Penalty under 270A of Income Tax

[umeshkumar jhawar]

Dear Experts

Our client’s case was reopened u/s 147 of Income Tax Act 1961. We have filed Return u/s 148 accordingly.

Factual Position:

Return of Income as per Original Return of Income was Rs. 10,05,000.00

The reason and issue while opening the case was that the interest income from bank was not shown.

Return of Income as per 148 Return was Rs. 16,55,000.00 hence Income was increased by Rs, 6,50,000.00. The increased income is Interest income which was shown on accrual basis instead of receipt basis.

Our Scrutiny was completed with Income assessed as 16,70,000.00. Income Added Rs, 15,000.00

Order u/s 147:

AO has initiated Penalty proceeding u/s 270A(9) of Income Tax Act i.e. underreporting in the form of Misreporting on following additional Income i.e. Income Assessee Rs. 16,70,000.00 minus Income as per Original Return Rs. 10,05,000.00 i.e. Rs. 6,65,000.00

We are of opinion that Penalty should be levied on only on addition made during scrutiny i.e. Rs. 15,000.00. Please advised, We also request to provide any case law regarding same matter if available.

[DR.MARIAPPAN GOVINDARAJAN]

Section 270A (1) provides that the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income.

It is not clear what will the penalty amount.  What is the penalty imposed on you?

AI Summary

Underreported income penalty sought on full reassessed increase, while taxpayer argues penalty should target the actual assessment addition only. Reassessment under section 147 led to a return under section 148 showing additional interest income on an accrual basis. The AO treated the full difference between the original return and the revised return as under-reported income for misreporting and initiated penalty proceedings, while the assessee argues penalty should be limited to the specific addition confirmed in scrutiny.