For alleging ‘mis-reporting of income’ the specific clause of Section 270A(9) should be mentioned

[Vivek Jalan]

The concepts of ‘under reporting of income’ and ‘misreporting of income’ are two different charges with very clear boundaries. Sec.270A(2) of the Income Tax Act, deals with concept of ‘under reporting of income’ and for this, 50% penalty is provided. Section 270A(9) deals with concept of ‘misreporting of income’ and for this, 200% penalty is provided. Therefore, ‘under reporting of income’ and ‘misreporting of income’ shall not be used interchangeably nor are they synonymous, but each operates under strict definition and do not overlap each other. The AO, before initiating penalty proceedings should specifically arrive at a satisfaction to the effect that, for which charge, he has initiated penalty Sec.270A of the Act.

Incase of ‘misreporting of income’, the specific of the 6 clauses of Sec 270A(9) should be clearly specified as follows –

(a) misrepresentation or suppression of facts;

(b) failure to record investments in the books of account;

(c) claim of expenditure not substantiated by any evidence;

(d) recording of any false entry in the books of account;

(e) failure to record any receipt in books of account having a bearing on total income; and

(f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.

Incase the clause reference is not there, then the notice would be considered as a vague notice and initiation of penalty u/s.270A of the Act for ‘misreporting of income’ would be erroneous, arbitrary and thus, penalty proceedings cannot be sustained.

This legal position was held in JAYASAKTHI KNIT WEAR VERSUS THE ITO, WARD-1 (4) , TIRUPUR - 2024 (12) TMI 760 - ITAT CHENNAI, taking a cue from the decision of the Hon’ble Delhi High Court in the case of PREM BROTHERS INFRASTRUCTURE LLP. VERSUS NATIONAL FACELESS ASSESSMENT CENTRE & ANR. - 2022 (6) TMI 130 - DELHI HIGH COURT. Similar view was upheld by The Hon’ble Supreme Court in the case of COMMISSIONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, WARD-6 (3) , BANGALORE VERSUS M/S SSA’S EMERALD MEADOWS - 2015 (11) TMI 1620 - KARNATAKA HIGH COURT.