Answer

1. F

   Facts

   Under-reporting means the assessed income is higher than what you returned, and the penalty is 50% of the tax on the difference. Misreporting covers specific acts such as misrepresenting or suppressing facts, not recording investments, false entries or unrecorded receipts, and attracts 200%.

2. P

   Provisions and law

   • Sec 270A (now Sec 439)Penalty of 50% of tax on under-reported income, or 200% where under-reporting is due to misreporting
   • Sec 274 (now Sec 471)No penalty without giving the person a reasonable opportunity of being heard
3. A

   Analysis

   The label matters a lot. A disallowance of ₹2,00,000 of business expenses on a view of law is normally under-reporting, if at all. Claiming a deduction with fabricated rent receipts or not recording a cash sale is misreporting. If the notice says misreporting, check that the order shows one of the listed acts; if it does not, argue it is at most under-reporting. Courts have also criticised notices that do not say which limb applies.

4. C

   Conclusion

   1. 1Find the limb charged in the notice and in the assessment order
   2. 2Match the facts to the listed misreporting acts
   3. 3If none apply, argue the case is under-reporting at most
   4. 4Raise any vagueness in the notice in your reply

General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.