Section 270A has been inserted by the Finance Act, 2016 w.e.f. AY 2017-18 introducing a new concept of levying penalty under the Income Tax Act.
Following is a summarization of section 270A of the Income Tax Act, 1961
There are 2 legs of this section.
- Penalty on under reporting of income
- Penalty on misreporting of income
What is Under Reporting of Income?
A person shall be considered to have under reported his income if
|In Case Return is Filed||In case Return is not filed|
|The assessed income u/s 143(1) is more than the returned income||The assessed income is more than the maximum amount not chargeable to tax|
|The deemed total income u/s 115JB or 115JC assessed u/s 143(1) is more than the returned income||The deemed total income u/s 115JB or 115JC assessed is more than maximum amount not chargeable to tax|
|If the reassessed deemed total income u/s 115JB or 115JC is more than the preceding assessed income|
|The assessed loss is less than the returned loss|
Exceptions of Under Reporting of Income
In following cases, the income will not be considered as under reported if
|Assessee offers an explanation and the income tax authority is satisfied with that and all the facts have been discloses|
|Such under reported income is determined on the basis of an estimate.|
|Assessee on his own estimated a lower amount of addition or disallowance on issue and has included such amount in the computation of income|
|Assessee has maintained all the documents, information and records specified in section 92D|
|Where the undisclosed income is on account of a search operation and penalty is leviable u/s 271AAB|
What is Quantum of Penalty on under reporting of income?
- In case of under reporting of income, penalty is payable @ 50% of tax payable on under reported income.
What is Misreporting of Income?
The following cases will be considered as misreporting of income.
|· Misrepresentation or suppression of facts|
|· Failure to record investments in books of accounts.|
|· Claim of expenditure not substantiated by evidence|
|· Recording of any false entry in the books of accounts|
|· Failure to record any receipt in the books of accounts having an impact on the income|
|· Failure to report any international transaction or any specified domestic transaction|
What is Quantum of Penalty on misreporting of income?
- In case of misreporting reporting of income, penalty is payable @ 200% of tax payable on misreported income.
What is the remedy available to assessee?
Section 270AA provides the provisions relating immunity from levy of penalty u/s 270A (underreporting or misreporting of income) on following conditions.
- Assessee to make an application to AO for grant of immunity from penalty u/s 270A.
- This benefit is only available if assessee pays tax and interest payable as per order of assessment within the period specified in such notice of demand.
- Assessee does not prefer an appeal against said order.
- Such application is made within 1 month from the end of the month in which the order of assessment is received.
Course of action of Assessing Officer after receipt of application u/s 270AA
- The assessing officer, on fulfillment of above conditions and after the expiry of period of filing appeal, shall grant immunity from penalty / prosecution.
- Assessing officer is required to pass the order in writing of such acceptance or rejection.
- Rejection order cannot be passed before providing the opportunity of being heard.
- No appeal u/s 246A or revision u/s 264 is admissible against the order in case the immunity is granted.
CA Amit Mundhra
The author is a Fellow Member of Institute of Chartered Accountants of India. He can be reached at email@example.com. Mobile : 9 8 2 9 0 1 0 1 7 2