Section 273A relief turns on arrangements for interest payment, not prior payment alone.

Under section 273A of the Income-tax Act, an application for waiver or reduction of penalty is not to be rejected merely because interest has not already been paid; the relevant question is whether arrangements for payment have been made. If that condition is met, the request should be examined on merits rather than at the threshold. Where the application does not show such arrangements, deposit of the interest amount may be directed so the statutory requirement is satisfied. The Commissioner was therefore not justified in refusing consideration solely for non-payment of interest.

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Issues: Whether an application under section 273A of the Income-tax Act, 1961 could be rejected as incompetent merely because the assessee had not paid interest, and whether the application was entitled to be considered on merits if interest was arranged or directed to be deposited.

Analysis: The statutory requirement under section 273A was not that interest must already have been paid before the Commissioner could examine the request for waiver or reduction of penalty. The relevant consideration was whether the assessee had made arrangements for payment of interest, in which event the application could not be thrown out at the threshold and had to be considered on merits. Since the application did not state that such arrangements had been made, the Court directed the assessee to deposit the entire amount of interest in cash within one month so that the statutory requirement would stand satisfied.

Conclusion: The Commissioner was not justified in rejecting the application solely on the ground of non-payment of interest, and the assessee was entitled to reconsideration after deposit of the interest amount.

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