLOCK PERIOD 01.04.1989 TO 16.11.1999 - 2 - FURTHER SUBMITTED THAT SECTION 113 AS IT STOOD UNTIL 31 ST MAY, 2002 DID NOT HAVE ANY PROVISION IN REGARD TO LEVY OF SURCHARGE ON THE FLAT RATE OF INCOME TAX AT 60 PERCENT. IT WAS ONLY BY THE FINANCE ACT 2002 THAT THE PROVISO TO SECTION 113 CAME TO BE INTRODUCED PROVIDING THAT THE, TAX CHARGEABLE UNDER THIS SECTION SHALL BE INCREASED BY A SURCHARGE AS APPLICABLE IN THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH WAS INITIATED U/S. 132. THUS, THERE WAS NO PROVI SION FOR LEVYING OF SURCHARGE U/S. 113 DURING THE YEARS UNDER APPEAL AS SEARCH U/S. 132 WAS INITIATED ON 16 - 11 - 1999. FOR MAKING THIS SUBMISSION ASSESSEE RELIED ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MERIT ENTERPRISES VS. DCIT 101 ITD 1 (H YD)(SB) WHEREIN IT WAS HELD THAT THE INTRODUCTION OF THE PROVISO TO SECTION 113 W.E.F. 01 - 06 - 2002 WAS ONLY PROSPECTIVE IN NATURE AND THE SAME CANNOT BE APPLIED TO SEARCHES INITIATED PRIOR TO THAT DATE. 4. LD. CIT(A) PLACING RELIANCE ON THE DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. SURESH N. GUPTA, 297 ITR 322(SC) WHEREIN IT HAS BEEN HELD THAT THOUGH THE PROVISO TO SECTION 113 HAS BEEN INSERTED ONLY W.E.F. 01.06.2002, WAS APPLICABLE TO SEARCHES CONDUCTED PRIOR TO THAT DATE AS IT WAS CLARIFICA TORY AND CURATIVE IN NATURE, DECIDED THE ISSUE AGAINST THE ASSESSEE. SINCE, LD. CIT(A) HAS FOLLOWED HON BLE APEX COURT DECISION IN THE CASE OF CIT VS. SURESH N. GUPTA (SUPRA) WHILE DECIDING THE ISSUE AGAINST THE ASSESSEE, WE FEEL NO NEED TO INTERFERE WITH THE ORDER PASSED BY HIM AND THE SAME IS HEREBY UPHELD. 2. NOW, THE APPLICANT HAS STATED THAT IN VIEW OF THE DECISION OF VATIKA TOWNSHIP PVT. LTD., 367 ITR 466 (SC) THE VIEW TAKEN AGAINST THE ASSESSEE IS REQUIRED TO BE CORRECT ED . THE APPLICANT IN THE APPL ICATION HAS STATED AS UNDER, RELEVANT PORTION REPRODUCED: 3. THE ASSESSEE WISHES TO SUBMIT THAT BEFORE THE LEARNED CIT(A) IT HAD RAISED THE ADDITIONAL GROUND CHALLENGING THE LEVY OF SURCHARGE U/S. 113 OF THE IT. ACT, POINTING OUT THAT THE PROVISION LEVYIN G SURCHARGE WAS INTRODUCED BY THE FINANCE ACT 2002 W.E.F. 1 - 6 - 2002 AND THEREFORE THERE WAS NO PROVISION FOR LEVY OF SURCHARGE U/S. 113 DURING A.Y. 2000 - 01, BEING THE RELEVANT YEAR WHEN THE SEARCH WAS INITIATED U/S. 132 ON 16 - 11 - 1999. THE LEARNED CIT(A) HAD INVITED THE ASSESSEE'S ATTENTION TO THE DECISION OF THE HON'BLE SUPREME COURT IN C I T VS. SURESH N. GUPTA 297 ITR 322 (SC), WHEREIN THE COURT HAD HELD THAT THE PROVISO TO SECTION 113 WAS APPLICABLE TO SEARCHES CONDUCTED PRIOR TO THAT DATE AS IT WAS CLARIFI CATORY AND CURATIVE IN NATURE. IN RESPONSE TO THE SAME, THE ASSESSEE HAD POINTED OUT THAT POST THIS DECISION, IN ANOTHER MATTER IN THE CASE OF CT VS. VATIKA TOWNSHIP (P) LTD. 314 ITR 338 (SC), THE ISSUE HAD BEEN REFERRED BY THE DIVISION BENCH TO A LARGER B ENCH OF THE APEX COURT. HOWEVER, THE LEARNED CIT(A) HAD FOLLOWED SURESH N. GUPTA (SUPRA) AND DECIDED THIS ISSUE AGAINST THE ASSESSEE. MA NO S174, 175, 176, 177 & 178 /A/14 IN CO NO S177, 178, 179, 202 & 203 /A/1 0 DASHRATHBHAI V. PATEL, GUJARAT MULTI GAS BASE, MANEK CHEMICALS PVT. LTD., KIRIT V. PATEL & GUJARAT MINECHEM VS. DCIT, CENTRAL CIRCLE - 2(2), AHMEDABAD BLOCK PERIOD 01.04.1989 TO 16.11.1999 - 3 - 4. EVEN WHILE ARGUING THE AFORESAID CROSS OBJECTION BEFORE THE HON'BLE IT AT, THE A.R. OF THE ASSESSEE SUBMITTED THAT THE ISSUE DECIDED BY THE HON'BLE SUPREME COURT IN SURESH N. GUPTA (SUPRA) HAD BEEN REFERRED TO A LARGER BENCH OF THE APEX COURT. THE HON'BLE ITAT BENCH 'A' IN ITS ORDER DATED 28 - 02 - 2013, HOWEVER, FOLLOWED THE RATIO OF THE APEX COURT IN SURESH N. GUPTA (SUPRA) AND DISMISSED THE C.O. FILED BY THE ASSESSEE. 5. RECENTLY, THE FIVE MEMBER BENCH OF THE HON'BLE SUPREME COURT IN THE CASE OF C/T VS. VATIKA TOWNSHIP (P) LTD. [2014] 49 TAXMANN.COM 249 (SC) HAS HELD IN FAVOUR OF THE ASSESSEE AS UNDER: 'THE CHARGE IN RESPEC T OF THE SURCHARGE, HAVING BEEN CREATED FOR THE FIRST TIME BY THE INSERTION OF THE PROVISO TO SECTION 113, IS CLEARLY A SUBSTANTIVE PROVISION AND HENCE IS TO BE CONSTRUED PROSPECTIVE IN OPERATION. THE AMENDMENT NEITHER PURPORTS TO BE MERELY CLARIFICATORY N OR IS THERE ANY MATERIAL TO SUGGEST THAT IT WAS INTENDED BY PARLIAMENT. FURTHERMORE, AN AMENDMENT MADE TO A TAXING STATUTE CAN BE SAID TO BE INTENDED TO REMOVE 'HARDSHIPS' ONLY OF THE ASSESSEE, NOT OF THE DEPARTMENT. ON THE CONTRARY, IMPOSING A RETROSPECTI VE LEVY ON THE ASSESSEE WOULD HAVE CAUSED UNDUE HARDSHIP AND FOR THAT REASON PARLIAMENT SPECIFICALLY CHOSE TO MAKE THE PROVISO EFFECTIVE FROM 1.6.2002. THE AFORESAID DISCURSIVE OF OURS ALSO MAKES IT OBVIOUS THAT THE CONCLUSION OF THE DIVISION BENCH IN SURE SH N. GUPTA TREATING THE PROVISO AS CLARIFICATORY AND GIVING IT RETROSPECTIVE EFFECT IS NOT A CORRECT CONCLUSION. SAID JUDGMENT IS ACCORDINGLY OVERRULED, AS A RESULT OF THE AFORESAID DISCUSSION, THE APPEALS FILED BY THE INCOME TAX DEPARTMENT ARE HEREBY DIS MISSED. APPEALS OF THE ASSESSEES ARE ALLOWED DELETING THE SURCHARGE LEVIED BY THE ASSESSING OFFICER FOR THIS BLOCK ASSESSMENT PERTAINING TO THE PERIOD PRIOR TO 1ST JUNE, 2002. 3. FROM THE SIDE OF THE APPLICANT, LEARNED AR, MR. MUKESH PATEL HAS PLEADED TH AT A SUBSEQUENT DECISION OF THE HON BLE SUPREME COURT IS TO BE FOLLOWED AS HELD IN THE FOLLOWING CASES. I. ACIT VS. SAURASHTRA KUTCH STOCK EXCHANGE LTD. 305 1TR 227 (SC) II BVK SESHAVATARAM VS. CIT 210 ITR 633 (AP) III KIL KOTAGIRI TEA & COFFEE ESTAT ES VS. ITAT 42 TAXMAN 33 (KER) IV BANK OF RAJASTHAN VS. IAC 88 ITD 577 (JODH.) V JOINDRE CAPITAL SERVICES LTD. MA NO.678/MUM/2010 4. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., SHRI V.K. SINGH HAS SUPPORTED THE ORDER PRONOUNCED BY THE TRIBUNAL PRIMARI LY ON THE GROUND THAT THERE WAS NO MISTAKE IN THE SAID ORDER OF THE TRIBUNAL BECAUSE AT THAT POINT O F TIME THERE WAS AN ORDER OF HON BLE SUPREME MA NO S174, 175, 176, 177 & 178 /A/14 IN CO NO S177, 178, 179, 202 & 203 /A/1 0 DASHRATHBHAI V. PATEL, GUJARAT MULTI GAS BASE, MANEK CHEMICALS PVT. LTD., KIRIT V. PATEL & GUJARAT MINECHEM VS. DCIT, CENTRAL CIRCLE - 2(2), AHMEDABAD BLOCK PERIOD 01.04.1989 TO 16.11.1999 - 4 - COURT WHICH WAS DULY FOLLOWED BY THE TRIBUNAL , THEREFORE , THE DEVELOPMENT TAKEN PLACE LATER ON SHOULD NOT BE CO NSIDERED AS A MISTAKE OF THE TRIBUNAL BECAUSE THE DECISION OF VATIKA TOWNSHIP (P) LTD. (SUPRA) WAS NOT AT ALL CITED BEFORE THE TRIBUNAL BEING PRONOUNCED ON 15 TH OF SEPTEMBER, 2014 , HOWEVER THE ORDER OF THE TRIBUNAL IS DATED 28.02.2013. 5. HEARD BOTH THE S IDES. ALTHOUGH IT IS TRUE THAT THE ORDER OF THE HON BLE SUPREME COURT IN THE CASE OF VATIKA TOWNSHIP (P) LTD. ( S UPRA) IS NOW PRONOUNCED ON 15 TH OF SEPTEMBER, 2015, ADMITTEDLY AFTER THE DECISION OF THE TRIBUNAL BUT LAID DOWN THE LAW OF THE LAND AS IF EXISTE D SINCE INCEPTION OF THE ENACTMENT. IN THE DECISIONS AS CITED ABOVE A VIEW HAS BEEN EXPRESSED BY HON BLE COURTS THAT AN ORDER OF THE SUPREME COURT ; ALTHOUGH A SUBSEQUENT DECISION IN POINT OF TIME ; BUT BINDING ON THE TRIBUNAL ; PRECEDENT CITED OF SAURASHTRA KUTCH STOCK EXCHANGE, 30 5 ITR 227 (SC) . THE HON BLE SUPREME COURT HAS HELD THAT EVEN A SUBSEQUENT DECISION OF THE HON BLE SUPREME COURT IS BINDING ON THE TRIBUNAL AND IF THE DECISION OF THE TRIBUNAL IS CONTRARY TO THE SUBSEQUENT DECISION OF THE SUPREME COU RT THEN SUCH DECISION OF THE TRIBUNAL GIVE RISE TO A MISTAKE APPARENT REQUIRED TO BE RECTIFIED. 5.1 THE HON BLE SUPREME COURT IN THE CASE OF VATIKA TOWNSHIP PVT. LTD. (SUPRA) HAS HELD THAT THE PROVISO APPENDED TO SECTION 113 BY FINANCE ACT, 2002 IS TO OPE RATE PROSPECTIVELY W.E.F. 1 ST JUNE, 2002. A PORTION QUOTED BELOW: (B) NOTWITHSTANDING THAT THE CHIEF COMMISSIONERS RECOMMENDED RETROSPECTIVE AMENDMENT TO SECTION 113, THE NOTES ON CLAUSES APPENDED TO THE FINANCE BILL, 2002, WHILE PROPOSING INSERTION OF TH E PROVISO CATEGORICALLY STATED THAT THE AMENDMENT WOULD TAKE EFFECT FROM JUNE 1, 2002. IT WAS A CONSCIOUS DECISION OF THE LEGISLATURE, EVEN WHEN THE LEGISLATURE KNEW THE MA NO S174, 175, 176, 177 & 178 /A/14 IN CO NO S177, 178, 179, 202 & 203 /A/1 0 DASHRATHBHAI V. PATEL, GUJARAT MULTI GAS BASE, MANEK CHEMICALS PVT. LTD., KIRIT V. PATEL & GUJARAT MINECHEM VS. DCIT, CENTRAL CIRCLE - 2(2), AHMEDABAD BLOCK PERIOD 01.04.1989 TO 16.11.1999 - 5 - IMPLICATION THEREOF AND TOOK NOTE OF THE REASON WHICH LED TO THE INSERTION OF THE PROV ISO, THAT THE AMENDMENT WAS TO OPERATE PROSPECTIVELY. THE CBDT ITSELF IN CIRCULAR NO.8 OF 2002, DATED AUGUST 27,2002, STATES THAT THE AMENDMENT TO SECTION 113 OF THE ACT, ALONG WITH THE AMENDMENTS IN SECTION 158BD, WOULD BE PROSPECTIVE, I.E., TAKE EFFECT F ROM JUNE 1,2002. THE FINANCE ACT, 2003, BY ADDITION OF A FURTHER PROVISO, AGAIN MAKES THE POSITION CLEAR THAT SURCHARGE IN RESPECT OF BLOCK ASSESSMENT OF UNDISCLOSED INCOME WAS MADE PROSPECTIVE. WHERE A BLOCK ASSESSMENT WAS MADE FOR THE PERIOD APRIL 1,198 9, TO FEBRUARY 10, 2000, PURSUANT TO SEARCH AND SEIZURE OPERATIONS CONDUCTED UNDER SECTION 132 OF THE ACT IN THE PREMISES OF THE ASSESSEE: HELD ACCORDINGLY, THAT SURCHARGE LEVIED BY THE ASSESSING OFFICER FOR THE BLOCK ASSESSMENT PERTAINING TO THE PERIOD P RIOR TO JUNE 1,2002 WAS LIABLE TO BE DELETED. 5.2 OUR ATTENTION HAS BEEN DRAWN ON THE FACT THAT IN THIS CASE THE SEARCH WAS CONDUCTED ON 16 TH OF DECEMBER, 1999; THEREFORE, SURCHARGE IS NOT TO BE LEVIED. WE ACCORDINGLY ALLOW THIS APPLICATION OF THE ASSESS EE. 6. IN THE RESULT, ALL THE APPLICATIONS OF THE ASSESSEES ARE ALLOWED. SD/ - SD/ - ( N.S. SAINI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMED ABAD; DATED 23 / 01 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD