Assistant Commissioner Of Income v. Chokshy Keshrimal Mohanlal & Company....opponent(S

O/TAXAP/1187/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1187 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ ASSISTANT COMMISSIONER OF INCOME....Appellant(s) Versus CHOKSHY KESHRIMAL MOHANLAL & COMPANY....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1RULE SERVED for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 22/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as ‘the Tribunal’) dated 18.01.2007 in ITA (SS) No. 219/Ahd/2002, the revenue has preferred the present Tax Appeal. 1.1This appeal was admitted by this Court on 28.02.2008 for consideration of the following substantial question of law: Whether on the facts and in circumstances of the case, the Income Tax Appellate Tribunal is right in coming to the conclusion that surcharge could not be levied, as, on the date of search, such provision for levy of surcharge was not there on the Statute? 2. Notice u/s 158BC of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was issued upon the assessee pursuant to search and seizure and he was directed to file return for the block period 1990-91 to 1999-2000 being the block assessment years. The assessee filed his return of income and during the course of assessment proceedings, the assessing officer charged surcharge at the rate of 10% under section 113 of the Act. On appeal the CIT (Appeals) partly allowed the appeal and deleted the surcharge imposed by the Assessing Officer. 3. On appeal before the Tribunal by the revenue, by impugned order, the Tribunal dismissed the appeal filed by the revenue. Being aggrieved and dissatisfied with the impugned order passed by the Tribunal, the revenue has preferred the present Tax Appeal for consideration of the aforesaid substantial question of law. 4.The question of law raised in the present Tax Appeal is now not res integra in view of the decision of this Court in the case of Commissioner of Income Tax vs. Vatika Township P. Ltd reported in [2014] 367 ITR 466 (SC) wherein the Hon’ble Supreme Court has held as under: 3. On appeal before the Tribunal by the revenue, by impugned order, the Tribunal dismissed the appeal filed by the revenue. Being aggrieved and dissatisfied with the impugned order passed by the Tribunal, the revenue has preferred the present Tax Appeal for consideration of the aforesaid substantial question of law. 4.The question of law raised in the present Tax Appeal is now not res integra in view of the decision of this Court in the case of Commissioner of Income Tax vs. Vatika Township P. Ltd reported in [2014] 367 ITR 466 (SC) wherein the Hon’ble Supreme Court has held as under: “The surcharge on the income tax was introduced for the first time by the Finance Act, 1995, in Section 2 (3) thereof. However, initially, this surcharge was levied only on the income of companies i.e. corporate entities incorporated under the Indian Companies Act by specified surcharge at the rate of 15% in the Finance Act, 1996, which was reduced to 7.50% in the Finance Act, 1997. In the next two Finance Acts i.e. 1998 and 1999, there was no surcharge levied even in the cases of companies. However, by Finance Act, 2000, surcharge at a flat rate of 10% came to be levied in respect of individuals, HUF, BOI, AOP as well as co-operative societies, partnership firms, local authorities and also the companies. In subsequent years, the rates at which the surcharge is levied on the aforesaid entities are of varying nature. A tabulated form showing surcharge in respect of different category of assessees in different assessment years, levied under each Finance Act, shall be reproduced at the relevant stage. ... (a) The first and foremost poser is as to whether it was possible to make the block assessment with the addition of levy of surcharge, in the absence of proviso to Section 113? In Suresh N. Gupta itself, it was acknowledged and admitted that the position prior to the amendment of Section 113 of the Act whereby the proviso was added, whether surcharge was payable in respect of block assessment or not, was totally ambiguous and unclear. The Court pointed out that some assessing officers had taken the view that no surcharge is leviable. Others were at a loss to apply a particular rate of surcharge as they were not clear as to which Finance Act, prescribing such rates, was applicable. It is a matter of common knowledge and is also pointed out that the surcharge varies from year to year. However, the assessing officers were in-determinative about the date with reference to which rates provided for in the Finance Act were to be made applicable. They had four dates before them viz.: (i) Whether surcharge was leviable with reference to the rates provided for in the Finance Act of the year in which the search was inititated; or (ii) the year in which the search was concluded; or (iii) the year in which the block assessment proceedings under Section 158 BC of the Act were initiated; or (iv) the year in which block assessment order was passed. The position which prevailed before amending Section 113 of the Act was that some Assessing Officers were not levying any surcharge and others who had a view that surcharge is payable were adopting different dates for the application of a particular Finance Act, which resulted in different rates of surcharge in the assessment orders. In the absence of a specified date, it was not possible to levy surcharge and there could not have been an assessment without a particular rate of surcharge. As stated above, in Suresh N. Gupta itself, the Court has pointed out four different dates which were bothering the assessees as well as the Department. The choice of a particular date would have material bearing on the payment of surcharge. Not only the surcharge is different for different years, it varies according to the category of assessees and for some years, there is no surcharge at all.... have material bearing on the payment of surcharge. Not only the surcharge is different for different years, it varies according to the category of assessees and for some years, there is no surcharge at all.... ... (f) Finance Act, 2003, again makes the position clear that surcharge in respect of block assessment of undisclosed income was made prospective. Such a stipulation is contained in second proviso to sub-section (3) of Section 2 of Finance Act, 2003. This proviso reads as under: “Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part III of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act.” Addition of this proviso in the Finance Act, 2003 further makes it clear that such a provision was necessary to provide for surcharge in the cases of block assessments and thereby making it prospective in nature. The charge in respect 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 nor 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 retrospective 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 Suresh N. Gupta treating the proviso as clarificatory and giving it retrospective effect is not a correct conclusion. Said judgment is accordingly overruled. “ 5.Mr. Sudhir Mehta, learned advocate on behalf of the revenue is not in a position to dispute the above and is not in a position to show and/or point out any contrary decision. 6. Having heard learned advocate appearing on behalf of the revenue and the question posed for consideration before us reproduced hereinabove and considering the decision of the Hon’ble Supreme Court in the case of Vatika Township (Supra), the question which is raised in the present appeal is required to be answered in favour of the assessee. We are not giving further elaborate reasons for the same as in the case of Vatika Township (Supra) it is held by the Hon’ble Supreme Court that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. The Apex Court accordingly deleted the surcharge levied by the Assessing Officer. 7.In view of the aforesaid discussion, we are of the opinion that the CIT(A) was justified in deleting the surcharge levied by the Assessing Officer. The Tribunal confirming the decision of the CIT(A) came to the conclusion that for the block period under consideration there was no proviso to section 113 of the 7.In view of the aforesaid discussion, we are of the opinion that the CIT(A) was justified in deleting the surcharge levied by the Assessing Officer. The Tribunal confirming the decision of the CIT(A) came to the conclusion that for the block period under consideration there was no proviso to section 113 of the Act. We are not giving any elaborate reasons in view of the decision of the Apex Court referred hereinabove. Accordingly, the question raised in the present appeal is answered in the affirmative i.e. against the appellant – revenue and in favour of the assessee. The Tribunal is justified in coming to the conclusion that surcharge could not be levied, as, on the date of search, such provision for levy of surcharge was not there on the Statute Book. 8. In view of the above, the impugned order passed by the Tribunal is confirmed. Hence, the present Tax Appeal is dismissed. (K.S.JHAVERI, J.) divya (K.J.THAKER, J)