Supreme Court: The 5-judge bench of R.M. Lodha, CJ and J.S. Khehar, J. Chelameswar, Dr. A.K. Sikri and R.F. Nariman deciding the question of law as to whether the proviso appended to Section 113 of the Income Tax Act, 1961 which was inserted in that Section by the Finance Act, 2002 is to operate prospectively or is clarificatory and curative in nature and, therefore, has retrospective operation, overruled the decision of the division bench in Commissioner of Income Tax v. Suresh N. Gupta, (2008) 4 SCC 362 which treated the said proviso as clarificatory and gave it a retrospective effect.
Applying the principle of fairness to the rule of restrospectivity, the Court held that legislation’s which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. Considering the proviso to Section 113 of the IT Act which states that the tax chargeable under the said Section shall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated under Section 132 or the requisition is made under Section 132-A of IT Act, the Court noticed that the said provision id not beneficial but rather onerous to the assessee, hence, it cannot be retrospective effect.
In the present case, which was represented by B.V. Balram Das and Bhargava V. Desai, a search and seizure operation under Section 132 of ITAct was conducted in the year 2001 and consequently, the assessee filed its return of income for the block period from 01.04.1989 to 10.02.2000. The said block assessment was completed in the year 2002 but later it was observed that surcharge had not been levied on the tax imposed upon the assessee, thereby, resulting into the above issue before the Court. CIT v. Vatika Township Pvt. Ltd., Civil Appeal No. 8750 of 2014, decided on 15.09.2014
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