Penalty for under-reporting — Section 270A

What this section is

Section 270A, applicable from AY 2017-18, replaces the older Section 271(1)(c). Penalty is 50% of tax payable on under-reported income; 200% on misreported income (where there is misrepresentation, suppression, false claim, etc.). Penalty does not apply where the explanation is bona fide and material facts have been disclosed.

When it is issued

Through a separate penalty SCN after the assessment order, typically under Section 274 read with 270A.

What you should do

1. 1Distinguish under-reporting from misreporting. The 4x difference in penalty rate often turns on this.
2. 2Examine if any of the immunities under Section 270A(6) apply (computation method, quantum estimate, deduction estimate, transfer pricing safe harbour).
3. 3Consider an application for immunity under Section 270AA — pay the demand and interest, do not appeal, and the penalty is waived.
4. 4If proceeding to penalty contest, file a detailed reply addressing each element of misreporting.

Documents typically needed

• Assessment order with the additions
• Penalty SCN under Section 274
• Original return, computation, and explanation for each disputed item

Common mistakes

• Missing the Section 270AA immunity window — it is often the cheapest exit.
• Not appealing the quantum order — once it attains finality, the penalty defence narrows.