2011 (7) TMI 572 - HC - Income Tax

Liability to pay surcharge - Held that - As the law stands today surcharge is payable by the assessee. In the event of the larger Bench of the Supreme Court reversing the judgment of CIT v. Vatika Township (P.) Ltd. 2009 (1) TMI 217 - SUPREME COURT and holding surcharge is not leviable the assesseee is absolved of the liability to pay surcharge. Therefore the proper order to be passed is to set aside the order of the Tribunal and remit the matter to the Assessing Authority with the direction to await the judgment of the Apex Court and consequent to the order passed by the larger Bench to give effect to our order - Appeal is allowed.

Summary

Issues:
1. Retrospective application of proviso to section 113 regarding surcharge levied on the assessee.
2. Interpretation of the proviso by the Income Tax Tribunal.
3. Reference to conflicting judgments by the Supreme Court.
4. Decision on the liability of the assessee to pay surcharge pending the larger Bench's decision.

Issue 1: Retrospective Application of Proviso to Section 113
The High Court analyzed the appeal challenging the Income Tax Tribunal's order regarding the retrospective application of the proviso to section 113, inserted by the Finance Act, 2002. The Tribunal held that the proviso does not have retrospective application, leading to the deletion of the surcharge levied on the assessee. The High Court noted the Apex Court's view that the proviso was clarificatory and not retrospective, emphasizing the relevance of the year in which the search was initiated for the applicability of the financial year.

Issue 2: Interpretation of the Proviso by the Income Tax Tribunal
The High Court overturned the Tribunal's decision, stating that the proviso to section 113 is curative in nature and clarifies the relevant date for the applicability of the financial year. The High Court set aside the Tribunal's order and reinstated the Assessing Officer's decision, emphasizing that the Tribunal's order contradicted the Assessing Officer's decision.

Issue 3: Reference to Conflicting Judgments by the Supreme Court
The High Court referred to the case of CIT v. Vatika Township (P.) Ltd., where the larger Bench of the Supreme Court directed a reconsideration of a previous judgment related to the applicability of surcharge. The matter was pending before the larger Bench for further consideration, indicating the evolving nature of the legal interpretation on the issue of surcharge.

Issue 4: Decision on Liability Pending Larger Bench's Decision
Given the uncertainty surrounding the liability to pay surcharge pending the larger Bench's decision, the High Court ordered the remittance of the matter to the Assessing Authority. The Assessing Officer was directed to await the larger Bench's decision and act accordingly based on the Apex Court's ruling. The High Court allowed the appeal, set aside the Tribunal's order, and restored the orders of the Assessing Authority and the Appellate Commissioner, pending the final decision of the larger Bench of the Supreme Court.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the High Court's decision on each aspect, considering the legal interpretations and precedents cited in the case.