I.T.A. NO.282/KB OF 1998-99, DECIDED ON 3RD APRIL, 1999. Versus I.T.A. NO.282/KB OF 1998-99, DECIDED ON 3RD APRIL, 1999.

ORDER

The departmental appeal is directed against CIT(A)'s Order No.572, dated 3-7-1998 cancelling the order passed under section 111 of the Income Tax Ordinance.

2. The learned D.R. and A.R. have been heard, Perusal of the penalty order shows that the same was imposed by the Assessing Officer on the ground that the electricity expenses amounting to Rs.1,48,501 were claimed twice once in the trading account and secondly in the profit and loss account.

According to the Assessing Officer no satisfactory explanation was submitted for this double claim made by the assessee, which was held to be concealed income liable to penalty equal 100% of the tax evaded. When the matter went to the CIT(A), the penalty order passed by the Assessing Officer was cancelled by him on the ground that the Demand Notice was never issued and never served on the assessee. The learned D.R. has contested these findings of the learned CIT(A). The learned A.R. has also been heard.

3. As the facts appear from the record a penalty order is found to have been passed by the Assessing Officer. It is not clear why the demand notice was not served on the assessee. However, apart from this lacuna, it is seen that the penalty order in itself has been passed only on the basis of a accounting deviation whereby the expenses relating to trading account were found to have been claimed in the Profit and Loss Account. This deviation was corrected when the amount claimed in the P&L Account was added back to the income of the respondent-assessee. It is not the case of the department that the expenditure was not incurred at all or that it was fictitious. The fact as can be seen from the record presented by the learned A.R's. that a return of income was filed on estimate basis whereby sales were declared at Rs.3,20,000 on which G.P. rate was worked out @ 60% against which expenses including expenses incurred on electricity amounting to Rs.1,48,101 were also claimed. The learned A.R. who appeared before this bench has conceded that electricity expenses were properly added back by the Assessing Officer but has reiterated that no in accurate particulars were submitted calling for imposition of penalty.

4. The matter has been considered. As the facts are, the return was filed on estimate basis and an accounting mistake was committed by the assessee whereby trading expenses were claimed in the P&L Account. This' mistake having been corrected by the department by adding back the amount claimed under the head P&L Account, the income of the assessee has properly been subjected to tax. The plea of the respondent-assessee that there was no submission of any inaccurate particulars is found to be proper. The department has not been able to prove that electricity expenses incurred were less than the amount claimed and as such, there was no claim for any expenditure not incurred by the assessee. Accordingly on merit alone, the penalty order passed by the Assessing Officer is not maintainable. The issue regarding non-service of demand notice is not-pertinent to the maintainability of the penalty order and, as such, the same is not discussed. The cancellation of the penalty order is, however, confirmed for the reasons discussed above.

5. In consequence, the departmental appeal stands dismissed.

C.M.A./67/Tax(Trib.) Appeal dismissed.