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I. T. AS. Nos. 579 (IB), 580(IB) and 581 (1B) of 1984‑85, decided on 7th September, 1985.

‑‑ S. 111‑Penalty‑‑Penalty should not be less than 100% of tax evaded by assessee‑Word ‑may' used in S. 111 to be interpreted with reference to first part of sentence which prescribes ceiling of penalty for concealment of income‑Discretion given by word 'may', there fore, by virtue of second part of sentence ranges from minimum of 100% to 25% of Tax evaded by assessee‑Penalty, held, could not be less than amount of tax which would have been accepted as correct income i.e. 100 %, tax evaded by assessee.

‑‑‑‑ Ss. 111 & 116‑Penalty‑Commissioner of Income‑tax reducing quantum of penalty imposed by Income‑tax Officer to 50% of tax evaded by assessee which be could not do under section 111 in respect of years 1978‑79, 1979‑80 and 1980‑81‑Order of Commissioner of Income‑tax vacated and that of Income‑tax Officer restored in respect of each year.

Maqbool Hussain Shah, D. R. for Appellant.

Akhtar Hussain for Respondents.

Date of hearing: 7th September 1985.

By virtue of these three appeals, the department have sought to contest order of the learned CIT (Appeals) in consequence of which he reduced the quantum of penalty to 50% of the tax evaded by the assessee in respect of the charge years 1978‑79, 1979‑80 and 1990‑81.

2. Brief facts of this case are that the assessee, who is an individual, holds one fourth share in a registered firm namely Messrs D-----A----R-------- He also derives income from property which was not originally disclosed by him in respect of the charge years 1978-79, 1979-80.

3. According to the facts on record, original assessments were made on the following incomes in respect of the assessee's share from Messrs D-----A-------R------:

4. Subsequently, information was received from the Income‑tax Officer, Survey Circle‑3, Rawalpindi vide letter No. 25 dated 9‑12‑1982 that the assessee also derived income at the rate of Rs. 1,450 p. m. in respect of property No. B/ 760 Satellite Town, Rawalpindi which was not disclosed by him in respect of the above years. In consequence, thereof, completed assessments were reopened under section 65 of the Income‑tax Ordinance, 1979. As a result of reassessment proceedings, incomes of the assessee were charged to tax as under:‑

5. Simultaneously show‑cause ‑notices were served upon the assessee under section 116 of the Ordinance for concealment of income from pro perty. As explanation submitted by the assesses did not find favour with the Income‑tax Officer, the assessee was charged to penalty under section 111 of the Ordinance as under:‑

6. Against imposition of ,penalty, the assessee filed appeals before the learned C.I.T. (Appeals) which were disposed of vide appeal Nos. 1357 to 1360 dated 13‑3‑1985. In consequence thereof, quantum of penalty was reduced to 50% of the tax evaded by the assessee. In other words, quantum of penalty was fixed as under by the learned C.I.T. (Appeals)‑:

7. Reduction allowed by the learned C.I.T. (Appeals) in the quantum of penalty‑for the charge years 1978‑79, 1979‑80 and 1980‑81 was contested by the department before the Tribunal. In this connection, the only griev ance of the department is that the learned C.I.T. (Appeals) fell into an error in reducing penalty to 50% of the tax evaded by the assessee as according to section 111 of the Ordinance minimum penalty for conceal ment of income is equal to the tax which would have been evaded if the income as returned by the assessee had been accepted as the correct income.

8. The learned DR has at the outset drawn my attention to section 111 of the Ordinance according to which penalty for concealment of income could not be less than 100% of the tax sought to be evaded. He has invited my attention to the relevant part of the said section which is set out below:‑

"He or it may impose upon such person a penalty not exceeding 21 times but in no case less than the amount of tax which would have been evaded if the income as returned by such person had been accented as the correct income."

9. Arguing further, the learned D R has stated that in this case, tax evaded in respect of the charge years 1978‑79, 1979‑80 and 1980‑81 amoun ted to Rs. 1,913, Rs. 719 and Rs. 1,000 respectively. He has, therefore, submitted that according to law, penalty could not be less than the amount of tax sought to be evaded. Finally, be has strongly pleaded for restoration of penalty imposed by the Income Tax Officer.

10. The learned counsel of the assessee, on his part, has stated that in the relevant part of section 111, the word used is "may" instead of "shall". He has accordingly emphasised that penalty could be imposed at less than the tax evaded by the assessee.

11. After giving my earnest consideration to arguments of both the parties, it is my considered opinion that the word "may" has to be interpreted with reference to first part of the sentence which prescribes ceiling of penalty for concealment of income. The discretion given by the word "may" therefore, by virtue of second part of the sentence ranges from minimum of 100% to 250% of the tax evaded by the assessee. In the present case, undoubtedly tax evaded by the assessee was Rs. l 913 Rs. 719 and Rs 1,000 for the charge years 1978‑79, 1979‑80 and 1980‑81 respectively. This fact has not been controverted by the learned AR of the assessee. Therefore, according to the provisions of section III of the' Ordinance penalty could not be less than the amount of tax which would have been evaded if the income as returned by the assessee had been accepted as the correct ii come In other wards, penalty could not be less than 100% of the tax evaded by the assessee. On account of this legal position, I have been left with no other alternative but to vacate the order of the learned C.I.T. (Appeals) and restore that of the Income‑tax Officer in respect of each year. In consequence of this finding, all the departmental appeals succeed.

M.Y.H. Appeals allowed.

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