IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.02.2008 CORAM THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN AND THE HONOURABLE MRS. JUSTICE CHITRA VENKATARAMAN TAX CASE (APPEAL) NOS.2622 AND 2686 OF 2006 AND 91, 93 TO 96, 118, 184, 399, 1299 TO 1302 AND 1374 OF 2007 T.C.No.2622 of 2006: Commissioner of Income Tax Cent.I, Coimbatore. .... Appellant Vs. Shri A.Chandran 133A-11 J.K.K.Nataraja Nagar Komarapalayam Namakkal District. .... Respondent T.C.2686/2006: Commissioner of Income Tax Chennai ... Appellant -vs- Dr.A.Gajanan Rao 49,Kakan Street, West Tambaram, Chennai – 600 045 ... Respondent T.C.91/2007 Commissioner of Income Tax Cent Circle III Chennai ... Appellant -vs- Dr. Aruna Jonathan, 5,Rajaji Road, Salem – 7 ... Respondent T.C.93/2007 Commissioner of Income Tax Cent Circle - I Coimbatore ...Appellant https://hcservices.ecourts.gov.in/hcservices/ -vs- M/s. Sivam & Co 126-131, Bhavani Road Erode ... Respondent T.C.94/2007 Commissioner of Income Tax, Cent Circle I, Coimbatore ... Appellant -vs- M/s. Raja Traders, 126-131, Bhavani Road, Erode ... Respondent T.C.95/2007 Commissioner of Income Tax, Cent Circle – I, Coimbatore ... Appellant -vs- Shri K.Paramasivam, 126-131, Bhavani Road, Erode ... Respondent T.C.96/2007 Commissioner of Income Tax Cent Circle – I Coimbatore ... Appellant -vs- M/s. Sri Maharaja Refineries 126-131, Bhavani Road, Erode ... Respondent T.C.118/2007 Commissioner of Income Tax Cent Circle – III Chennai ... Appellant -vs- M/s. Neotech Company (P) Ltd D-105, 2nd Floor, Ist Main Road, Anna Nagar East, Chennai – 102 ... Respondent https://hcservices.ecourts.gov.in/hcservices/ T.C.184/2007 Commissioner of Income Tax Cent – I, Chennai ... Appellant -vs- Dr.S.Rajamony New No.86 (Old No.34) Beach Road, Besant Nagar, Madras – 90 ... Respondent T.C.No.399/2007 Commissioner of Income Tax Cent – I Chennai ... Appellant -vs- Mrs.Leelamma Thomas 18,Dr.Subbaraya Nagar, 5th Street, Kodambakkam, Chennai – 24 ... Respondent T.C.1299 / 2007 Commissioner of Income Tax Cent – III Chennai ... Appellant -vs- R.Devaraj 333, Alagesan Road (East) Saibaba Colony, Coimbatore – 11 ... Respondent T.C.1300/ 2007 Commissioner of Income Tax Cent – III Chennai ... Appellant -vs- R.Paramasivam 333, Alagesan Road (East) Saibaba Colony, Coimbatore ... Respondent https://hcservices.ecourts.gov.in/hcservices/ T.C.1301/2007 Commissioner of Income Tax Cent III Chennai ... Appellant -vs- R.Shanmugasundaram 333, Alagesan Road (East) Saibaba Colony, Coimbatore – 11 ... Respondent T.C.1302/2007 Commissioner of Income Tax Cent III Chennai ... Appellant -vs- R.Vellingiri 333,Alagesan Road (East) Saibaba Colony, Coimbatore – 11 ... Respondent T.C.1374/2007 Commissioner of Income Tax Cent – I, Chennai ... Appellant -vs- M/s. Sri Selvakumaran Finance 21,A-A Road, Opp.Shanthi Theatre, Salem – 636 001 ... Respondent PRAYER: Tax case filed under section 260-A of the Income Tax Act 1961, against the order of the Income Tax Appellate Tribunal D;C.B.A Benches,Chennai,dt.22/05/2006,30/05/2006,30/06/2006,09/06/2006,19/06/ 2006,15/09/2006,22/09/2006 and 14/03/2007. In I.T(SS)A.No.3/Mds/2002 Block Period 1990-91 to 1999-2000 and upto 20/08/99;A.No.15/Mds/2004, Block period 1990-91 to 2000-2001; A.No.223/Mds/03 Block Assessment period 01/04/89 to 27/10/99;ITA.No.156,157,158/mds 2002 Block period 01/04/89 to 25/11/99 in IT:(SS) A.No.3/Mds/2001 Block period 1988-89 to 1998-99 & from 01/04/98 to 09/07/98;No.180/mds/2004 Block period – 01/04/95 to 28/03/2002 A.No.17/mds-2006-Block Period 1991-92 to 2000-01; A31/MDS/2004 A.No.32/Mds/2004, Block period 1991-92 to 2001 - 02 (upto-23/01/2000)A.No.33,Mds/2004 Block Period 1991-92 to 2001-02(up https://hcservices.ecourts.gov.in/hcservices/ to 23/01/2000) No.34/mds/2004,Block Period 1991-92 to 2001-02(upto 23/01/2000)A.No.35,Mds/2004, Block Period 1991-92 to 2001-02(upto 23/01/2000)IT(ss)A.No.42/mds/2002 Block period -1989-90 to 1999-2000 arising out of the commissioner of Income Tax-(Appeals)II-Coimbatore dt-16.11.2001 in order No.45-c/2001-02;and commissioner of Income Tax (Appeals)Central I, Madras-34-dt-18/12/2003 in ITA;No.207/2002-2003, order of the commissioner of Income Tax, appeals-II(Coimbatore)dt- 17/07/2003 in ITA;No.375-c/2002-03;dt 19/08/2002;in A.No.182-c/2002- 03;dt19/08/2002,in A.No.183-c/2002-03;in A.No.181-c/2002-03;A.No.184- c/2002-03;dt 04/01/2002 in A.No.143-c/2001-2002, and against the order of commissioner of Income Tax(Appeals)I, chennai, 34, dt- 10/11/2000, in ITA;130/2000-2001, dt-4/11/2004 in ITA;No.126/2004-05 dt 16/12/2005 in ITA:164/04-05 against the order of commissioner of Income Tax-(Appeals)II, Coimbatore dt-16/01/2004 in I.T.A:No.396- C/02-03;ITA:No.397-c/02-03 ITA;No.399-C/02-03; ITA:400-c/02-03 and against the assessment order of deputy commissioner of Income Tax central circle-I, Coimbatore dt 27/08/2001; in G.I.No.ACXPC1705D-and Commissioner of Income Tax(A) central I, Chennai-Madras34. dt-18-12- 2003 in ITA.No.207/2002-03 and Deputy Commissioner of Income Tax, Central Circle, Salem, Coimbatore, dt-27.08.2002; 31.1.2003, 26.11.2001, 28.11.2001 PAN/GIR-NO:ACXPC1705D; CCPA – 006; S-342; R- 5391; S-349; P-719; and Assistant Commissioner of Income Tax – Central Circle I (1)(1) /C, /Chennai – 34 and Central Circle IV (3) dt.30.4.2004; 24.7.2000; and 30.3.2004 in PAN/GIR.No.ANAPH 5545N; 3- N; and AAFPR6434A; and Asst. Commissioner of Income tax Central Circle IV, Coimbatore; dt.27.2.2003; in PAN GIR.No.AFCPD5108D AHYPP6225F; AGVPSQ802P; ABAPV2406J and Deputy Commissioner of Income Tax Central Circle I, Coimbatore, Dt.23.7.2001 in PAN/GIR No.S-554 For Appellant : Mr.J.Naresh Kumar For Respondent : Mr.Venkatanarayanan for in T.C.No.2686/06 M/s.Subbaraya Aiyar, Padmanabhan and Ramamani For Respondent : No Appearance in T.C.Nos.2622/06, 91, 93 to 96, 118 and 1299 to 1302 of 2007 For Respondent in : Mr.Philip George T.C.Nos.184 and 399 of 2007 For Respondent in : Mr.N.Quadir Hussain T.C.No.1374/2007 C O M M O N J U D G M E N T (Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J) In all these cases, the common question of law raised for consideration is: https://hcservices.ecourts.gov.in/hcservices/ "Whether in the facts and circumstances of the case, the Tribunal was right in holding that surcharge is not applicable to block assessments if the search took place prior to introduction of the proviso to Section 113 with effect from 1.6.2002?" 2. In all these cases, the respondents were duly served. The first tax case in T.C.No.2622 of 2006 is taken up as a typical case. In that case, there was a search under Section 132 in the residential premises of the assessee on 22.6.1999. A block assessment was framed for the block period 1.4.1989 to 20.8.1989, and the block assessment order was passed on 27.8.2001. The assessing officer levied a surcharge at 10 percent on the tax payable on the block assessment. The appeal preferred by the assessee before the Commissioner of Tax (Appeals) ended in dismissal. However, on further appeal to the Tribunal, the Tribunal following the decision of Special Bench of Income-tax Appellate Tribunal, Hyderabad in the case of Merit Enterprises held that prior to the introduction of proviso to Section 113 with effect from 1.6.2002 surcharge was not leviable. The correctness of the same is put in issue in this appeal. 3. We heard the argument of the learned counsel on either side. The issue is now settled by the Supreme Court in the case of COMMISSIONER OF INCOME-TAX VS. SURESH N.GUPTA, wherein the Supreme Court has held 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 158A 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. https://hcservices.ecourts.gov.in/hcservices/ 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 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 158BC is initiated, which date would be relevant for applicability of a particular Finance Act." 4. Therefore, following the judgment of the Supreme Court which profounded the law that even prior to 1.6.2002 the Department is entitled to levy surcharge as the proviso introduced on that is only curative in nature, the Appeals are allowed by answering the question of law in negative in favour of the revenue. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. Usk To 1.The Commissioner of Income Tax Chennai – 600 034 2.Deputy Commissioner of Income Tax Appeals (II) Coimbatore 3.Commissioner of Income Tax Appeals, Central – I, Madras – 34 https://hcservices.ecourts.gov.in/hcservices/ 4.The Commissioner of Income Tax Appeals II, Coimbatore 5.Deputy Commissioner of Income Tax Central Circle – I, Coimbatore 6.Deputy Commissioner of Income Tax Central Circle, Salem. 7.Assistant Commissioner of Income Tax Central Circle I (1) (1)/C, Chennai – 34. 8.Assistant Commissioner of Income Tax Central Circle IV, Coimbatore 9.The Assistant Registrar Income Tax Appellate Tribunal Bench C Rajaji Bhavan, 3rd Floor, Besant Nagar, Chennai – 90 10.The Secretary, Central Board of Direct Taxes, New Delhi. + 15 CCs To M/s. Pushya Sitaraman, Advocate SR Nos.8124,8125,8126,8130,8129,8128,8127,8131,8132,8133,8134, 8137, 8135, 8138; and 8136 + 2 Ccs to Mr.Philip George, Advocate, S.R.Nos.8042 and 8043 T.C.(A) No.2622 of 2006 etc., batch MDR(CO) SRA(12/06/2008) https://hcservices.ecourts.gov.in/hcservices/