1980 (2) TMI 48

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....ri. The HUF submitted return of income for the assessment year 1972-73 for the accounting year ending on March 31, 1972, showing Rs. 12,160 as income from immovable property. It appears that a new building was constructed and part of the cost of construction was incurred in the year under consideration, namely, the year ending on March 31, 1972. The cost of construction was estimated by the ITO and from the estimated cost the ITO deducted an amount which was shown to have been actually spent by the petitioner for the construction of the building and the difference was treated by the ITO as unexplained investment and was treated as income of the petitioner. The cost of construction was estimated at Rs. 14,25,000 and the actual expenditure of....

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.... on account of the estimate of cost made by the ITO. The assessee pointed out in the application that the petitioner had applied for extension of time for filing the return and no reply was received from the ITO. It was also pointed out that the return was filed, on November 29, 1972, and yet the assessment was completed on March 20, 1975, but the delay was not attributable to the petitioner. In those proceedings under s. 273A finally the order was passed on March 27, 1979 ; in that order the respondent stated as follows: " I find that there is a wide variation between the income returned and the income finally determined after considering the effect of the order of the, I.T. Appellate Tribunal. In this view of the matter, the relevant con....

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.... has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year." The Explanation to s. 273A, sub-s. (1), states: " For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of clause (c) of sub-section (1) of section 271. " From April 1, 1964, to April 1, 1976, the Explanation to section 271(1) provided: " Where the total income returned by any person is less than eighty per cent. of the total ....

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....t weighs with the authorities in the context of penalty proceedings should also be borne in mind by them when considering waiver or reduction of interest under s. 273A(1), cl. (iii). It must be pointed out that time and again the Supreme Court and the High Courts have pointed out that if the variation between the returned income and the assessed income arises by virtue of additions to the income made either because of disallowance or because of the deemed income added or because of the estimate of the income made by the ITO, then penalty is not leviable. The same concept must be held to be underlying the concept of penal interest when the Commissioner sits down to consider whether interest under s. 217 or s. 139(8) is to be waived or reduc....