Section 270A penalty upheld for non-disclosure of mutual fund capital gains leading to underreporting and misreporting.

Section 270A penalty was sustained for underreporting of income in consequence of misreporting where the assessee failed to disclose capital gains from redemption of mutual funds in the return. The Tribunal treated underreporting as the difference between returned income and assessed income, and held that non-recording of the redemption receipts fell within misreporting under section 270A(9)(e). The plea of inadvertent omission and reliance on the cited Supreme Court decision was rejected because the facts involved non-disclosure of taxable income, not a mere error in making a claim. The penalty was upheld and no relief was granted.

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Issues: Whether penalty under section 270A of the Income-tax Act, 1961 was leviable for underreporting of income in consequence of misreporting of income arising from non-disclosure of capital gains on redemption of mutual funds.

Analysis: The additions made in assessment towards short-term capital gains and long-term capital gains from redemption of mutual funds were accepted by the assessee. The Tribunal held that section 270A contemplates underreporting as the difference between returned income and assessed income, and that the failure to record the receipts from redemption of mutual funds in the return constituted misreporting within section 270A(9)(e). The explanation of inadvertent omission and reliance on the cited Supreme Court decision was found inapplicable on the facts, as the case involved non-disclosure of income rather than a mere human error in making a claim.

Conclusion: The penalty under section 270A was rightly levied and sustained; the appeal was liable to be dismissed.

Final Conclusion: The penalty order was upheld in full and the assessee obtained no relief.

Ratio Decidendi: Where an assessee fails to disclose receipts giving rise to taxable income in the return, and the omission results in a difference between returned income and assessed income, the case falls within underreporting in consequence of misreporting for the purposes of section 270A.

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