Income-tax Act (XI of 1922)---

----S. 15-BB (4-AA) (as amended by Finance Ordinance (XXI of 1972)-- Assessment year 1971-72---Exemption---No penalty could be imposed on the assessee for non-tiling of return of income under S. 34 of the Act on the inclusion of income from dividend received from the company enjoying tax holiday under S. 15-BB---Operation of S. 15-BB (4-AA) could not go beyond 20th December, 1971 and had no retrospective effect.

1982 PTD 130 and 1989 PTD 1245 fol.

Shaikh Haider for Applicant.

Iqbal Naeem Pasha for Respondent.

Date of hearing: 24th October, 1991.

JUDGMENT

NASIR ASLAM ZAHID, ACTG. C. J.---This judgment will govern I.T.R. No.39/86, I.T.R. No.40/80, I.T.R. No.41/86, I.T.R. No.42/86 and I.T.R. tro.43/86. In all these applications filed under section 136(2) of the Income Tax Ordinance, 1979, the applicant is the Commissioner of Income-Tax, Central Zone `A', Karachi. In I.T.R. No.39/86 the respondent/assessee is Nadeem Zafar, in I.T.R. No.40/86 respondent is Mst. Naseema Mazhar, in I.T.R. No.41 /8f> respondent is Sohail Mazhar, in I.T.R. No.42/86 the assessee is Nusrat Jawed and in I.T.R. No.43/86 respondent is Mst. Sakina Begum. In all these cases the assessment year is 1971-72.

2. In all these cases the respondents have claimed exemption on dividend received from the Tax Holiday Company which was not allowed by the Income-Tax Officer but, on appeal, the Income-Tax Appellate Tribunal allowed the exemption. By Finance Ordinance XX of 1972. section 4-AA was added whereupon the Income-Tax Officer served notices under section 34 and also a notice under section 28 of the Repealed Income-Tax Act 1922 to submit returns but the assessees did not file the returns and in the circumstances the Income-Tax Officer imposed penalty at 2-1/2% of the amount of tax. The assessees preferred appeals before the Appellate Commissioner who reduced the penalty to 1-1/2% of the amount of the tax.

The assessees submitted further appeals before the Income Tax Appellate Tribunal and the Tribunal held that in the relevant year i.e. assessment year 1971-72, dividend income was not liable to lax and as such the assessees were not required to submit returns and the total amounts penalties were deleted. The Department made reference under section 136(1) to the Tribunal which were dismissed by the Tribunal. In the circumstances, these applications have been filed under section 136(2) for opinion of this Court on the following question:--

"Whether the Tribunal was justified in deleting the penalties imposed on non-riling of return of income under section 34 of the Repealed Act on the inclusion of income from dividend received from the company enjoying tax holiday under section 15-BB?"

3. We have heard Mr. Shaikh Haider, learned counsel for the Department and Mr. Iqbal Naeem Pasha, learned counsel for the respondents in these cases. Mr. Iqbal Naeem Pasha has pointed out that in the case of Commissioner of Income-Tax v. Ebrahim D. Ahmed 1982 PTD 130, similar question had come up for consideration before this Court and it was held that operation of subsection (4-AA) of section 15-BB of the Repealed Income-Tax Act could not go beyond 20th December, 1971. The said judgment was followed in another case being Commissioner of Income-tax v. S.M. Idris Allahwalla 1989 PTD 1245, Mr. Shaikh Haider, learned counsel for the Department concedes to the above position but submits that the matter has been taken by the Department to the Supreme Court where appeals riled by the Department are pending.

4. Following our earlier decisions referred to above, we acre of the view [hat the Tribunal decided the question correctly. The applications in the 5 cases under section 136(2) of the Income-tax Ordinance are dismissed but with no order as to costs.

M.B.A./C-250/KOrder accordingly,