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I.T.C. No.11 of 1978, decided on 27th October, 1986.

--Ss.46(i) & 66(2)--Assessee called upon by Income-tax Officer to pay tax by certain date--Tax not deposited by assessee--Appeal filed by assessee before Appellate Tribunal before imposition of penalty- Penalty imposed by Income-tax officer pending assessee's appeal before Tribunal--Maintainability of order imposing penalty--Penalty order, held, would merge with appellate order passed by Tribunal subsequently.- [Commissioner of Income-tax, Dacca v. Baijunath Prasad Mahadeo Prasad P L D 1964 Dacca 765 dissented from ].

Commissioner of Income-tax, Dacca v. Baijunath Prasad Mahadeo Prasad P L D 1964 Dacca 765 dissented from.

Bawany Violin Textile Mills Ltd. v. Commissioner of Income-tax 1967 P T D 622; Commissioner of Income-tax v. Messrs David D Souza & Sons I T C No. 13 of 1977 and Commissioner of Income-tax Rawalpindi v. Begum Mumtaz Jamal 1976 P T D 182 ref.

K. Salahuddin for Department.

G.M. Paryani for Assessee.

Date of hearing: 27th October, 1986.

.--This case relates to assessment year 1969-70. The assessee company had defaulted in the payment c income-tax and the income-tax Officer imposed a penalty of Rs.6,00 under section 46(l) of the Income-tax Act, 1922 on 15-5-1976. Before the penalty was imposed, the assessee had filed an appeal against the assessment and that appeal was pending and by order, dated 9-7-197 of the Income-tax Tribunal the assessment, which was the basis for creating the defaulted demand, was set aside and the imposition c penalty of Rs.6,000 on account of default in payment of tax was cancelled The Department moved an application before the Tribunal under section 66(1) of the Income-tax, 1922, praying the Tribunal to refer the following two questions for the opinion of the High Court:--

(1) Whether on the facts and in the circumstances of the case, the learned Tribunal was justified in cancelling penalty imposed under section 46(1) of the Income-tax Act when there was clear default in payment of tax by the assessee

(2) Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in accepting the assessee' contention that the penalty order stood merged with the appellate order passed subsequently "

2. This application was rejected by order, dated 15-11-1977 of the Tribunal on the ground that the view taken by the Tribunal for cancelling the penalty was based on two decisions of this Court. In the circumstances, the present application under section 66(2) of the Income-tax Act, 1922 has been filed by the Department for opinion this Court. We have heard Mr. K. Salahuddin, learned counsel for the Department /appellant and Mr. G.M. Paryani, learned counsel for the respondent.

3. The view taken by the Tribunal in cancelling the penalty is in accord with two judgments of this Court and one judgment of the Lahore High Court namely: (i) Bawany Violine Textile Mills Ltd. Commissioner of Income-tax 1967 P T D 622; (ii) unreported decision of this Court, dated 4-9-1986 in the case of Commissioner of Income-tax v. Messrs David D Souza & Sons I T C No. 13 of 1977; and (iii) Commissioner of Income-tax, Rawalpindi v. Begum Mumtaz Jamal 1976 18 P T D 182.

Mr. K. Salahuddin, however, referred to a decision of the Dacca High Court in the case of Commissioner of Income-tax. Dacca v. Baijunath Prasad Mahadeo Prasad P L D 1964 Dacca 765 for the proposition canvassed in this case on behalf of the department. We are in agreement with the view taken in the aforesaid two judgments of this Court and one judgment of the Lahore High Court and with respect we may observe that we have not been persuaded to adopt the view taken by the Dacca High Court in P. L D 1964 Dacca 765.

4. As a result, the two questions are answered in the affirmative.

M.B.A./C-3/K Tribunal affirmed.

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