Penalty for Under-reporting or Misreporting of Income u/s 270A


(Last Updated On: May 12, 2018)

 

Recently, Income Tax Department has issued a advisory for the salaried taxpayers to report correct income while filing the returns . Due to this cautionary, penalty for under reporting or misreporting of income u/s 270A came into light. Further, department has also made major changes in the ITR Form 1 (Sahaj) for F.Y 17-18 in regard to the income details. Now, complete breakup of your salary and house property income would be mentioned in the ITR instead of the total figure. Both these move clearly reflects the intention of  department to end the malpractices performed by the taxpayers in order to evade tax.

Therefore, it has become very important for you to know about penalty u/s 270A of the Act. If a person under-reports his income or inflate his deduction while filing the ITR then penalty shall be attracted on such person u/s 270A of the Act.

Let’s understand that what exactly does Sec 270A states. What are the meaning of terms used in this section and how much amount to be paid as penalty…


What is section 270A ?

Section 270A of Income Tax Act states that an assessing officer (AO), a commissioner (appeals), a principal commissioner or a commissioner may direct a person to pay penalty if he under-reports or misreports his income. The penalty may range from 50% to 200%. This section was introduced in Budget 2016 and became effective from F.Y 16-17.


What does the term “Under reporting of income” means?

Under reporting of income will depend on the facts of each case.Therefore, there can be various circumstances on which under reporting can occur and we have enumerated some of them as below :

Example 1 – If a person does not file the return but his income exceeds the basic exemption limit then it will be considered as a case of under-reporting.
Example 2 – If a person has filed the return but failed to consider his income from the all the sources like FD interest etc.


What does the term “Misreporting of income” means ?

As per the Income Tax Act, the term misreporting of income would include the circumstances as under –

a) Misrepresentation or suppression of information

b) Failure to record investments in the books

c) Claim of expenditure without any evidence

d) Recording of false entry in the books

e) Failure to record receipt in books which is having effect on total income 

f) Failure to report any international transaction or deemed to be an international transaction.


What is the amount of penalty that can be levied u/s 270A?

If income is under-reported due to misreporting of income, then penalty shall be levied at 200% of tax payable on such under-reported income.However, if income is under-reported due to any other circumstances, then penalty shall be 50% of tax payable on under-reported income.

Example – If your income is say Rs. 20,00,000 and you have not reported an income of Rs 4,00,000 while filing your ITR. Then AO can impose a penalty u/s 270A of about Rs 60,000 (50% of the tax on under-reported income, i.e., Rs 1,20,000 (400000*30%)). However, If the under reporting is due to misreporting of income then penalty can be up to 200% of the tax on unreported income. That means  200% of Rs. 1,20,000 (400000*30%) amounting to Rs. 2,40,000.


Conclusion :

While filing your returns, you must disclose all your incomes under the respective heads in order to avoid penalty u/s 270A. This penalty is levied upon you for under reporting or misreporting of your income. Remember, penalty is to be paid over and above the taxes. Therefore, file an accurate and well timed return and become a tax compliant citizen.

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