Summary: Section 270A of the Income Tax Act, introduced by the Finance Act, 2016 effective from Assessment Year 2017–18, deals with penalties for under-reporting and misreporting of income. This section replaced the earlier provision under Section 271(1)(c). Under this law, if an assessee fails to declare accurate income—either intentionally or due to oversight—they may face a penalty in addition to the tax due. The power to impose such penalties lies with the Assessing Officer, Joint Commissioner (Appeals), Commissioner (Appeals), Principal Commissioner, or Commissioner during any tax proceedings. Under-reporting is identified in scenarios such as: assessed income under Section 143(1)(a) being higher than what was declared, failure to file returns when income exceeds exemption limits, reassessed income exceeding prior assessments, and discrepancies in deemed total income under Minimum Alternate Tax (MAT) or Alternate Minimum Tax (AMT) provisions. However, such discrepancies are not penalized if the taxpayer provides full disclosures, maintains proper records, or if the differences arise from accepted estimates or accounting methods. The penalty for under-reporting is set at 50% of the tax payable on the under-reported income. Misreporting, however, carries a higher penalty of 200%. Misreporting includes suppression of facts, false entries in books, unreported receipts or investments, and failure to disclose international or specified domestic transactions. These severe penalties aim to curb tax evasion while allowing room for genuine errors or reasonable clarifications to be considered.
Introduction:
Every year, assesse submit his return of income, where in shows the income earned during the year and accordingly pay the tax on that income. If assesse forget or intensely not shown the correct income earned during the year, is liable to pay tax as well as heavy penalty also.
Since financial year 2016-17, that is by Finance Act, 2016 from assessment year 2017-18 a new Section 270A of the Income Tax Act added. Before that penalty was livable under section 271(1)(c) of the Act. As per Section 270A of the Act penalty for under-reporting and misreporting of income is prescribe.
The authority of imposing penalty has been given to, The Assessing Officer or the joint commissioner (appeals) or the Commissioner (appeals) or the Principal Commissioner or the 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 a penalty in addition to tax, if any, on the under reported income.
A person shall be considered to have under-reported his income, if-
- Assessed income u/s 143(1)(a) of the Act, is more than return of income;
- If the return of income is not submitted, but the assessed income is more than, exempted income;
- If the income reassessed, is greater that the income assessed or reassessed immediately before such reassessment;
- When the amount of deemed total income assessed or reassessed as per provisions of section 115JB or section 115JC, as the case may be is greater than the deemed total income determined in the return processed u/s 143(1)(a) of the Act.
- Where return of income has not filed or furnished for the first time under section 148 the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax;
- The amount of deemed total income reassessed as per the provisions or section 115JB, or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such assessment;
- Due to the income assessed or reassessed has the effect of reducing the loss or converting such loss in to income.
Under the following circumstances Under Reporting of Income is not considered.
- When an assesse has given full clarification and is acceptable and satisfied to the income tax authority.
- Where an assesse has disclose all the facts about showing less income or claiming wrong expenditures are satisfied by the tax authority.
- Accounting method is not clear that whether cash or mercantile, income is not decided and shown on estimate, but if assesse shows his account correct and prove it.
- If the concealed income is of any search and penalty u/s 271AAB is impossible.
- If an assesse has maintain and produced documents and details as per section 92D, so far as related to international transactions.
Penalty on Under Reporting Income is 50%.
Under the following circumstances Miss Reporting of Income is not considered:
- The facts are suppression or misrepresented;
- No proof for expenditure are provided;
- Details of investment are not shown in books of account;
- Receipt not shown in the books of account, which directly affected to the calculation of income;
- Wrong entries are passed in the books of account;
- In the case of transfer pricing, any international transactions or local transactions are not reported.
Penalty for Miss reporting of income is 200%
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