Section 270A of the Income Tax Act was introduced to curb tax evasion and bring discipline among taxpayers.
It replaces the old penalty provision under Section 271(1)(c) from AY 2017-18 onwards.

Earlier, penalties were based on subjective judgments by officers. Now, under Section 270A, penalties are:

• Clearly defined
• Based on actual figures
• Two categories:
  ✅Under-reporting of income (Mistake or careless)
  ❌Misreporting of income (Intentional or fraudulent)

Applicability of Section 270A

This section applies to:

• All persons (Individual, HUF, Company, etc.)
• In relation to any income under the Income-tax Act
• Assessment/Reassessment/Best judgment orders where:
  • Income is under-reported or
  • There is misreporting of facts

Types of Defaults Covered

Section 270A penalizes:

1. Under-reporting of income – Penalty is 50% of tax on under-reported income.
2. Misreporting of income – Penalty is 200% of tax on under-reported income.

What is Under-Reporting of Income?

Under-reporting occurs when:

✅ In case of return filed:

• Assessed income > Income determined in return processed u/s 143(1)(a)

✅ In case of no return filed:

• Assessed income > Basic exemption limit

✅ In case of reassessment:

• Reassessed income > Previously assessed income

✅ In case of MAT/AMT (Sections 115JB or 115JC):

• Deemed total income assessed > Deemed total income as per return

✅ In case of reduction of loss:

• Loss determined during assessment < Loss claimed in return

Penalty for Under-Reported Income

📌Penalty = 50% of tax payable on under-reported income

Example:

• Income as per 143(1): ₹10,00,000
• Assessed Income u/s 143(3): ₹15,00,000
• Under-reported Income: ₹5,00,000
• Tax on ₹5,00,000 = say ₹1,00,000
• Penalty = 50% of ₹1,00,000 = ₹50,000

What is Misreporting of Income?

Misreporting is a serious and deliberate offense. It includes:

1. Misrepresentation or suppression of facts
2. Failure to record investments in books of account
3. Claim of expenditure not substantiated by evidence
4. Recording false entry in books
5. Failure to record receipts affecting total income
6. Failure to report international transactions or specified domestic transactions

 Penalty for Misreporting of Income

📌Penalty = 200% of tax payable on under-reported income

Example:

• Under-reported Income due to false entries: ₹5,00,000
• Tax on ₹5,00,000 = ₹1,00,000
• Penalty = 200% of ₹1,00,000 = ₹2,00,000

🛑 Exceptions – When Penalty Not Levied

Penalty shall not be levied if the assessee proves:

• He had declared the income correctly, and
• There was no intention to under-report or misreport, and
• He has maintained proper documentation

Also, bonafide errors or technical interpretations without malafide intention may escape penalty.

Comparison – Under-reporting vs Misreporting