Section 270A penalty requires clear identification of underreporting or misreporting; estimated addition alone was insufficient.

Penalty under section 270A was held unsustainable where the addition rested on estimated short turnover and the penalty order failed to specify whether the default was underreporting or misreporting of income. Section 270A creates distinct consequences for underreporting and misreporting, so the authority had to identify the exact limb invoked. As the estimate was made without rejection of books of account and the order did not place the case within any misreporting category under section 270A(9), the penalty could not be sustained and was directed to be deleted.

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Issues: Whether penalty under section 270A of the Income-tax Act, 1961 could be sustained where the addition was made on estimated basis and the penalty order did not specify whether the case was one of underreporting or misreporting of income.

Analysis: Section 270A contemplates two distinct defaults, namely underreporting of income and underreporting as a consequence of misreporting, attracting different consequences. In penalty proceedings, it was incumbent on the authority to identify the specific default. The addition in the present case was made on estimation of short turnover without rejection of books of account, which could not form a foundation for penalty for underreporting. The penalty order also did not bring the case within any specified category of misreporting under section 270A(9).

Conclusion: The penalty was not legally sustainable and was directed to be deleted.

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