IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 2.2.2015 CORAM HON'BLE MR.JUSTICE R.SUDHAKAR AND HON'BLE MRS.JUSTICE S.VIMALA T.C.(A).No.1453 of 2007 Commissioner of Income Tax (Central-I), Chennai. .. Appellant Vs. P.Ramanathan .. Respondent PRAYER: Appeal under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal 'D' Bench, Chennai, dated 20.7.2007 made in I.T.(SS)A.No.60/Mds/2004 for block assessment year 1989-1990 to 1998-1999. For Appellant : Mr.M.Swaminathan Standing Counsel For Respondent : Mr.Venkat Narayanan for M/s.Subbaraya Aiyar JUDGMENT (Delivered by R.SUDHAKAR, J.) Revenue has filed this appeal assailing order of Income Tax Appellate Tribunal 'D' Bench, Chennai, dated 20.7.2007 made in I.T.(SS)A.No.60/Mds/2004 for block assessment year 1989-1990 to 1998-1999 and same was admitted on following questions of law: (i) Whether Tribunal was right in holding that surcharge is not applicable to block period 1989-1990 to 1998-1999? (2) (ii) Whether Tribunal was right in holding that surcharge is not applicable to block assessments if search took place prior to introduction of proviso to Section 113 with effect from 1.6.2002, even though Finance Acts of different years falling within block period prescribed levy of surcharge with reference to Section 113 of Act? (iii)Whether Tribunal was right in holding that surcharge is not leviable on block assessments during relevant period, on ground that calculation is complex? 2.1. facts in nutshell are as under: assessee is broker running partnership concern named M/s.Shine Well at Madras Race Club to conduct bets on horse races. There was search under Section 132 of Act in residential and business premises of assessee on 21.9.1998, which was concluded on 28.1.1999. Based on materials found during search, block assessment was framed for block period 1989-1990 to 1998-1999 and block assessment order was passed on 31.1.2001. Assessing Officer levied surcharge on tax payable on block assessment. 2.2. Aggrieved by said order, assessee appealed to Commissioner of Income Tax (Appeals), who confirmed order passed by Assessing Officer and upheld levy of surcharge. (3) 2.3. On further appeal by assessee, Tribunal held that since search in present case was conducted prior to 1.6.2002, namely, prior to introduction of proviso to Section 113 of Act, surcharge is not leviable on tax payable on block assessment. 2.4. Calling in question said order, Revenue has filed this appeal on questions of law, referred supra. 3. We have heard Mr.M.Swaminathan, learned Standing Counsel appearing for Revenue and Mr.Venkat Narayanan, learned counsel appearing for assessee and perused orders passed by Tribunal and authorities below. 4. issue raised in this appeal was considered by Constitution Bench of Supreme Court in Commissioner of Income Tax (Central)-I v. Vatika Township Private Limited, (2014) 109 DTR (SC) 33. For better understanding of issue, view taken in order passed by High Court, which was challenged before Supreme Court, and scope of reference to Constitution Bench are extracted hereunder: 7. It is clear from aforesaid narration that High Court has taken view that proviso inserted in Section 113 of Act by Finance Act, 2002 was prospective in nature and surcharge as leviable under aforesaid proviso could not be made applicable to block (4) assessment in question of earlier period i.e. period from 01.04.1989 to 10.02.2000 in instant case. Reference Order 8. It so happened that this very issue about said proviso to Section 113, viz., whether it is clarificatory and curative in nature and, therefore, can be applied retrospectively or it is to take effect from date i.e. 01.06.2002 when it was inserted by Finance Act, 2002, attracted attention of this Court and was considered by Division Bench in case of Commissioner of Income Tax, Central II v. Suresh N. Gupta, (2008) 4 SCC 362. Division Bench held that said proviso is clarificatory in nature. When instant appeal came up before another Division Bench on 06.01.2009 for hearing, said Division Bench expressed its doubts about correctness of view taken in Suresh N. Gupta and directed Registry to place matter before Hon'ble Chief Justice of India for constitution of larger Bench. Constitution Bench answered reference in following manner: 38. When we examine insertion of proviso in Section 113 of Act, keeping in view aforesaid principles, our irresistible conclusion is that intention of legislature was to make it prospective in nature. .... 39. charge in respect of surcharge, having been created for first time by insertion of proviso to Section 113, is clearly substantive provision and hence is to be construed prospective in operation. amendment neither purports to be merely clarificatory nor is there any (5) material to suggest that it was intended by Parliament. Furthermore, amendment made to taxing statute can be said to be intended to remove 'hardships' only of assessee, not of Department. On contrary, imposing retrospective levy on assessee would have caused undue hardship and for that reason Parliament specifically chose to make proviso effective from 1.6.2002. (emphasis supplied) In view of proposition of law enunciated in decision, referred supra, this appeal is dismissed answering questions of law raised in this appeal against revenue and in favour of assessee. No costs. (R.S.J.) (S.V.J.) 2.2.2015 Index : No Internet : Yes sasi To: 1. Assistant Registrar, Income Tax Appellate Tribunal Chennai Bench "D", Chennai. 2. Secretary, Central Board of Direct Taxes, New Delhi. 3. Commissioner of Income Tax (Appeals) - VI Chennai. 4. Assistant Commissioner of Income Tax City Circle II (Inv), Chennai. (6) R.SUDHAKAR,J. and S.VIMALA,J. (sasi) T.C.(A).No.1453 of 2007 2.2.2015 Commissioner of Income-tax, (Central-I), Chennai v. P. Ramanathan