D.b. Income Tax Appeal v. Narendra Kumar Shah

D.B. INCOME TAX APPEAL NO.126/2006 (CIT, Jaipur Vs. Narendra Kumar Shah) Date of order : 18.12.2006 HON'BLE MR. JUSTICE RAJESH BALIAHON'BLE MR. JUSTICE GOPAL KRISHAN VYAS Mr. K.K. Bissa, for the appellant. We have heard learned counsel for theappellant. The revenue seeks to raise followingsubstantial questions of law require to be consideredin this appeal: “(i) Whether on the facts and in thecircumstances of the case as well as in thelaw the learned Tribunal was justified insetting aside the order passed by AssessingOfficer under Section 154 of the Act anddeleting the surcharge of Rs.5,23,286/- @17% of the levied in tis case which wasconfirmed by the CIT (A), ignoring thesettled law that over looking a mandatoryprovision of law which leaves no option ordiscretion to the taxing authority e.g.Omission to charge tax, surcharge orinterest is a mistake apparent from therecord” (ii) Whether in the facts andcircumstances of the case the learnedTribunal was justified in deleting thesurcharge levied by the Assessing Officerunder Section 154 which was confirmed bythe CIT(A)? (iii) Whether in the facts andcircumstances of the case, the learnedTribunal was justified in holding that levyof surcharge while computing tax demand isdebatable issue and hence levy of it couldnot be made subject matter of applicablefor rectification under Section 154 of theIncome Tax Act, 1961?” The facts of the case in brief which we shallpresently notice are that a search was conducted onthe premises of the respondent-assessee on 19.2.2001and assessment order was made on 23.1.2003 for theblock assessment period year 1991-92 to 2000-01 endingas on 31.3.2001. The tax for the income to becomputed for the aforesaid block assessment period waslevied at the rate prescribed under Section 113. Theyear relevant to previous year in which the search wasconducted, was 2001-02 which ended on 31.3.2002.Section 113 was amended after 31.3.2002 by putting aproviso as under : “Provided that the tax chargeableunder this section shall be increased by asurcharge, if any, levied by any CentralAct and applicable in the assessment yearrelevant to the previous year in which thesearch is initiated under section 132 orthe requisition is made under section132A.” The aforesaid amendment came in force w.e.f.1.6.2002 only. Relying on the aforesaid proviso, theassessing officer resorted to Section 154 invoking itspowers to rectify the assessment order dated 23.1.2003for the purpose of levying surcharge on the taxcomputed on the income of the block assessment period.The rectification order dated 21.4.2003 was subjected to appeal before the CIT (Appeals), who affirmed theorder. However, the Tribunal set aside the order ofthe rectification holding that the question about thelevy of surcharge in respect of assessment year endedprior to 1.6.2002 was a debatable issue and thereforesuch a debatable issue could not be subject torectification under Section 154. Apparently, the question whether the provisowhich was brought into effect only w.e.f. 1.6.2002applied to the assessment year which has ended priorto 2002 is a debatable issue and cannot be consideredto be an issue on which two interpretation are notpossible. The proviso in its retrospective effectconfined its applicability on levy of surcharge onlyin cases where the search was initiated under Section132 and 132-A in the previous year relating to theassessment year provided in that assessment year thesurcharge was leviable, over and above the taxprescribed under the Finance Act in respect of regularassessment. The question does arise whether theproviso which was made effective from 1.6.2002 at allaffects the assessments made in respect of assessmentyear 2001-02 ending prior to 1.6.2002 the date witheffect from which only the proviso became applicablefor the purpose of invoking provisions of proviso toSection 113. That being the position, the applicability of That being the position, the applicability of arun proviso to Section 113 is clearly debatable questionand such exercise cannot be taken in rectificationwhich is well settled by Supreme Court. Reference maybe made to decisionof Supreme Court in case of T.S.Balaram, Income-Tax Officer, Company Circle IV, BombayVs. Volkart Brothers and Ors., reported in 1971(Vol.82) ITR 50. In view thereof, we do not find any merit inthis appeal. The same is dismissed. (GOPAL KRISHAN VYAS), J. (RAJESH BALIA), J.