Penalty under Section 271A requires established under-reporting or related misreporting; absent foundational conditions, the levy lacks legal support.

Penalty under Section 271A of the Income-tax Act, 1961 is presented as contingent on established under-reporting of income or misreporting resulting from such under-reporting. The material discussed indicates that, without a finding or evidentiary basis establishing either foundational condition, the provision cannot properly support a penalty. Accordingly, the penalty is described as legally unsustainable and liable to be deleted, with the issue treated as favouring the assessee. The notes focus on the requirement that the statutory preconditions for penalty must be demonstrated before the levy can be sustained.

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Issues: Whether penalty under Section 271A of the Income-tax Act, 1961 could be sustained where the Revenue had not made out any case of under-reporting of income or misreporting resulting from under-reporting.

Analysis: Penalty under Section 271A of the Income-tax Act, 1961 is attracted only in cases of established under-reporting of income or misreporting consequent to such under-reporting. The record did not show any finding or basis establishing either under-reporting of income or misreporting for the purpose of invoking that provision. In the absence of the foundational conditions required for levy of penalty, the impugned penalty lacked legal support.

Conclusion: The penalty under Section 271A of the Income-tax Act, 1961 was unsustainable and was directed to be deleted; the issue was decided in favour of the assessee.

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