THE COMMISSIONER OF INCOMET AX V. B NAGENDRA BALIGA

ITA/334/2007

AI Insights

The case involves an appeal by the Commissioner of Income-Tax and the Assistant Commissioner of Income-Tax against Shri B. Nagendra Baliga concerning the levy of surcharge during the block assessment period from April 1, 1989, to January 28, 2000. The ITAT had set aside the surcharge levied, which was contested by the Revenue in the High Court. The primary legal question was whether the surcharge could be levied despite the assessee admitting its applicability for the assessment year 2000-2001. The High Court referenced a previous Supreme Court decision and noted that the matter was pending before a larger bench, which could affect the outcome.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 729083 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 04-02-2014
• Assessment Year: misc
• Other Referred Cases: COMMISSIONER OF INCOME-TAX v/s K.C.PUTTASWAMY GOWDA, CIT v. Suresh N.Gupta, CIT v. Vatika Township (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: VANI
• Assessee Lawyers: K V ARAVIND
• Keywords: Block assessment; Curative nature; Income tax appellate tribunal; Retrospective application; Surcharge
• Section: 113; 260A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 4TH DAY OF FEBRUARY 2014 PRESENT THE HON'BLE MR.JUSTICE DILIP B.BHOSALE AND THE HON'BLE MR.JUSTICE B.MANOHAR ITA.No.334/2007 BETWEEN: 1. The Commissioner of Income-Tax, Central Circle, C.R.Building, Queens Road, Bangalore. 2. The Assistant Commissioner of Income-Tax, Central Circle, C.R.Building, Nandigudda Road, Mangalore. …Appellants (By Sri.K.V.Aravind, Advocate) AND: Shri.B.Nagendra Baliga, Jewelers, Main Road, Bantwal. . …. Respondent (By Smt.Vani.H. Advocate) 2 This ITA filed under Section 260A of the Income Tax Act, 1961 arising out of order dated 22/09/2006 passed in IT(SS)A.No.7/Panj/2002 for the Block Assessment Year 01-04-1989 to 28-01-2000, praying that this Hon’ble Court may be pleased to i. formulate the substantial questions of law stated therein., ii. allow the appeal and set aside the order passed by the ITAT, Bangalore in IT(SS)A.No.7/Panj/2002 dated 22-09-2006 confirming the order of the Appellate Commissioner & confirm the order passed by the Asst. Commissioner of Income Tax, Central Circle, Mangalore, in the interest of justice and equity. This appeal coming on for hearing this day, B.Manohar.J., delivered the following: J U D G M E N T The Revenue has filed this appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’) challenging the order dated 22-09-2006 made in IT(SS)A No.7/PANJ/2002 passed by the Income Tax Appellate Tribunal, Bangalore ‘B’ Bench (for short ‘the Tribunal’), 3 setting aside the order passed by the Commissioner of Income-Tax (Appeals)-VI, Bangalore (for short ‘the First Appellate Authority’) and the Assessing Authority insofar as levy of surcharge for the block assessment period from 01-04-1989 to 28-01-2000. 2. The appeal was admitted for considering the following substantial question of law: Whether the Tribunal was correct in setting aside the order of the Appellate Commissioner that no surcharge can be levied despite the assessee having admitted that the surcharge is payable for the assessment year 2000-2001 before the Appellate Commissioner corresponding to the said Financial year? 3. The learned counsel appearing for both the parties submit that the substantial question of law raised in this appeal is covered by the judgment of this court reported in (2011) 202 Taxman 661 (Kar) in the case of COMMISSIONER OF INCOME-TAX v/s K.C.PUTTASWAMY GOWDA, wherein the Division 4 Bench of this Court relying upon the judgment of the Apex Court held as under: “The Revenue has preferred this appeal challenging the order passed by the Income Tax Tribunal which held that proviso to Section 113 which was inserted by Finance Act, 2002 with effect from 1-6-2002 does not have retrospective application, therefore, the surcharge levied on the assessee is not leviable and therefore, it preferred to delete surcharge. Aggrieved by the said order, Revenue has preferred this appeal. 2. The Apex Court in the case of CIT v. Suresh N.Gupta (2008) 166 39 Taxman 313 at paragraph Nos.37 and 38 has held as under: “37. According to the assessee, prior to 1st June, 2002, the position was ambiguous as it was not clear even to the Department as to which year’s FA would be applicable. To clear this doubt precisely, the proviso has been inserted in section 113 by which it is indicated that FA of the year in which the search was initiated would apply. Therefore, in our view, the said proviso was clarificatory in nature. In taxation, the legislation of the type indicated by the proviso has to be read strictly. There is no question of retrospective effect. The proviso only clarifies that out of the four dates, Parliament, has opted for the date, namely, the year in which the search is initiated, which date would be relevant for applicability of a particular FA. Therefore, we have to read the proviso as it stands. 5 38. There is one more reason for rejecting the above submission. Prior to 1st June, 2002, in several cases, tax was prescribed sometimes in the 1961 Act and sometimes in FA and often 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 S.113 but the year of FA 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 FA would be the year in which the search stood initiated under section 158BC.” Therefore, the Apex Court, has said that such proviso is curative in nature and it merely clarifies that for a relevant date for applicability of the financial year would be the year in which the search is initiated under section 158BC. Therefore, the order of the Tribunal is contrary to the order passed by the Assessing Officer and it is hereby set aside. 3. However, in the case of CIT v. Vatika Township (P) Ltd.,(2009)314ITR 338 / 178 Taxman 3 22 after referring to the aforesaid Supreme Court judgment, the larger Bench of the Apex Court was at the view that the aforesaid judgment requires to be considered by a larger Bench and accordingly, a direction was issued by the Registry to place the matter before the larger Bench. It was submitted that, now the matter is before the larger Bench. 6 4. Under these circumstances, as the law stands today surcharge is payable by the assessee. In the event of the larger Bench of the Supreme Court reversing the aforesaid judgment of the Apex Court and holding surcharge is not leviable, the assessee is absolved of the liability to pay surcharge. Therefore, in our view the proper order to be passed is to set aside the order of the Tribunal and remit the matter to the Assessing Authority with the direction to await the judgment of the Apex Court and consequent to the order passed by the larger Bench to give effect to our order. Hence, the following order: 1. Appeal is allowed . 2. The impugned order passed by the Tribunal is hereby set aside. 3. The orders passed by the Assessing Authority and the Appellate Commissioner is restored. 4. However, the Assessing Officer shall await the decision of the larger Bench of the Apex Court and depending on the decision to be rendered by the Apex Court to give effect to the order. Matter remanded.” 4. In view of the authoritative pronouncement, the substantial question of law is answered in favour of the Revenue and against the assessee. However, the 7 Assessing Officer shall await the decision of the larger bench of the Hon’ble Supreme Court and may proceed subject to the outcome of the decision that will be rendered by the Supreme Court. 5. With the above observations, this appeal is disposed of. Sd/- JUDGE Sd/- JUDGE mpk/-* "