2001 PLP 1348 (PTD)

NASIM SIKANDAR, J.

This is-a case stated by the Lahore Bench of the Income Tax Appellate Tribunal at the instance of C.I.T., Faisalabad. Following questions of law have been framed for our consideration and reply:

"(1) Whether on the facts and in the circumstances of the case, the learned Tribunal was justified in upholding the deletion, of addition of Rs. .4,19,000 made under section 13(1)(aa) of the Income Tax Ordinance, 1979. (2) Whether on the facts and in the circumstances of the case, the learned Tribunal was justified in upholding the cancellation of penalty of Rs. 2,17,644 imposed under section 111 of the Income Tax Ordinance, 1979: "

2. The assessee-respondent is a member of A.O.P. namely Noorani a Ghazi Poultry Hatchery Breeding Farm. For the assessment year, 1985-86 the assessee claimed certain exempt income alleged to have been derived as a member of A.O.P. namely Noorani Ghazi Poultry Hatchery Breeding Farm. The Assessing Officer noted that the income of the said A.O.P. had been restricted to some extent. Therefore, the exempt income of A.O.P. was apportioned in the hands of the assessee and the balance was added towards Income under section 13(1)(aa) of the Ordinance. Thereafter, the Assessing Officer imposed penalty under section 111 of the Income Tax Ordinance, 1979. The A.O.P. as well as the respondent preferred appeals which were accepted by C.I.T. (Appeals). The assessment framed in the case of the A.O.P. was cancelled in toto and in view of that order the amount disallowed/restricted and the proportionate sum added under section 13(1)(aa) of the Income Tax Ordinance in the hands of the respondent was also deleted as a consequential relief. The departmental appeal filed against both the orders failed.

3. After hearing the learned counsel for the parties we are of the considered view that the first question as framed does not give rise to a legal controversy to be resolved by this Court. It is a simple case in which an individual disclosed the source of income which was claimed exempted. The Assessing Officer on the basis of the fact that the source had been allowed only part of the income claimed as exempt and the individual was entitled to the proportionate share of the exempt income and nothing more. The individual was burdened with a penalty for concealment. The learned First Appellate Authority found that the Assessing Officer could not curtail the claim from a source which was exempt from levy of income tax. It was noted that the Assessing Officer had failed to bring sufficient material on record to dispute that A.O.P. had received a certain sum as income which was exempt under the Second Schedule to the Income Tax - Ordinance, 1979. That cancellation obviously had a result of restoring the claim of the respondent as an individual to have enjoyed, an exempt income to the extent of his share in the A.O.P. There is, therefore, hardly any legal controversy to be made a subject-matter of reference to this Court. We would like to point out that imposition of penalty for concealment under section 111 was absolutely unjustified. As noted earlier it was a simple case in which a claim as share of exempt income was made which was finally accepted in appeal. Even if it had not been done, to prefer a claim for exemption of certain amount which is partially disallowed by the Revenue does not in any case attract the provisions of section 1 I 1 of the Income Tax Ordinance, 1979.

4. Therefore, the first question is declined to be answered while the second is answered in the affirmative. M.B.AJC-43/L Order accordingly.