COMMISSIONER OF INCOME-TAX Versus ZAMIR & SONS

MUHAMMAD AKRAM, J.‑ The respondent‑assessee was served with a notice of demand under section 29 of the Income‑tax Act for the payment of income tax amounting to Rs. 2,83,894 due for the assessment year 1964‑65. In spite of the subsequent reminders the assessee failed to make the payment. In these circumstances on the 15th September, 1969 the Income‑tax Officer, J‑Circle, Lahore imposed a penalty of Rs. 5,833 on the assessee in default under section 46 of the Act. But on appeal on the 16th January, 1970 the Appel late Assistant Commissioner of Income‑tax, A‑Range, Lahore cancelled the order of imposition of the penalty for the reason that the original assess ment made by Income‑tax Officer relating to the charged year in question had already been set aside by him in appeal. The order canceling the penalty was upheld by the Income‑tax Appellate Tribunal (Pakistan), Lahore in I. T. A. No. 1670 of 1969‑70 dismissed on the 11th of November, 1970.

2. In these circumstances at the instance of the Commissioner of Income‑tax, Lahore the Tribunal has referred. the following question of law said to arise out of its appellate order passed in I. T. A. No. 1670 of 1969‑70 :‑

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty amounting to Rs. 5,833 imposed under section 46(1) of the Income‑tax Act?"

3. Under somewhat similar circumstances in T. R. No. 80 of 1971 Re : The Commissioner of Income‑tax, Rawalpindi v. Begum Mumtaz Jamal we have held that penalty imposed by the Income‑tax Officer under sec tion 46(1) of the Act for default on the part of assessee to comply with the demand notice served on him in pursuance to the assessment is liable to be cancelled and cannot be sustained in case afterwards the assessment is reduced enhanced, annulled or set aside on appeal against it. For our detailed, reasons recorded in that case, we have no hesitation in holding that on the facts and in the circumstances of this case the Tribunal was justified in cancel ling the penalty imposed on the respondent‑assessee by the Income‑tax Officer under section 46(1) of the Act. Accordingly our answer to the above question referred to the High Court is returned in the affirmative. But there shall be no order as to costs in the circumstances of the case.

M.Y.M. Reference answered in affirmative.