ITR
Penalty proceedings started with the scrutiny order
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Facts
Along with additions, the officer can start penalty proceedings for under-reporting or misreporting. Under-reporting attracts 50% of the tax on that income, and misreporting 200%.
Provisions and law
- Sec 270A, Income-tax Act 1961 (now Sec 439, Income-tax Act 2025)Penalty for under-reporting and misreporting of income.
- Sec 270AA, Income-tax Act 1961 (now Sec 440, Income-tax Act 2025)Immunity from penalty if tax is paid and no appeal is filed, subject to conditions.
- Sec 274, Income-tax Act 1961 (now Sec 471, Income-tax Act 2025)Penalty can be levied only after giving a hearing.
Analysis
You can either contest the penalty or seek immunity. Immunity needs you to pay the tax and interest within the demand period, not file an appeal, and apply in Form 68 (now Form 161) in time. Immunity is not available for misreporting. Compare the tax at stake with the chance of winning an appeal before choosing.
Conclusion
- Check whether the order says under-reporting or misreporting.
- Decide between appeal and immunity.
- For immunity, pay the demand and apply in time.
- For contest, reply to the penalty notice with reasons.
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Scrutiny assessment, Sec 143(2) (now 270(8))
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