Section 270A contains provisions relating to penalty for under-reporting and misreporting of income. The existing provisions provide for various situations for the purposes of levy of penalty under this section. However, these provisions do not contain the mechanism for determining under-reporting of income and quantum of penalty to be levied in the case where the person has under-reported income and furnished the return of income for the first time under section 148 of the Act.

In order to provide for manner of computing the quantum of penalty in a case where the person has under-reported income and furnished his return for the first time under section 148, it is proposed to suitably amend the provisions of section 270A.

These amendments will take effect retrospectively from 1st April, 2017 and will, accordingly, apply in relation to assessment year 2017-2018 and subsequent assessment years.

[Clause 61]

Extract of Clause 61 of Finance Bill 2019

61. Amendment of section 270A.

In Section 270A of the Income-tax Act,––

(A) for the words “no return of income has been furnished” at both the places where they occur, the words and figures “no return of income has been furnished or where return has been furnished 40 for the first time under section 148” shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2017;

(B) in sub-section (2), in clause (e), for the words “no return of income has been filed”, the words and figures “no return of income has been furnished or where return has been furnished for the first time under section 148” shall be substituted and shall be deemed to have been substituted with 45 effect from the 1st day of April, 2017;

(C) in sub-section (3), in clause (i), in sub-clause (b), for the words “no return has been furnished”, the words and figures “no return of income has been furnished or where return has been furnished for the first time under section 148” shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2017.

Note on Clause 61 of Finance Bill 2019

Clause 61 of the Bill seeks to amend section 270A of the Income-tax Act relating to penalty for under-reporting and misreporting of income.

Sub-section (2) of the said section specifies the condition under which a person shall be considered to have under-reported his income.

Sub-section (3) of the said section provides for the manner in which under-reported income shall be determined.

It is proposed to amend clause (b) and clause (e) of the said sub-section (2) so as to provide that where return is furnished for the first time under section 148, a person shall be considered to have under-reported his income, if the income or deemed income assessed is greater than the maximum amount not chargeable to tax .

It is further proposed to amend sub-clause (b) of clause (i) of the said sub-section (3) so as to provide that where return is furnished for the first time under section 148 in the case of a company, firm or local authority, the amount of income assessed, and in any other case, the difference between the amount of income assessed and the maximum amount not chargeable to tax shall be the under-reported income.

It is also proposed to amend clause (a) of sub-section (10) of section 270A so as to provide that in a case where return is furnished for the first time under section 148, the tax payable in respect of under-reported income shall be the amount of tax calculated on the under-reported income as increased by the maximum amount not chargeable to tax as if it were the total income.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent assessment years.

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