- (1.) LEAVE granted.
(2.) WHETHER the AO had erred in imposing surcharge at 17% on the tax amount of rs. 97,456/- under Section 113 of the income-tax Act, 1961 ("1961 Act") for the "block period" comprising of previous years relevant to 10 assessment years, i. e. , 1991-92 to 2000-01, including the period from 1. 4. 2000 to 17. 1. 2001. FACTS On 17. 1. 2001 a search under Section 132 of the 1961 Act was carried out at the premises of the respondent-assessee, an individual. The search unearthed an unexplained investment of Rs. 65,000/- being the value of household valuables and Rs. 97,427/-on account of unexplained marriage expenses (undisclosed income ). Accordingly, in the block assessment, the A. O. determined the assessee's undisclosed income at rs. 1,62,427/ -. He computed tax thereon at 60% in terms of Section 113 of the 1961 Act amounting to Rs. 97,456/- on which surcharge was levied at 17%, i. e. , Rs. 16,504/ -. The levy of surcharge was challenged by the assessee in appeal before the CIT (A ). The said appeal was allowed. The decision of CIT (A) has been confirmed by the Tribunal and the High Court. Hence, this civil appeal. Two points arise for determination: whether on the facts and circumstances of this case, the Finance Act, 2001 ("fa" for short) was applicable to "block assessment" under Chapter XIV-B in respect of the search carried out on 17. 1. 2001; secondly, whether the proviso inserted in Section 113 by the finance Act, 2002 is clarificatory? whether Finance Act, 2001 was applicable to block assessment under Chapter XIV-B up to 1. 06. 2002:
(3.) CHAPTER XIV-B was inserted by the Finance act, 1995, w. e. f. 1. 7. 1995. According to the assessee, the said Chapter is a self-contained chapter as it lays down a special procedure for assessment of "undisclosed income" found during search for the "block period", containing a charging section (158ba), a computation section (158bb), a procedural section for block assessment (158bc), limitation provision for completion of block assessment (158be) and the provisions for imposition of interest and penalty (158bfa ). According to the assessee, the scheme of assessment of "undisclosed income" under chapter XIV B is different from scheme of assessment of "total income" of any person in terms of Section 4 (1) of the 1961 Act inasmuch as under Chapter XIV-B assessment is made of "undisclosed income" as against assessment of "total income" under Section 4 (1) of the Act; that, assessment under Chapter XIV-B is made for the "block period" as against assessment of income of the "previous year" under Section 4 (1) of the Act; that, under Chapter XIV-B "undisclosed income" is assessed at 60% in terms of Section 158ba (2) read with Section 113 as against taxation of normal income at the rates prescribed in the relevant Finance act; that, the provisions of the Finance Act are not found in the block assessment scheme under Chapter XIV-B up to 1. 06. 2002 and, therefore, according to the assessee, finance Act, 2001 was not applicable to chapter XIV-B. According to the assessee, proviso to Section 4 (1) of the 1961 Act carves out an exception to the normal rule in Section 4 (1) and provides that, where under any provision of the 1961 Act, tax is to be charged in respect of income of a period other than "the previous year", such tax shall be levied as may be specifically provided under special provision of the 1961 Act. According to the assessee, Chapter XIV-B is such special provision as it concerns assessment of undisclosed income for the "block period" which is the period other than the previous year referred to in Section 4 (1 ). Therefore, according to the assessee, block assessment falls not in Section 4 (1) but it falls under the aforesaid proviso to Section 4 (1) of the 1961 act. Consequently, it is urged that since there is no reference to the Finance Act under chapter XIV-B (Section 158ba), which only looks at a fixed rate of 60% stipulated under section 113, it was not open to the AO to impose surcharge at 17% prior to 1. 06. 2002.;