HOUSING BOARD HARYANA,PANCHKULA vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE PANCHKULA, PANCHKULA

That on the facts and in the circumstances of the case the learned CIT(A) Income Tax Department NFAC Delhi has erred in law and facts in computing surcharge on the tax payable on income of Rs.28,06,93,486/- @ 37% of the tax liability of Rs.8,42,08,047/- instead of 12% which comes to Rs.1,01,04,966/-.

That the appellant reserves the right to add, amend or delete one or more of the grounds of appeal before the appeal is disposed off.

The brief facts of the case are that the assessee, Housing Board Haryana, filed its return of income for the year under consideration. The assessment was completed under section 143(3) of the Act on 27.12.2022. While computing the tax liability, the Assessing Officer levied surcharge of Rs.3,11,56,977/- on the tax payable of Rs.8,42,08,047/-. The assessee contended that the surcharge had been wrongly computed and that the correct surcharge leviable was Rs.1,01,04,966/- being 12% of the tax payable.

Against the order of the AO the Assessee went in appeal before the Ld. CIT(A).

During the appellate proceedings, it was submitted before the Ld. CIT(A) that the Assessing Officer had committed a mistake in charging surcharge at Rs.3,11,56,977/- instead of Rs.1,01,04,966/- and that the computation sheet accompanying the assessment order clearly demonstrated that the levy was excessive and liable to be rectified. The assessee pleaded that the surcharge should have been restricted to 12% of the income tax payable.

1 The Ld. CIT(A), however, did not accept the contention of the assessee. The appellate authority observed that the surcharge had been correctly levied at 37% on the income tax payable of Rs.8,42,08,047/-. Referring to the surcharge rates applicable for Assessment Year 2021-22, the Ld. CIT(A) held that in cases where the total income exceeded Rs.5 crores, surcharge at the rate of 37% was leviable and that the computation made by the Assessing Officer was in accordance with law. The Ld. CIT(A) further observed that the assessee was entitled to marginal relief, wherever applicable, and consequently upheld the levy of surcharge. The appeal of the assessee was dismissed.

Aggrieved by the aforesaid order, the assessee is in appeal before the Tribunal.

During the course of hearing, the Ld. AR submitted that both the Assessing Officer and the Ld. CIT(A) had erred in applying the rate of surcharge applicable to individuals and certain other categories of assessees without appreciating the legal status of the assessee. It was contended that the assessee is a statutory local authority/local body and, therefore, the rate of tax and surcharge applicable to local authorities ought to have been considered. The Ld. AR invited our attention to the Finance Act and the CBDT Circular explaining the provisions relating to rates of income tax for Assessment Year 2021-22. It was argued that under the relevant provisions governing local authorities, the tax liability and surcharge structure were distinct from those applicable to other categories of assessees. The Ld. AR further submitted that the surcharge at 37% could not be mechanically applied without first determining the correct status of the assessee and the corresponding rate schedule prescribed under law.

Per contra, the Ld. DR strongly supported the orders of the lower authorities. It was submitted that the Assessing Officer had computed the tax liability strictly in 3 accordance with the computation mechanism available on record and that the Ld. CIT(A) had rightly confirmed the levy after examining the applicable surcharge rates. It was thus contended that no interference was called for in the impugned order.

We have heard the rival submissions and perused the material available on record. The controversy before us lies in a narrow compass and pertains to the correct rate of tax and surcharge applicable to the assessee for Assessment Year 2021-22. The specific contention of the assessee is that being a local body/local authority, a different rate schedule is applicable, whereas the Revenue authorities have proceeded to levy surcharge at 37% while computing the tax liability.

1 We find merit in the contention of the assessee that the determination of the correct status of the assessee and the corresponding rate of tax forms the foundation for computation of tax liability. The impugned orders do not clearly demonstrate examination of the provisions applicable to local authorities vis-à-vis the surcharge provisions relied upon by the Assessing Officer. The assessee has specifically relied upon the rate schedule notified for the relevant assessment year and has contended that the surcharge provisions applicable to other categories of assessees have been wrongly invoked.

2 We further notice that for Assessment Year 2021-22, the Finance Act contains specific provisions regarding surcharge, including situations where surcharge is restricted to 12% in respect of income chargeable under sections 111A, 112 and 112A of the Act. The applicability of these provisions, the status of the assessee, and the correct rate schedule require proper verification and adjudication at the assessment stage. In our considered opinion, these aspects have not been adequately examined either by the Assessing Officer or by the Ld. CIT(A).

3 In the interest of justice and fair play, we therefore deem it appropriate to set aside the orders of the lower authorities on this limited issue and restore the matter to the file of the Assessing Officer. The Assessing Officer shall examine afresh the status of the assessee, the rate of income tax applicable to local authorities/local bodies for Assessment Year 2021-22, the applicability of surcharge provisions contained in the Finance Act, including the provisions relating to surcharge at 12% in respect of income covered under sections 111A, 112 and 112A, and thereafter recompute the tax liability in accordance with law. The Assessing Officer shall afford adequate opportunity of being heard to the assessee and shall consider all documentary

4 Since we have restored the matter for fresh examination, we refrain from expressing any conclusive opinion on the merits of the controversy and all contentions of both parties are left open.

In the result, the appeal of the assessee is allowed for statistical purposes Order pronounced on 05/06/2026. मनोज कुमार अ"वाल लिलत कुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद"/ ACCOUNTANT MEMBER "ाियक सद" /JUDICIAL MEMBER AG आदेश की "ितिलिप अ"ेिषत/ Copy of the order forwarded to : 1. अपीलाथ"/ The Appellant

""थ"/ The Respondent 3. आयकर आयु"/ CIT 4. आयकर आयु" (अपील)/ The CIT(A) 5. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File