Law:

Section:

Section 217, read with section 139, of the Income-tax Act, 1961 - Advance tax - Interest payable by assessee when no estimate made - Assessment years 1964-65 to 1967-68 - Assessee undisputedly had failed to file return within time and also failed to pay advance tax - Commissioner arrived at settlement with assessee regarding assessment of income and levy of penalty - ITO in terms of settlement assessed assessee and, in notice of demand, added interest payable by assessee both under section 139 and under section 217 - Whether non-mention of question of interest in settlement could not be construed as agreeing not to raise demand of interest - Held, yes - Whether since claim of interest was in terms of statute and no dispute had been raised that there was infraction otherwise, settlement could not stand as bar to claim of interest - Held, yes FACTS The assessee made a disclosure of his income under section 271(4A) before the Commissioner. Thereafter, the assessee filed returns under section 139(4). The Commissioner arrived at a settlement with the assessee. The main terms of said settlement were that a sum as reduced by opening capital, would be spread over equally in four assessment years and in view of the disclosure made by the assessee penalty would be levied under section 271(1)(c) at 20 per cent, of the tax assessed in each year. The ITO in terms of what was settled assessed the assessee for the years in question and in the notice of demand added interest payable by the assessee both under section 139 and under section 217. The assessee appealed against the demand particularly in the matter of addition of interest. The appeals were, however, dismissed by the AAC on the basis that it was the outcome of the settlement. On revision application under section 264, the Commissioner held that the settlement did not deal with the assessee's liability for interest payable under section 139 and 217. In view of the fact that a part of the demand had already been paid by the assessee, he directed the ITO to recomputed interest under section 217 by giving credits to the payment made under section 140A or taxes paid thereafter before the completion of regular assessment.…

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