Divan, C.J.
1. The petitioner herein challenges the order, Ex. 'L', to the petition passed by the by the respondent, Commissioner of I.T. under s. 273A of the I.T. Act, 1961. The order was passed on March 27, 1979. The facts leading to this litigation are as follows: The petitioner before us is the karta of a HUF and the assessee in the income-tax proceedings is that HUF. The HUF is known as Navnitlal K. Zaveri and the Karta of the HUF as Dwarkadas N. Zaveri. The HUF submitted return of income for the assessment year 1972-73 for the according 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 Rs. 5,42,975 was deducted by the ITO. The petitioner were in appeal to the AAC and before the AAC the estimate of the cost of construction was reduced from Rs. 14,25,000 to Rs. 9,68,100. Thus, the deemed income on the ground of unexplained investment was reduced to Rs. 4,50,125 from the figure of Rs. 8,82,925, which was the figure reached by the ITO. Against the decision of the AAC the matter was carried in further appeal to the Tribunal by the assessee and the Tribunal reduced the estimated cost to Rs. 7,07,000 and the figure of cost was spread over a number of years. Thereafter, the petitioner filed a miscellaneous civil application before the Tribunal and by its order dated March 21, 1977, the Tribunal reduced the cost of the construction to Rs. 6,54,669. Yet another application was filed by the assessee before the Tribunal for rectification and the Tribunal passed a clarificatory order on August 12, 1977. By virtue of this clarificatory order the deemed income by virtue of unexplained investment was fixed at Rs. 96,200 for the assessment year 1972-73. In the order which was passed in consequence of the tribunal's order August 12, 1977, the ITO mentioned about interest under s. 139(8) and s. 217 of the I.T. Act. Thereafter, the petitioner applied under s. 273A to the respondent praying for waiver of interest chargeable under s. 139(8)(a) and s. 217 and his contention in the application was that the difference in the income returned and the income assessed arose only 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 condition that the assessee should have furnished full and true particulars of income is not satisfied in the assessee's case. In the circumstances, the assessee's petition cannot be entertained and it is accordingly rejected."
2. The order Ex. 'L' to the petition on the face of it shows non-application of mind on the part of the respondent. Though the application was for waiver of interest both under s. 139 and under s. 217 of the I.T. Act, yet the respondent seems to have treated the application only for waiver of interest charged under s. 139(8) for the assessment year 1972-73. Hence, on the face of it, the order discloses non-application of mind.
3. Section 273A provides :
"Notwithstanding anything contained in this Act, the Commissioner may, in his discretion, whether on his own motion or otherwise, - ...
(iii) reduce or waive the amount of interest paid or payable under sub-section (8) of section 139 or section 215 or section 217 or the penalty imposed or impossible under section 273, if he is satisfied that such person - ...
(c)... has, prior to the issue of a notice to him under sub-section (2) of section 139, or where no such notice has been issued and the period for the issue of such notice has expired, prior to the issue of notice to him under section 148, voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosed, and also has,...... co-operate in any enquiry relating to the assessment of his income and 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."
4. 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."
5. 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 eightly per cent. of the total income...... as assessed under
section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section."
6. We are concerned with the assessment year 1972-73. It is true that in view of the Explanation to s. 273A, sub-s. (1), if the provisions of s. 271(1)(c) are not attracted, the assessee shall be deemed to have made full and true disclosure of his income or of the particulars of his income, but the converse is not true and there is no deeming provision for the converse position. In the instant case, as has been pointed out in the petition, in the present proceedings, the Tribunal has in penalty proceedings decided in favour of the petitioner and held that penalty is not leviable. As regards the provisions of s. 273A it, must be borne in mind that though the concept of penal interest, payable under s. 139(8) or s. 217 is different from the concept of penalty under s. 271, yet the Legislature has given indication that for the purposes of considering whether there is full true disclosure of the income by the assessee, what 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), clause (iii).
7. 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 reduced, otherwise because of the variations arising at the instance of some estimates made by the ITO or I.T. authorities interest under s. 139(8) or s. 217 will not be reduced. As to the correct position under s. 273A, a Division Bench of this High Court has in Smt Kherunissa Allibhai v. CIT [1978] 113 ITR 443 mentioned that the whole concept of s. 273A is that the assessee concerned admits his liability to penalty but relies upon certain mitigating circumstances or certain circumstances specified in the section for the purpose of getting the penalty or penal interest waived or reduced. It is in the context of mitigating circumstances that the Commissioner has to consider the case under s. 273A and has to apply his mind, first, whether the conditions of 273A(1), clause (c), are satisfied or not, and secondly, if they are satisfied whether he would waived the interest or whether he would reduced the amount of interest under s. 139(8) and/or s. 217. One of the conditions is that the assessee should have made in good faith full and true disclosure of his income. Because of the wide variation between the income disclosed and the income ultimately determined, it cannot be said that, on the facts and circumstances of this case, there was no full and true disclosure of the income by the assessee. The wide variation has arisen because of the estimate made by the I.T. authorities and not because of any failure on the part of the assessee to make full and true disclosure of his income and it is possible that on the materials available on the record of the case the respondent may otherwise come to the conclusion on the facts and circumstances of the case that there was no full and true disclosure of his income. However, we express no opinion about it but just because of the variation between the income returned and the income determined which is mentioned in the order, Ex. "L", it cannot be said that there was no disclosure of full and true particulars of income by the assessee. The order, Ex. "L", therefore, was passed on considerations which were not germane to the factors which were required to be considered by the respondent while passing the order under s. 273A. We, therefore, quash and set aside the order, Ex. "L", and direct that no action should be taken in pursuance of that order. The matter will now go back to the respondent for disposing of the application under s. 273A for waiver of interest under s. 139(8) and s. 217 in accordance with law and in accordance with what has been stated in the course of this judgment. There will be no order as to costs of this special civil application. Rule made absolute accordingly.