Judgment in TCA No.1159/2010 dated 28.01.2020 (V.Sekaran V. Income Tax Officer, Namakkal) 1/6 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 28.01.2020 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE R.SURESH KUMAR Tax Case Appeal No.1159of 2010 V.Sekaran ... Appellant Vs. Income Tax Officer, Ward I (2), Namakkal. ... Respondent Appeal filed under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal 'D' Bench, Chennai dated 10.12.2009 in M.P.No.224/Mds/2008 in I.T.(SS)A. Nos.85 & 77/Mds/2003 for Block Assessment Period 01.04.1990 to 21.09.2000. For Appellant : Mr.M.P.Senthil Kumar For Respondent : Mrs.S.Premalatha Junior Standing Counsel JUDGMENT (Judgment of Court was delivered by DR.VINEET KOTHARI,J.) Assessee V.Sekaran has filed present appeal against order dated 10.12.2009 passed by learned Income Tax Appellate http://www.judis.nic.in Judgment in TCA No.1159/2010 dated 28.01.2020 (V.Sekaran V. Income Tax Officer, Namakkal) 2/6 Tribunal whereby Tribunal decided question against Assessee on issue of levy of surcharge in case of block assessment, in view of judgment of Hon'ble Supreme Court in case of CIT Vs. Suresh N.Gupta (297 ITR 32). 2.The said judgment of Suresh N.Gupta came to be reversed later on by Hon'ble Supreme Court on 29th October, 2014 in case of Commissioner of Income Tax, Bangalore Vs. K.Raheja Hotels & Estate (P.) Ltd., [(2015) 228 Taxman 5 (SC)]. relevant portions of judgment of Hon'ble Supreme Court in case of K.Raheja Hotels & Estate (P.) Ltd., are quoted below for ready reference: "Thus, it was conscious decision of legislature, even when legislature knew implication thereof and took note of reasons which led to insertion of proviso, that amendment is to operate prospectively. Learned counsel appearing for assessees sagaciously contrasted aforesaid stipulation while effecting amendment in Section 113 of Act, with various other provisions not only in same Finance Act but Finance Acts pertaining to other years where legislature specifically provided such amendment to be either retrospective or clarificatory. In so far as amendment to Section 113 is concerned, there is no such language used http://www.judis.nic.in Judgment in TCA No.1159/2010 dated 28.01.2020 (V.Sekaran V. Income Tax Officer, Namakkal) 3/6 and on contrary, specific stipulation is added making provision effective from 1st June, 2002. (e) There is yet another very interesting piece of evidence that clarifies provision beyond any pale of doubt, viz. understanding of CBDT itself regarding this provision. It is contained in CBDT circular No.8 of 2002 dated 27th August, 2002, with subject "Finance Act, 2002 - Explanatory Notes on provision relating to Direct Taxes". This circular has been issued after passing of Finance Act, 2002, by which amendment to Section 113 was made. In this circular, various amendments to Income Tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, explanation to Section 158BB is stated to be clarificatory in nature. Likewise, it is mentioned that amendments in Section 145 whereby provisions of that section are made applicable to block assessments is made clarificatory and would take effect retrospectively from 1st day of July, 1995. When it comes to amendment to Section 113 of Act, this very circular provides that said amendment along with amendments in Section 158BE, would be prospective i.e. it will take effect from 1st June, 2002. (f) Finance Act, 2003, again makes position clear that surcharge in respect of block assessment of undisclosed income was made prospective. Such stipulation is contained in second proviso to sub-section (3) of Section 2 http://www.judis.nic.in Judgment in TCA No.1159/2010 dated 28.01.2020 (V.Sekaran V. Income Tax Officer, Namakkal) 4/6 of Finance Act, 2003. This priviso reads as under: "Provided further that amount of income-tax computed in accordance with provisions of section 113 shall be increased by surcharge for purposes of Union as provided in Paragraph A, B, C, D or E, as case may be, of Part III of First Schedule of Finance Act of year in which search is initiated under Section 132 or requisition is made under section 132A of income-tax Act." Addition of this proviso in Finance Act, 2003 further makes it clear that such provision was necessary to provide for surcharge in cases of block assessments and thereby making it prospective in nature. 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 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. 40.The aforesaid discursive of ours also makes it obvious that conclusion of Division Bench in Suresh N. Gupta treating proviso as clarificatory and giving it retrospective effect is not correct conclusion. Said http://www.judis.nic.in Judgment in TCA No.1159/2010 dated 28.01.2020 (V.Sekaran V. Income Tax Officer, Namakkal) 5/6 judgment is accordingly overruled. 41.As result of aforesaid discussion, appeals filed by Income Tax Department are hereby dismissed. Appeals of assessees are allowed deleting surcharge levied by assessing officer for this block assessment pertaining to period prior to 1st June, 2002." 3.In view of this, matter deserves to be sent back to learned Tribunal for deciding appeal again, in light of latest decision of Hon'ble Supreme Court in case of Commissioner of Income Tax, Bangalore Vs. K.Raheja Hotels & Estate (P.) Ltd. 4.Accordingly, we dispose of present Appeal and setting aside order of learned Income Tax Appellate Tribunal dated 31.12.2007 and order dated 10.12.2009 passed in M.P.No.224/Mds/2008 in I.T.(SS).A.Nos.85 & 77/Mds/2003. On this aspect of matter, we remand case back to learned Tribunal for deciding afresh in accordance with law. No costs. (V.K.J.) (R.S.K.J.) 28.01.2020 Sgl http://www.judis.nic.in Judgment in TCA No.1159/2010 dated 28.01.2020 (V.Sekaran V. Income Tax Officer, Namakkal) 6/6 DR.VINEET KOTHARI, J. And R. SURESH KUMAR, J. Sgl To Income Tax Appellate Tribunal, 'D' Bench, Chennai. T.C.A.No.1159 of 2010 28.01.2020 http://www.judis.nic.in V. Sekaran v. Income-tax Officer, Ward I(2), Namakkal