Tax notices + litigation · Penalty
Sec 270A (now 439) penalty: how to contest under-reporting vs misreporting
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Facts
Sec 270A (now Sec 439, Income-tax Act 2025) replaced 271(1)(c) from AY 2017-18 onwards. Two levels:
Provisions and law
- IT Act 1961, Sec 270A, 270AA (now 439, 440) | Finance Act 2016
Analysis
Under-reporting (50% penalty): Income assessed > income returned. Penalty = 50% of tax on the difference. This applies even if the addition was genuine, a ₹5L omission causes ₹7,500+ penalty at 30% slab × 50%. Misreporting (200% penalty): Specific categories, false claim, suppression of evidence, entry in books without corresponding income. Much harder for AO to prove. Most AOs try to frame under-reporting as misreporting, contest this vigorously. Sec 270AA (now Sec 440) immunity: If you pay the assessed tax and interest within 30 days of assessment order, you can apply for immunity from penalty under Sec 270A (now Sec 439). Immunity is granted if: no appeal is pending, you've paid in full, and the addition was not based on misreporting.
Conclusion
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