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Section 113 of the Income-tax Act, 1961 - Block assessment in search cases - Tax in case of - Block period from 1-4-1990 to 3-7-2000 - Whether proviso to section 113 inserted by Finance Act, 2002 with effect from 1-6-2002 was clarificatory in nature and, therefore, surcharge would be leviable in those cases also where search had taken place prior to 1-6-2002 - Held, yes FACTS A search was conducted in the assessee's premises on 6-4-2000. The Assessing Officer in the block assessment order imposed surcharge on the tax worked out on the undisclosed income. The assessee filed an applica-tion under section 154 for rectification which was rejected by the Assess-ing Officer on the ground that there was no mistake apparent from record. On appeal, the Commissioner (Appeals) reversed the order of the Assessing Officer and held that surcharge was not leviable since search had been conducted prior to 1-6-2002, i.e., prior to insertion of proviso to section 113 by Finance Act, 2002. On the revenue's appeal, the Tribunal upheld the order of the Commissioner (Appeals). On further appeal, the High Court also affirmed the order of the Commissioner (Appeals). On the revenue's appeal to the Supreme Court : HELD The power to levy a surcharge on income-tax is traceable to article 271 read with entry 82 of List I of Schedule VII to the Constitution. It is not traceable to section 4. Every year, the Finance Act is enacted by the Parliament to give effect to the financial proposals of the Central Government. The rate at which a charge on the total income of the previous year is imposed under section 4(1) is not laid down in the Income-tax Act and, therefore, the said section provides that the charge has to be fixed by the central Act. It is because of this, that income-tax is levied at different rates under the Finance Act. [Para 5] In order that the charge should be a legal charge under section 4, it must be a tax on the income of the assessee. If the charge is the tax on anything else, then it would not be a valid charge. That is the only limitation upon the power or authority of the Parliament to fix any rate it pleases. So long as the charge is on 'total income' of the previous…

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