Commissioner of Income Tax vs Kirti Kumar Shah

This appeal is filed by the revenue against the judgment of the Tribunal dated 6-5-2005, accepting the appeal of the assessee, and setting aside the orders of the Assessing Officer, and the Commissioner, Income Tax (Appeals), and thereby deleting the surcharge, as levied u/s 113 of the Income Tax Act, 1961. The appeal was admitted on 4-4-2006, by framing a substantial question, reading as under:

Whether in the facts and circumstances of the case, the Tribunal was justified in holding that levy of surcharge while computing tax demand is debatable issue and hence non-levy of it could not be made subject-matter of application for rectification u/s 154 of the Income Tax Act, 1961.

Thus, the question precisely comprehends the aspect, as to whether the levy of surcharge, while computing the tax demand is a debatable issue or not. Learned Assessing Officer has passed a very short order (Annex 4), holding, that on examination of assessment records it is noticed, that surcharge leviable has not been charged, and finding it to be a mistake apparent from record, it was purportedly rectified, and the demand notice was issued. The matter was carried in appeal, which was dismissed by learned Commissioner, vide order dated 5-2-2004. It is a different story, that the certified copy of that order, which was required to be filed in this appeal, has not been filed.

However, learned counsel made available for our perusal the certified copy thereof, and a look at that judgment shows, that in Para 3, the contention of the assessee was noticed, about the proviso to Section 113 being not retrospective, and for that purpose, two judgments of Hon''ble Supreme Court were cited, then three judgments of ITAT, Jaipur were cited, and two more judgments were cited. Likewise, judgments of Hon''ble Supreme Court in T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, , was also cited to contend, that for invoking Section 154, the mistake apparent on record must be obvious, and patent mistake, and not something, which can be established by long drawn process of reasoning, on points, on which there may conceivably be two opinions. After noticing these contentions, the learned Commissioner also found, that one interpretation of course is that in cases where survey have been concluded after 1-6-2002, surcharge could be levied, and that this interpretation has not been considered by the ITAT, Jaipur, in cases cited by the assessee, and that the ITAT, Jaipur is also not categorical to hold, that surcharge is to be levied only on cases where searches have been conducted after 1-6-2002. Then reference is made to a Circular of CBDT dated 4-8-1995, and thus the appeal was dismissed.

The learned Tribunal has found, that it is undisputed fact, that the amended provision came into force with effect from 1-6-2002 only, and there cannot be two opinions, that non-charging of surcharges cannot be stated to be a mistake apparent on record, and that, any issue which is debatable one, cannot be subject-matter of order u/s 154, and has relied upon the judgment of Hon''ble Supreme Court, in Volkart Bros.'' case (supra).

Arguing the appeal, the learned counsel for the revenue relied upon the judgment of Hon''ble Supreme Court, in Commissioner of Income Central II Vs. Suresh N. Gupta, , and read that judgment in extenso.

In our view, the bare reading of the judgment of Hon''ble the Supreme Court in Suresh N. Gupta''s case (supra), by itself made it clear, that it was by that judgment, that Hon''ble Supreme Court proceeded to set at rest the controversy, as to whether the amendment in Section 113, made with effect from 1-6-2002 is retrospective or prospective, and held it to be clarificatory and retrospective. That is the judgment rendered in the year 2008.

Even without anything else, even this judgment does make it clear, that at least, on the date, when the Tribunal passed the impugned order, the question about retrospective applicability of the amendment, made in Section 113, was very much a debatable question.

In that view of the matter, the question, as framed, is required to be, and is, answered against the revenue. The appeal thus has no force, and is dismissed. The parties are left to bear their own costs.