Supreme Court: Surcharge not retroactive. Income Tax Act amended in 2002. Relief for assessee.

The Supreme Court held that the surcharge was not applicable to block assessments for the period 1989-1999. The proviso to Section 113 of the Income Tax Act was interpreted as prospective, with the amendment creating the surcharge being considered substantive and effective from 1.6.2002. The Court clarified that the intention was to relieve hardships for the assessee. The Tribunal's decision aligning with the Supreme Court's interpretation was upheld, dismissing the appeal and ruling in favor of the assessee without awarding costs.

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Issues:
1. Applicability of surcharge to block assessment for the period 1989-1999.
2. Interpretation of the proviso to Section 113 of the Income Tax Act.
3. Levy of surcharge on block assessments during the relevant period.

Analysis:
1. The appeal challenged the order of the Income Tax Appellate Tribunal regarding the applicability of surcharge to the block assessment for the years 1989-1999. The assessee, a broker, had a search conducted in their premises, leading to a block assessment. The Assessing Officer levied surcharge on the tax payable for the block assessment. The Commissioner of Income Tax (Appeals) upheld the levy, but the Tribunal ruled that since the search occurred before 1.6.2002, surcharge was not applicable. The Revenue appealed this decision.

2. The issue of interpreting the proviso to Section 113 of the Income Tax Act was crucial in this case. The High Court's view that the proviso was prospective in nature was challenged before the Supreme Court. The Constitution Bench, in the case of Commissioner of Income Tax (Central)-I v. Vatika Township Private Limited, clarified that the proviso was intended to be prospective. The amendment creating the surcharge was considered substantive and hence prospective. The amendment aimed to remove hardships for the assessee and was effective from 1.6.2002. Therefore, the surcharge was not applicable to block assessments for the relevant period.

3. The Tribunal's decision was in line with the interpretation provided by the Constitution Bench of the Supreme Court. The intention of the legislature in making the proviso to Section 113 prospective was clear. The amendment was not clarificatory but substantive, aimed at relieving hardships for the assessee. As a result, the appeal was dismissed, and the questions of law were answered against the revenue and in favor of the assessee. No costs were awarded in this matter.

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