Clause 439 of the Income Tax Bill, 2025, largely replicates...

Clause 439 of the Income Tax Bill, 2025, largely replicates Section 270A of the Income-tax Act, 1961, establishing a formula-based penalty regime for under-reporting and misreporting of income to enhance tax compliance and reduce litigation. Both provisions empower designated tax authorities to impose penalties of 50% of tax on under-reported income and 200% for misreporting, distinguishing between inadvertent errors and deliberate falsification. They enumerate specific scenarios constituting under-reporting, provide detailed computation methods, and include exceptions for bona fide explanations and voluntary disclosures. The key difference is Clause 439's omission of an explicit exclusion for undisclosed income in search cases, present in Section 270A. Procedural safeguards require written orders for penalties, and double penalization is prohibited. The updated clause aligns with the new legislative framework, aiming to maintain clarity, fairness, and deterrence while adapting to procedural changes, though certain interpretational issues, such as the scope of bona fide explanations, may continue to invite judicial scrutiny.