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THE COMMISSIONER OF INCOME TAX (CENTRAL) v. SHRI ROSHAN SINGH MAKKER - ITA-29-2006  RD-P&H 5341 (8 August 2006)
ITA NO. 29 OF 2006
DATE OF DECISION: 16.5.2006
THE COMMISSIONER OF INCOME TAX (CENTRAL), LUDHIANA ....APPELLANT
SHRI ROSHAN SINGH MAKKER
CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL
HON'BLE MR. JUSTICE RAJESH BINDAL
PRESENT: MR. S.K. GARG NARWANA, ADVOCATE FOR THE APPELLANT
This appeal, filed under Section 260 A of the Income Tax Act, 1961 (for short 'the Act'), against the order dated 22.8.2005 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar in M.A. No. 65 (Asr.)/2005 arising out of IT (SS) No. 30/Asr./2003 for block period 1.4.1990 to 6.4.2000 raises the following substantial question of law : "Whether, on the facts and in the circumstances of the case, the ITAT was right in law in confirming the CIT (A)'s order directing not to levy surcharge on the tax worked out on the undisclosed income, as the case pertains to search conducted prior to 01.06.2002." Briefly the facts of the case are that search and seizure operations were conducted at the business as well as residential premises of Sh. Roshan Singh Makkar, (deceased) on 6.4.2000. As a result thereof notice under Section 158 BC of the Income Tax Act, 1961 (for short 'the Act') was issued on 29.12.2000. In response to the notice, the assessee filed his return for the block period ended 6.4.2000 declaring an undisclosed income of Rs. 21 lacs. In assessment, the Assessing Officer determined the tax liability at Rs. 16,81,015/- and surcharge thereon at Rs.
2,85,772/-. In appeal against the order, the CIT (A) deleted the addition on merits and as far as surcharge was concerned, addition was deleted relying upon earlier orders passed by the Tribunal in the case of Hemco Inds. Vs. ACIT in ITAT No. 5/(ASR) 1996 dated 25.10.2002 and M/s V.S.
Fabrics & Investment Co. (P) Ltd. Vs. ACIT, Circle 1(2), Ludhiana in ITA No. 1218/CHANDI/ 96 dated 22.11.2002 holding that since the proviso to Section 113 of the Act providing for levy of surcharge was added in the statute book w.e.f. 1.6.2002, hence was not applicable in respect to search conducted before 1.6.2002.
Still aggrieved, the Revenue went in appeal before the Tribunal. The Tribunal also vide order dated 30.12.2004 dismissed the appeal filed by the Revenue. However, the Revenue filed a miscellaneous application No. 65 (ASR)/2005, inter alia, on the ground that the issue relating to levy of surcharge had not been dealt with in the order. While accepting the plea of the Revenue about the maintainability of the application for rectification under Section 254 (2) of the Act, on the issue of levy of surcharge, the same was considered on merits and rejected. While doing so, the Tribunal relied upon a number of earlier orders of the Tribunal on the same issue.
The findings to that effect have been recorded in the para 9 of the Tribunal's order, which is extracted below: "9. We have heard both the parties and considered the rival contentions. The Ld. CIT (A) has decided the matter by relying on the decisions of various Benches mentioned in para 7 of this order. In addition to the same, we find this issue is also squarely covered in favour of assessee and against the Revenue by ITAT, Amritsar Bench's recent decision dated 14.06.2005 in the case of the Dy.
CIT, Central Circle-2, Jalandhar Vs. Shri Charanjit Lal Chauhan, Prop. Chauhan Zewrat House, Kapurthala (Supra) where by relying on its earlier decision in the case of DCIT, Central Circle-2, Jalandhar Vs. M/s R.K.
Jewellers in ITA (SS) No. 10/Asr./2004 it was held that surcharge on tax on undisclosed income in respect of cases were searches were carried out before 01.06.2002 was not leviable. The relevant findings recorded by Tribunal in para 8.2. are as under: "We have heard both the parties and considered the rival contentions. We find that the same issue came up before us in the case of DCIT, C.C.2, Jalandhar Vs. M/s R.K. Jewellers in ITA (SS) No. 10/Asr./2004 where on identical facts, the order of the CIT (A) was upheld by recording following finding in para 6 of the order:-
"6. We have heard both the parties and considered the rival submissions with reference to facts and material on record. From the facts discussed above, it is obvious that search and seizure action in the present case was carried out by the Income tax authorities on 01.03.2001. Chapter XIV-B of the Income-tax, has been specifically inserted in the Income-tax Act, w.e.f. 01.07.1995 and the same prescribe. Special Procedure for completion of Block assessments. The purpose of inserting such Chapter was to make expeditious
assessment in respect of cases where searches had taken place and to compute the undisclosed income of the Block period. This was in addition to the regular assessment provided under normal provisions of the Act. The rate of tax to be levied on the undisclosed income was different from the rate of tax on normal income disclosed in the regular returns. As per provisions of section 113, as these stood in the statute prior to 01.06.2002, it was not provided that in addition to tax on undisclosed income, surcharge should also be levied. However, the proviso to section 113 was inserted by the Finance Act, 2002 w.e.f.
01.06.2002 as per which levy of surcharge on the undisclosed income was specifically provided w.e.f. 01.06.2002. However, such proviso has not been given retrospective effect and is applicable only to cases where searches had been carried out after 01.06.2002. In the present case, the search had been carried out prior to 01.06.2002 and, therefore, no surcharge on tax on
undisclosed income was leviable. This view also finds support from the decision of the ITAT Chandigarh Bench in the case of VS. Fabrics & Investment Co.(P) Ltd. Vs. ACIT, Cir. 1 (2), Ludhiana (Supra) and decision of ITAT, Bombay Bench in the case of D.G.P. Windsor (India ) Ltd.
Vs. DCIT (Supra) and also the decision of ITAT, Amritsar Bench in the case of Hemco Indus. Vs.
ACIT in ITA No. 5 (Asr.)/ 1996 dated 25.10.2002.
Having regard to these facts and the legal position we are of the opinion that the order of the CIT (A) does not merit any interference. The same is upheld and this ground of appeal is dismissed." In the present case also search took place prior to 01.06.2002 i.e. before proviso to section 113 was inserted. Therefore, the ratio of the aforesaid decision is directly applicable to the facts of the present case.
Respectfully, following the same, we confirm the order of the CIT (A) and reject the ground of appeal of the Revenue."
In the present case also search and seizure action was carried out on 06.04.2000 i.e. prior to 01.06.2002.
Therefore, the above decision is squarely applicable to the present case. Respectfully, following the same we do not find any justification to interfere with the order of CIT (A). The same is upheld and this ground of appeal is dismissed. In the result, appeal of the Revenue is dismissed."
We have perused the order passed by the Tribunal and Section 113 of the Act in which new proviso was inserted w.e.f. 1.6.2002 by Finance Act, 2002. The provisions of Section 113 of the Act are as under:- "Tax in the case of block assessment of search cases.
113. The total undisclosed income of the block period, determined under section 158 BC, shall be chargeable to tax at the rate of sixty per cent: Provided that the tax chargeable under this section shall 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 132 A." Relevant clause of Notes on clause is extracted below:- Clause 41 seeks to amend section 113 of the Income-tax Act relating to tax in the case of block assessment of search cases.
Under the existing provision of the said section, the total undisclosed income of the block period, determined under section 158 BC, 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 section shall 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 132 A.
This amendment will take effect from 1st June, 2002." (emphasis supplied)
We have perused Section 113 of the Act, especially the proviso added on 1.6.2002, which provide for levy of surcharge. The counsel could not dispute that the same has not been given retrospective effect on the language of clause (1) of Notes on clauses is in clear terms.
Since the search in the present case was conducted on 1.4.2000 i.e. before the insertion of the proviso in Section 113 of the Act, w.e.f. 1.6.2002. The levy of surcharge envisaged under this proviso will not be attracted in the present case. While holding this in favour of the assessee, the Tribunal has relied upon a series of judgments on the issue taking a view in favour of the assessees as referred to in para 9 of the Tribunal's order, as extracted above. The Revenue has not been able to point out as to what is the distinction between the present case and the cases which have been relied upon by the Tribunal while deciding the issue in favour of the assessee and if facts were same, as why those decisions were not challenged further.
In view of our above discussion, we do not find that any substantial question of law arises for consideration in the present case.
Hence, the appeal is dismissed.
(ADARSH KUMAR GOEL)
May 16, 2006 (RAJESH BINDAL)
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