Commissioner of Income Tax vs M.S. Aggarwal

C.M. No. 4222/2008 (condonation of delay) in I. T. A. No. 366/2008

For the reasons stated in the application and on submissions made by the learned Counsel for the appellant, this application for condonation of delay is allowed. The delay is condoned. This application stands disposed of.

I.T.A. No. 366/2008

This appeal pertains to the block assessment period April 1, 1989, to January 15, 2000, and is directed against the order dated January 5, 2007, passed by the Income Tax Appellate Tribunal.

The issue involved before the Tribunal was whether surcharge could be levied in the case of a search carried out prior to June 1, 2002. The Tribunal took the view that the proviso inserted to Section 113 of the Income Tax Act, 1961, by the Finance Act of 2002, with effect from June 1, 2002, was prospective and that surcharge could only be levied in respect of searches conducted after June 1, 2002. The search in the present case was conducted on November 25, 1999.

The second point on which the Tribunal agreed with the assessee as well as the conclusion arrived at by the Commissioner of Income Tax (Appeals) was that the issue with regard to the levy of surcharge was debatable when the Assessing Officer passed his order on June 11, 2003, u/s 154 of the said Act. Therefore, the Tribunal concluded that the rectification proceedings were not in order and consequently, dismissed the appeal preferred by the Revenue.

In so far as the issue on the merits is concerned, that has now been settled by the Supreme Court by its decision in the case of Commissioner of Income Central II Vs. Suresh N. Gupta, whereby the Supreme Court has concluded that the introduction of the proviso to Section 113 of the said Act by the Finance Act, 2002, was only clarificatory in nature. Consequently, the said proviso would be applicable to searches conducted prior to June 1, 2002, also.

However, the issue with regard to the initiation of action u/s 154 of the said Act is predicated by the jurisdictional question of whether the said provision was properly invoked or not. In so far as that is concerned, it is an admitted position that if the issue was debatable one, then the provisions of Section 154 of the said Act could not be invoked. We find that the Commissioner of Income Tax (Appeals) has gone into great detail into examining this aspect of the matter and has concluded that the issue was certainly a debatable one. The same view has been expressed by the Tribunal and it is on the basis of this conclusion also that the Revenue''s appeal preferred before the Tribunal, was dismissed.

Thus, although, on the merits, the issue now stands concluded in favour of the Revenue by virtue of the decision of the Supreme Court in Commissioner of Income Central II Vs. Suresh N. Gupta, , the present appeal has to fail because the jurisdictional issue has been decided against the Revenue by both the Commissioner of Income Tax (Appeals) and the Tribunal on the finding that the issue was a debatable one and, therefore, the provisions of Section 154 of the said Act could not be invoked.

We see no reason to interfere with these findings of the authorities below.

The present appeal is dismissed.