Section 271 (1) (c) of the Income Tax Act was known as penalty for concealment. But from assessment year 2017-18 this section was deleted and new Section 270A was introduced. As per section 271(1)(c), concealment of income and filing of inaccurate particulars of income penalty was levied. This article explores the nuances of Section 270A, its calculation methods for under-reported income, exceptions, and implications.
Section 270A is as under:
Penalty for under-reporting and misreporting of income:
(1) The assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or The Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay penalty in addition to tax, if any, on the under-reported income.
(2) A person shall be considered to have under-reported his income, if,
(a) the income assessed is greater than the income determined in the return processed under Section 143(1)(a);
(b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished;
(c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment;
(d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section115JC, as the case may be, is greater than the deemed total income determined in the return processed under section 143(1)(a);
(e) the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC, is greater that the maximum amount not chargeable to tax;
(f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment;
(g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income.
How to calculate Under Reported Income?
As per subsection 3, of Section 270A, the amount of under reported income shall be,-
(i) in the case where income has been assessed for the first time,
(a) if return has been furnished, the difference between the amount of income assessed and the amount of income determined under section 143(1)(a);
(b) in case where, no return of income has been furnished or where return has been furnished for the first time under section 148,
(A) the amount of income assessed, in the case of company, firm or local authority; and
(B) the difference between the amount of income assessed and the maximum amount not chargeable to tax, in the case not covered in item (A);
(ii) in any other case, the difference between the amount of income reassessed or recomputed and the amount of income assessed, reassessed or recomputed in any preceding order.
As per proviso, where under reported income arises out of determination of deemed total income in accordance with the provisions of section 115JB or section 115JC, the amount of total under reported income shall be determined in accordance with the following formula-
(A-B) + (C-D) WHERE,
A= the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC;
B= the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under reported income;
C= the total income assessed as per the provisions contained in section115JB or section 115JC;
D= the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been reduced by the amount of under reported income.
As per section 270 A (6), following income shall not be include, as under reported income.
(a) the amount of income in respect of which the assesse offers an explanation and the A.O. or JCIT (Apples) or the CIT (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assesse has disclosed all the material facts to substantiate the explanation offered;
(b) the amount of under reported in come determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of A.O. or JCIT(appeals), or the CIT(appeals) or the commissioner or Principal Commissioner as the case may be, but the method employed is such that the income cannot properly be deducted therefrom;
(c) the amount of under reported income determined on the basis of an estimate, if the assesse has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance;
(d) As per section 92 D, assesse has maintain all the required documents and maintain details and declared all the international transections under chapter X, and disclosed all the material facts relating to the transections;
(e) the amount of undisclosed income referred to in section 271AAB./
Sub section 7 speaks about the amount of penalty, referred to in subsection (1), shall be a sum equal to 50 % of the amount of tax payable on under reported income.
Sub-section 8 speaks about under reported income is in consequence of any misreporting thereof by any person, the penalty referred to in sub section (1) shall be equal to 200% of the amount of tax payable on under reported income.
Section 270A of the Income Tax Act introduces a structured penalty framework for under-reporting and misreporting income. It aims to ensure tax transparency and compliance, emphasizing accurate income disclosure. Understanding these provisions is crucial for taxpayers to avoid penalties and maintain tax compliance integrity.
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