IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 21.04.2009 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN and THE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal) Nos.1506 and 1507 of 2007 Commissioner of Income Tax, Central III, Madras Appellant v. Shri.P.N.Mallikarjuna Rao No.3, Lodikhan Street, T.Nagar, Chennai 17 Respondent Tax Case Appeals filed under section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai, dated 02.03.2007 passed in IT(SS)A No.125/209/(Mds)/2003 and IT(SS)A.No.209 MDS/2003 Dt.02.03.2007 against ITA 297-C/02/03 Dt.1.5.2003 on the file of the Commissioner of Income Tax, Coimbatore against No.GI/PA/No.AF VPM 4989/M on the file of the Central Circle, Chennai. For appellant : Mrs.Pushya Sitaraman For respondent : Mr.N.Devanathan JUDGMENT (Judgment of the Court was delivered by K.RAVIRAJA PANDIAN, J.) These are the appeals at the instance of the revenue filed against the order of the Tribunal, wherein the Tribunal has held that in respect of the block assessment years, the levy of surcharge is impermissible in law. Hence, the revenue carried the matter by way of appeals before this Court by framing the following question of law:- " Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in deleting the surcharge levied under Section 113 of the Income Tax Act is valid in law". https://hcservices.ecourts.gov.in/hcservices/ 2. The issue involved is whether the revenue can levy surcharge under the block assessment prior to 01.06.2002. This issue has been considered and decided in favour of the revenue by the Division Bench of this Court in the case of Commissioner of Income Tax vs A.Chandran reported in 306 ITR 274, wherein this Court has held as follows:- "This issue is now settled by the Supreme Court in the case of Commissioner of Income Tax vs. Suresh N.Gupta reported in (2008) 297 ITR 322 (SC) and the Supreme Court has categorically observed as follows:- "Section 158BA relates to assessment of "undisclosed income" discovered as a result of a search, and section 158BB deals with the computation thereof. Parliament has taken the block period to mean the period comprising previous years relevant to 10 or 6 assessment years preceding the previous year in which the search is conducted. The unit of time remains constant. Block assessment computation in section 158BB does not exclude either the concept of "previous year" or the concept of "total income": they are retained. Section 158BB(1) incorporates the principle of aggregation of total income of previous years falling within the block period computed in accordance with the provisions of Chapter IV, which deals with "computation of total income". Even computation of "undisclosed income" under section 158BB has to be done in the manner provided under Chapter IV dealing with "computation of total income". In view of the non obstante clause in section 158BA and the retention of the concepts of "previous year" and "total income", one has to read section 158BB with section 4. There is no conflict between the computation machinery under Chapter XIV-B and the normal computation machinery under Chapter IV. Section 158BH inter alia states that if there is no conflict between the provisions of Chapter XIV- B and any other provision of the Act then the latter will operate. Once section 158BB is to be read with section 4 then the relevant Finance Act of the concerned year would automatically stand attracted to the computation under Chapter XIV-B. Section 158BB looks to section 113. The proviso was inserted in section 113 to indicate that the Finance Act of the year in which the search was initiated would apply. That proviso was only clarificatory in nature. There is no question of retrospective effect. The proviso has to be read as it stands. Prior to June 1, 2002, in several cases, tax was prescribed sometimes in the Income Tax Act and sometimes in the Finance Act and sometimes in both. This made https://hcservices.ecourts.gov.in/hcservices/ liability uncertain. Therefore, clarification was needed. The proviso is curative in nature. The proviso only clarifies that out of the four dates, Parliament has opted the date, namely, the year in which the search under Section 158BBC is initiated, which date would be relevant for applicability of a particular Finance Act". 3. Following the Division Bench Judgment in the case of Commissioner of Income Tax vs A.Chandran reported in 306 ITR 274 which was held against the assessee as the issue is covered by the decision of the Supreme Court referred to above, both the appeals are allowed by answering the question in affirmative in favour of the revenue. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar rg To 1. The Assistant Registrar Income Tax Appellate Tribunal, Chennai 'b' Bench, Chennai. 2. The Commissioner of Income Tax, Central III, Chennai 3. The Deputy Commissioner of Income Tax, Central Circle, Chennai T.C.A.Nos.1506 and 1507 of 2007 MBS(CO) SRA(5/5/2009) https://hcservices.ecourts.gov.in/hcservices/