Penalty u/s 270A - Non Reporting of Business Income

Applicability of Section 270A: Under-reporting vs Misreporting

• Section 270A(1): Provides for penalty if a person has under-reported income.

• Section 270A(8): Provides that under-reporting will be treated as misreporting in certain circumstances (e.g. misrepresentation, suppression of facts, failure to report income, etc.).

 In your case:

• The assessee filed ITR-1, which does not permit reporting of business income.

• However, business income was discovered during survey.

• This constitutes a failure to report income that was clearly known to the assessee.

Therefore, this falls under “Misreporting of Income” under Section 270A(9)(a): “misrepresentation or suppression of facts”.

Penalty Rate: 50% or 200%? Can AO impose in between (e.g., 75%, 100%)?

• For under-reporting (not misreporting): Penalty is 50% of tax on under-reported income.

• For misreporting (like in your case): Penalty is 200% of tax on under-reported income.

There is no discretion given to the AO to choose any rate between 50% and 200%. It is either:

• 50% – for under-reporting, or

• 200% – for misreporting.

So, penalty will be fixed at 200% of the tax on business income (i.e., the under-reported portion).

Thank you for the reply. Now I am little bit not clear as whether this will not constituted as "Misreporting".