LexCOMMISSIONER OF INCOME TAX CENTRAL II versus SURESH N. GUPTA
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... I (2008] 1 S.C.R. 157 COMMISSIONER OF INCOME TAX CENTRAL II II. SURESH N. GUPTA (C:A. No. 32 of 2008) _ JANUARY 7, 2008 [S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.] Income Tax Act, 1961 - s. 4 (1) and proviso, 113, 132, A B Chapter XIV B; ss. 158 BA, 158 BB, 158 BF - Undisclosed income - Unearthed during search carried out on 17.1.2001 - c Levy of surchar.ge @ 17% on the tax calculated at 60% on the total undisclosed income by placing reliance on Finance Act, 2001 - Propriety of - Held: Surcharge was rightly imposed - Revenue could place reliance on Finance Act, 2001 for the purpose of 'block assessment' under Chapter XIV B - Computation under Chapter XIV B has to be read with D computation of 'total income' under Chapter IV - Relevant date for applicability of the Finance Act would be the year in which the search stood initiated - Proviso inserted ins. 113 by Finance Act, 2002 was clarificatory in nature - Constitution of India, 1950 - Article 271 r/w VII Schedule List I Entry 82 - Finance E Act, 2001 - Finance Act, 2002 A search uls 132 of Income Tax Act, 1961 was carried out on 17.1.2001, at the premises of the respondent- assessee, an Individual. Undisclosed income was F _... · unearthed in the se~rch. Assessing Officer determined the undisclosed income and computed tax thereon at 60% in terms of Section 113 of the Act. Surcharge at the rate of 17% was also levied thereon. Assessee challenged the levy of surcharge. The appeal was allowed by Commissioner of Income Tax (Appeals). The decision was G further upheld by the Tribunal and also High Court. i_ In appeal to this court, the questions for determination were (1) whether in the facts of the instant case, Finance Act, 2001 was applicable to 'block H ' 157 158 SUPREME COURT REPORTS [2008] 1 S.C.R. A assessment' under Chapter XIV 8 in respect of the search r ' carried out on 17 .1.2006 upto 1.6.2002 and (2) whether the proviso inserted in Section 113 by the Finance Act, 2002 was clarificatory. B Allowing the appeal, the Court HELD: 1.1 The concept of a charge on the "total income" of the previous year under Income Tax Act, 1961 is retained even under Chapter XIV-8. Therefore, Section t//I 15888 which deals with computation of undisclosed c income of the block period has to be read with computation of 'total income' under Chapter IV of Income Tax Act. Once Section 15888 is required to be read with Section 4 of the 1961 Act, then the relevant Finance Act of the concerned year would automatically stand attracted to the computation under Chapter XIV-8. (Para 15 and16] -~ D (178-E-G] 1.2 There is a fallacy in the argument of the assessee +~ that the concepts of "total income" and "previous year" are given ago by in Chapter XIV-8. The analysis of Section E 15888 indicates that both the concepts are retained in Chapter XIV-8. The only difference is that Section 4 of the 1961 Act charges the total income of a person of one single previous year (unit of assessment) whereas Section 158BA(2) levies a charge on the income of a person for F the block period of previous years relevant to 10/6 ~ assessment years. The word "block period", as defined in Section 1588(a), comprises previous years relevant to 10/6 assessment years as one unit of time for the purposes of assessment. (Para 15] (177-G-H; 178-A-8] G 1.3 The object behind enactment O·f Chapter XIV-8 is to assess and compute "undisclosed incomes" relatable to different accounting years in which the income is earned. r Therefore, if the block period comprising of previous years relevant to 10/6 assessment years is treated by Parliament H as one unit of time for assessment purposes, one has to COMMISSIONER OF INCOME TAX CENTRAL II v. 159 SURESH N. GUPTA ' '-1 correlate "undisclosed income" to each of the years in A which income was earned by the assessee. It is true that under Chapter XIV-B, computation of regular income and computation of undisclosed income has to be worked out separately. However, to arrive at the figure of undisclosed income, the said parallel calculations have to converge B in order to work out the difference between the first and the second aggregates of the total incomes/losses of the 1\, previous year, in which undisclosed income is taxed under Section 113. [Para 15] [178-B-E] 1.4 Section 4(1) prescribes the subject matter of the c tax and the rate of that tax is prescribed by the Legislature, eith
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