2009-VIL-36-SC-DT

Equivalent Citation: [2009] 314 ITR 338 (SC)

Supreme Court of India

540 of 2009

Date: 06.01.2009

COMMISSIONER OF INCOME-TAX

Vs

VATIKA TOWNSHIP P. LTD.

Mohan Parasaran, Additional Solicitor-General of India (Ms. Aruna Gupta and B.V. Balaram Das, Advocates, with him) for the petitioner.

BENCH

S. B. SINHA and DR. MUKUNDAKAM SHARMA JJ.

JUDGMENT

1. Delay condoned.

2. The question which fell for consideration before the High Court was as to whether the proviso appended to section 113 of the Income-tax Act, 1961, is clarificatory and/or curative in nature. The said provision had come into force with effect from June 1, 2002. It reads as under:

"Provided that the tax chargeable under this section shall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated under section 132 or the requisition is made under section 132A."

3. In this case, the search and seizure took place on October 6, 2001. An order of block assessment in terms of section 158BC was made in respect of the assessment years 1984 to 2003. The surcharge was levied on June 30, 2003.

4. In support of his contention that the said proviso was retrospective in nature, the learned Additional Solicitor General relies upon a Division Bench decision of this court in CIT v. Suresh N. Gupta [2008] 297 ITR 322 ; [2008] 4 SCC 362, 379, wherein it has been held:

"37. According to the assessee, prior to June 1, 2002, the position was ambiguous as it was not dear even to the Department as to which year's FA would be applicable. To clear this doubt precisely, the proviso has been inserted in section 113 by which it is indicated that FA of the year in which the search was initiated would apply. Therefore, in our view, the said proviso was clarificatory in nature. In taxation, the legislation of the type indicated by the proviso has to be read strictly. There is no question of retrospective effect. The proviso only clarifies that out of the four dates, Parliament has opted for the date, namely, the year in which the search is initiated, which date would be relevant for applicability of a particular FA. Therefore, we have to read the proviso as it stands.

38. There is one more reason for rejecting the above submission. Prior to June 1, 2002, in several cases, tax was prescribed sometimes in the 1961 Act and sometimes in FA and often in both. This made liability uncertain. In the present case, however, the rate of tax in case of block assessment at 60% was prescribed by section 113 but the year of FA imposing surcharge was not stipulated. This resulted in the above four ambiguities. Therefore, clarification was needed. The proviso was curative in nature. Hence, the proviso inserted in section 113 merely clarifies that out of the above four dates, the relevant date for applicability of FA would be the year in which the search stood initiated under section 158BC."

5. As the said proviso was introduced with effect from June 1, 2002, i.e., with prospective effect and by reason thereof, tax chargeable under section 113 of the Income-tax Act is to be increased by surcharge levied by a Central Act, we are of the opinion that keeping in view the principles of law that the taxing statute should be construed strictly and a statute, ordinarily, should not be held to have any retrospective effect, it is necessary that the matter be considered by a larger Bench.

6. We, while issuing notice, direct the Registry to place the matter before the hon'ble the Chief Justice for constitution of a larger Bench.

 

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