Surcharge on Undisclosed Income Not Retrospective, Applies From June 2002; Appeal Accepted, Surcharge Quashed.

The ITAT concluded that the proviso to s. 113 of the IT Act, which imposes a surcharge on undisclosed income, is not retrospective and applies prospectively from 1st June 2002. As the search in this case occurred before this date, the surcharge was deemed unlawful. The assessee's appeal was accepted, and the surcharge was quashed.

---

---

Issues involved:
The appeal concerns the levy of surcharge on tax calculated on undisclosed income for the block period u/s 113 of the IT Act.

Summary:
The case involved an appeal by the assessee against the order passed by the CIT(A) confirming the levy of surcharge on undisclosed income for the block period. The AO had levied surcharge in addition to tax under s. 113 of the IT Act, which was contested by the assessee. The CIT(A) upheld the AO's action, citing the introduction of block assessment by the Finance Act, 1995, and the necessity to levy surcharge as per the provisions. The assessee further appealed, arguing against the retrospective application of the proviso to s. 113 inserted by the Finance Act, 2002.

During the proceedings, the assessee emphasized the strict construction of charging provisions and cited relevant case laws to support their contention that the proviso to s. 113 should not be applied retrospectively. The Departmental Representative supported the levy of surcharge, stating that the proviso was clarificatory in nature and meant to provide further clarification on the existing provisions.

After considering the arguments and legal principles, it was concluded that the proviso to s. 113, imposing surcharge, was not meant to be retrospective and should be prospectively effective from 1st June, 2002. Since the search in this case was conducted before this date, the levy of surcharge was deemed legally incorrect. Consequently, the appeal of the assessee was accepted, and the surcharge levied was quashed.

---