[ CIT v. Rajiv Bhatara, (2009) 310 ITR 105 (SC)]
Search was conducted on April 6, 200. The Assessing Officer
in his order dated May 22, 2002, imposed surcharge and an application u/s.154
of the Act filed by the assessee for rectification was dismissed vide order
dated September 17, 2003, with the observation that the surcharge was levied
as per the provisions of Part I of the First Schedule appended to the Finance
Act, 2000. However, the Commissioner of Income Tax (Appeals), Ludhiana, [for
brevity ‘the CIT(A)’] reversed the order passed by the Assessing Officer and
took the view that surcharge was not leviable in cases where the search had
taken place prior to June 1, 2002. In that regard, reliance was placed on a
Division Bench judgment of the Punjab and Haryana High Court in the case of
CIT v. Ram Lal Babu Lal, 234 ITR 776. On further appeal by the Revenue the
Tribunal upheld the order dated September 12, 2005, passed by the Commissioner
of Income-tax (Appeals) holding that the search in the present case took place
on April 6, 2000, which was much prior to the date of amendment made in S.
113. The amendment was incorporated on June 1, 2002, by inserting a proviso to
S. 113 by the Finance Act, 2002. It was by the amendment that the levy of
surcharge on the undisclosed income was specifically provided with effect from
June 1, 2002. The provision has not been given retrospective effect, and
therefore, the Tribunal held that it applied only to cases where searches were
carried out after June 1, 2002. The High Court dismissed the appeal relying on
its decision in the case of CIT v. Roshan Singh Makkar, (2006) 287 ITR
160 (P&H) and also referred to two other decisions of the Madras High Court in
CIT v. Neotech Company, (Firm) (2007) 291 ITR 27 and CIT v. S.
Palanivel, (2007) 291 ITR 33.
On an appeal before the Supreme Court, the learned counsel
for the appellant (Revenue) submitted that the case at hand was squarely
covered by a decision of the Supreme Court in CIT v. Suresh N. Gupta,
(2008) 297 ITR 322.
According to the appellant, prior to June 1, 2002, the
position was ambiguous as it was not clear even to the Department as to
whether surcharge was levied with reference to the rates provided for in the
Finance Act of the year in which the search was initiated or the year in which
the search was concluded or the year in which the block assessment proceedings
u/s.158C were initiated or the year in which block assessment order was
passed. The Supreme Court held that to clear that doubt precisely, the proviso
was inserted in S. 113 by which it is indicated that the Finance Act of the
year in which the search was initiated would apply. Therefore, the proviso to
S. 113 was clarificatory in nature. It only clarifies that out of the four
dates, Parliament has opted for the date, namely, the year in which the search
was initiated, which date would be relevant for applicability of a particular
Finance Act. The above position was highlighted in Suresh N. Gupta’s case. The
Supreme Court therefore allowed the appeal of the revenue.
