After a search I admitted the cash as professional receipts in a revised computation during the assessment and paid the tax. The AO has now levied penalty under s.270A(9) for misreporting AND a second penalty under s.271AAD(1)(ii) for omitting entries from my books. Can he do both?
The Tribunal deleted both. The s.270A penalty fell because the s.274 notice never said which of the six sub-clauses of s.270A(9) was alleged, and the s.271AAD(1)(ii) penalty fell because once the assessee had brought the receipts on record in a revised statement of total income filed during the assessment and paid the tax, there was no longer an omitted entry to penalise.
Decided by the ITAT (Shri Vijay Pal Rao, Vice President and Shri Manjunatha G, Accountant Member — Income Tax Appellate Tribunal, Visakhapatnam Bench) on 2026-08-21, reported as ITA Nos. 172 & 173/VIZ/2026; date of conclusion of hearing 10 August 2026. It bears on section 270A, section 270A(9), section 270A(11), section 271AAD, section 274, section 132, section 143(3), section 148, section 149 of the Income Tax Act 1961, in Penalty and Search, Survey & Block Assessment matters.
This is the first squarely reasoned Tribunal decision the library carries on s.271AAD, and it is being used by the Department in exactly the situation described — a search, an admitted surrender, and then two penalties on the same money. Two things are worth taking from it. First, the s.270A(9) limb point survives even where the AO writes the composite phrase "under-reporting of income in consequence of misreporting": the Commissioner (Appeals) had held that misreporting is itself a complete statutory category needing no sub-clause, and the Tribunal rejected that. Second, on s.271AAD the Tribunal read the section against the Memorandum to the Finance Bill 2020, which explains it as aimed at bogus invoices taken to claim input tax credit, and treated a subsequent disclosure and payment as answering the charge of omission. Note the limits: the Tribunal did NOT decide whether s.270A(11) bars the two penalties from standing together — it did not have to, having deleted both — so a reader who wants that argument is still arguing it fresh. The Commissioner (Appeals) had held s.270A(11) inapplicable on the footing that s.271AAD addresses a distinct field of misconduct, and that reasoning is left standing on the record, undisturbed rather than approved.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee is a practising doctor at Guntur. He filed his return for AY 2022-23 on 29 September 2022 declaring total income of Rs 48,97,990. A search under s.132 was conducted on him on 12 December 2022, in the course of which cash of Rs 5,24,18,100 was found and seized at his residential premises. Asked to explain the source, he stated the cash was his professional receipts and agreed to offer the whole of it as additional professional income spread over AY 2022-23 and AY 2023-24. For AY 2022-23 he filed a revised statement of total income during the assessment proceedings admitting additional income of Rs 3,03,74,646 and paid the tax on it. He did not, however, file a revised return within the statutory period. The assessment was completed under s.143(3) by order dated 19 January 2024, the AO adopting the income as per the revised computation. The AO then levied penalty under s.270A for under-reporting of income in consequence of misreporting, and a separate penalty under s.271AAD(1)(ii) for omitting from the books entries relevant to the computation of total income. The Commissioner (Appeals), Visakhapatnam-3 confirmed both by orders dated 9 December 2025 and 12 December 2025, relying on MAK Data (P) Ltd. v. CIT for the proposition that a surrender made after detection earns no immunity, holding that the composite phrase "under-reporting in consequence of misreporting" sufficiently conveyed the default without a sub-clause, and holding that s.270A(11) did not apply because the s.271AAD penalty proceeded on omitted or false entries while the s.270A penalty proceeded on under-reporting in consequence of misreporting. The search of 12 December 2022 falls in the period between 1 June 2003 and 31 August 2024, in which s.153A and s.153C governed; block assessment under s.158BA to s.158BI was revived only for searches initiated on or after 1 September 2024.
Both appeals allowed. The orders of the Commissioner (Appeals) were set aside and the AO was directed to delete both the penalty under s.270A(9) and the penalty under s.271AAD(1)(ii). The s.270A penalty was held bad because the show-cause notice under s.274 read with s.270A did not specify the sub-clause of s.270A(9) under which the proceedings were initiated, which the Tribunal characterised as non-application of mind vitiating the whole proceeding. The s.271AAD(1)(ii) penalty was held unsustainable because the assessee had admitted the additional income in a revised statement of total income filed during the assessment and paid the tax on it, so the question of an omission of an entry relevant to the computation of total income did not arise. Independently and as a second ground, the Tribunal held the assessment order under s.143(3) itself invalid because the AO had not followed the procedure under s.148 required in a search year, held that this could be raised collaterally in the penalty appeal, and directed deletion of both penalties on that count also (paras 21, 22, 25).
On the notice point the Tribunal separated the architecture of the section: sub-sections (1) to (6) of s.270A deal with under-reporting and with under-reporting in consequence of misreporting, while sub-section (9) sets out misreporting in six sub-clauses covering different circumstances — misrepresentation or suppression of facts, failure to record investments in the books, failure to record a receipt in the books having a bearing on total income, a claim of expenditure not substantiated by evidence, and recording a false entry in the books, among others. Because those situations call for different explanations from the assessee, the AO must name the sub-clause in the s.274 notice so that the assessee can meet the case against him; a notice that does not is vague and the penalty built on it cannot stand. The Tribunal followed the Hyderabad Bench in MSN Laboratories Private Limited v. ACIT (ITA Nos. 2304 and 2305/HYD/2025, order dated 25 February 2026), which had deleted a s.270A(9) penalty on identical facts. It rejected the Commissioner (Appeals)'s view that s.270A, unlike the old s.271(1)(c), requires no choice between mutually exclusive limbs, and rejected the Revenue's argument that once misreporting is invoked no sub-clause need be identified. On s.271AAD the Tribunal turned to the Memorandum Explaining the Provisions in the Finance Bill 2020, which states that the section was inserted to curb the menace of false entries in the books — forged or falsified documents such as a false invoice, and invoices for supply or receipt of goods or services without actual supply — the provision having been aimed at the practice of taking bogus invoices under the Goods and Services Tax to claim input tax credit, and which also covers an omission of an entry relevant to the computation of total income to evade tax. Applying that to the facts, the Tribunal reasoned that the assessee had already disclosed the true and correct income by the revised statement of total income filed during the assessment and had paid the tax, so there was nothing left that answered the description of an omitted entry, and s.271AAD(1)(ii) could not be invoked. The Tribunal also decided the appeals on a second and wider ground. Because the year was a search year, the assessment could not be completed under s.143(3) alone without the AO following the procedure under s.148; since he had not, the Tribunal held at paras 21 and 25 that "the Assessment Order passed by the Ld.AO becomes invalid". It further held, following Shri Valley Refractories Limited v. DCIT (ITA 1102/KOL/2023), that the assessee got his first opportunity to question the validity of the assessment when penalty was levied on the additional income offered, so "there is no bar in questioning the validity of the assessment proceedings in a collateral proceedings like penalty proceedings" (para 22). On that count also neither penalty could be upheld, and both were directed to be deleted.
The different situations warrant different explanation from the assessee with regard to misreporting of income.
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Handle my notice → Ask a CA on WhatsAppThe Tribunal deleted both. The s.270A penalty fell because the s.274 notice never said which of the six sub-clauses of s.270A(9) was alleged, and the s.271AAD(1)(ii) penalty fell because once the assessee had brought the receipts on record in a revised statement of total income filed during the assessment and paid the tax, there was no longer an omitted entry to penalise. This was decided by the ITAT (Shri Vijay Pal Rao, Vice President and Shri Manjunatha G, Accountant Member — Income Tax Appellate Tribunal, Visakhapatnam Bench) and bears on section 270A, section 270A(9), section 270A(11), section 271AAD, section 274, section 132, section 143(3), section 148, section 149 of the Income Tax Act 1961. It is reported as ITA Nos. 172 & 173/VIZ/2026; date of conclusion of hearing 10 August 2026. This is the first squarely reasoned Tribunal decision the library carries on s.271AAD, and it is being used by the Department in exactly the situation described — a search, an admitted surrender, and then two penalties on the same money. Two things are worth taking from it. First, the s.270A(9) limb point survives even where the AO writes the composite phrase "under-reporting of income in consequence of misreporting": the Commissioner (Appeals) had held that misreporting is itself a complete statutory category needing no sub-clause, and the Tribunal rejected that. Second, on s.271AAD the Tribunal read the section against the Memorandum to the Finance Bill 2020, which explains it as aimed at bogus invoices taken to claim input tax credit, and treated a subsequent disclosure and payment as answering the charge of omission. Note the limits: the Tribunal did NOT decide whether s.270A(11) bars the two penalties from standing together — it did not have to, having deleted both — so a reader who wants that argument is still arguing it fresh. The Commissioner (Appeals) had held s.270A(11) inapplicable on the footing that s.271AAD addresses a distinct field of misconduct, and that reasoning is left standing on the record, undisturbed rather than approved. If it applies to you, the first step is this: Get the s.274 r.w.s. 270A notice and read it word for word. If it says only "misreporting" or "under-reporting of income in consequence of misreporting" without naming clause (a) to (f) of s.270A(9), take that as your first ground.
The assessee is a practising doctor at Guntur. He filed his return for AY 2022-23 on 29 September 2022 declaring total income of Rs 48,97,990. A search under s.132 was conducted on him on 12 December 2022, in the course of which cash of Rs 5,24,18,100 was found and seized at his residential premises. Asked to explain the source, he stated the cash was his professional receipts and agreed to offer the whole of it as additional professional income spread over AY 2022-23 and AY 2023-24. For AY 2022-23 he filed a revised statement of total income during the assessment proceedings admitting additional income of Rs 3,03,74,646 and paid the tax on it. He did not, however, file a revised return within the statutory period. The assessment was completed under s.143(3) by order dated 19 January 2024, the AO adopting the income as per the revised computation. The AO then levied penalty under s.270A for under-reporting of income in consequence of misreporting, and a separate penalty under s.271AAD(1)(ii) for omitting from the books entries relevant to the computation of total income. The Commissioner (Appeals), Visakhapatnam-3 confirmed both by orders dated 9 December 2025 and 12 December 2025, relying on MAK Data (P) Ltd. v. CIT for the proposition that a surrender made after detection earns no immunity, holding that the composite phrase "under-reporting in consequence of misreporting" sufficiently conveyed the default without a sub-clause, and holding that s.270A(11) did not apply because the s.271AAD penalty proceeded on omitted or false entries while the s.270A penalty proceeded on under-reporting in consequence of misreporting. The search of 12 December 2022 falls in the period between 1 June 2003 and 31 August 2024, in which s.153A and s.153C governed; block assessment under s.158BA to s.158BI was revived only for searches initiated on or after 1 September 2024. The matter was decided on 2026-08-21 by the ITAT (Shri Vijay Pal Rao, Vice President and Shri Manjunatha G, Accountant Member — Income Tax Appellate Tribunal, Visakhapatnam Bench). On those facts the ITAT held as follows. Both appeals allowed. The orders of the Commissioner (Appeals) were set aside and the AO was directed to delete both the penalty under s.270A(9) and the penalty under s.271AAD(1)(ii). The s.270A penalty was held bad because the show-cause notice under s.274 read with s.270A did not specify the sub-clause of s.270A(9) under which the proceedings were initiated, which the Tribunal characterised as non-application of mind vitiating the whole proceeding. The s.271AAD(1)(ii) penalty was held unsustainable because the assessee had admitted the additional income in a revised statement of total income filed during the assessment and paid the tax on it, so the question of an omission of an entry relevant to the computation of total income did not arise. Independently and as a second ground, the Tribunal held the assessment order under s.143(3) itself invalid because the AO had not followed the procedure under s.148 required in a search year, held that this could be raised collaterally in the penalty appeal, and directed deletion of both penalties on that count also (paras 21, 22, 25).
On the notice point the Tribunal separated the architecture of the section: sub-sections (1) to (6) of s.270A deal with under-reporting and with under-reporting in consequence of misreporting, while sub-section (9) sets out misreporting in six sub-clauses covering different circumstances — misrepresentation or suppression of facts, failure to record investments in the books, failure to record a receipt in the books having a bearing on total income, a claim of expenditure not substantiated by evidence, and recording a false entry in the books, among others. Because those situations call for different explanations from the assessee, the AO must name the sub-clause in the s.274 notice so that the assessee can meet the case against him; a notice that does not is vague and the penalty built on it cannot stand. The Tribunal followed the Hyderabad Bench in MSN Laboratories Private Limited v. ACIT (ITA Nos. 2304 and 2305/HYD/2025, order dated 25 February 2026), which had deleted a s.270A(9) penalty on identical facts. It rejected the Commissioner (Appeals)'s view that s.270A, unlike the old s.271(1)(c), requires no choice between mutually exclusive limbs, and rejected the Revenue's argument that once misreporting is invoked no sub-clause need be identified. On s.271AAD the Tribunal turned to the Memorandum Explaining the Provisions in the Finance Bill 2020, which states that the section was inserted to curb the menace of false entries in the books — forged or falsified documents such as a false invoice, and invoices for supply or receipt of goods or services without actual supply — the provision having been aimed at the practice of taking bogus invoices under the Goods and Services Tax to claim input tax credit, and which also covers an omission of an entry relevant to the computation of total income to evade tax. Applying that to the facts, the Tribunal reasoned that the assessee had already disclosed the true and correct income by the revised statement of total income filed during the assessment and had paid the tax, so there was nothing left that answered the description of an omitted entry, and s.271AAD(1)(ii) could not be invoked. The Tribunal also decided the appeals on a second and wider ground. Because the year was a search year, the assessment could not be completed under s.143(3) alone without the AO following the procedure under s.148; since he had not, the Tribunal held at paras 21 and 25 that "the Assessment Order passed by the Ld.AO becomes invalid". It further held, following Shri Valley Refractories Limited v. DCIT (ITA 1102/KOL/2023), that the assessee got his first opportunity to question the validity of the assessment when penalty was levied on the additional income offered, so "there is no bar in questioning the validity of the assessment proceedings in a collateral proceedings like penalty proceedings" (para 22). On that count also neither penalty could be upheld, and both were directed to be deleted. In the words reproduced by the source cited on this page: "The different situations warrant different explanation from the assessee with regard to misreporting of income." The decision followed or applied MSN Laboratories Private Limited v. ACIT, ITA Nos. 2304 & 2305/HYD/2025 (ITAT Hyderabad), order dated 25 February 2026 — followed; MAK Data (P) Ltd. v. CIT [2013] 358 ITR 593 (SC) — relied on by the Commissioner (Appeals), not followed by the Tribunal on the facts.
It was decided by the ITAT on 2026-08-21 and is reported as ITA Nos. 172 & 173/VIZ/2026; date of conclusion of hearing 10 August 2026. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 270A, section 270A(9), section 270A(11), section 271AAD, section 274, section 132, section 143(3), section 148, section 149, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Both appeals allowed. The orders of the Commissioner (Appeals) were set aside and the AO was directed to delete both the penalty under s.270A(9) and the penalty under s.271AAD(1)(ii). The s.270A penalty was held bad because the show-cause notice under s.274 read with s.270A did not specify the sub-clause of s.270A(9) under which the proceedings were initiated, which the Tribunal characterised as non-application of mind vitiating the whole proceeding. The s.271AAD(1)(ii) penalty was held unsustainable because the assessee had admitted the additional income in a revised statement of total income filed during the assessment and paid the tax on it, so the question of an omission of an entry relevant to the computation of total income did not arise. Independently and as a second ground, the Tribunal held the assessment order under s.143(3) itself invalid because the AO had not followed the procedure under s.148 required in a search year, held that this could be raised collaterally in the penalty appeal, and directed deletion of both penalties on that count also (paras 21, 22, 25). It arises in Penalty and Search, Survey & Block Assessment matters, on section 270A, section 270A(9), section 270A(11), section 271AAD, section 274, section 132, section 143(3), section 148, section 149 of the Income Tax Act 1961, and was decided by Shri Vijay Pal Rao, Vice President and Shri Manjunatha G, Accountant Member — Income Tax Appellate Tribunal, Visakhapatnam Bench. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check the assessment order too — the Tribunal noted that the AO there had recorded no satisfaction identifying the default, and treated the notice and the order together. On the s.271AAD limb, pin down whether the charge is a false entry under clause (i) or an omitted entry under clause (ii). This decision helps only on clause (ii), and only where the entry was in fact brought on record before assessment. Document the exact date the revised statement of total income was filed and the date the tax was paid, and show both preceded the assessment order. Cite the Memorandum Explaining the Provisions in the Finance Bill 2020 for the purpose of s.271AAD, as the Tribunal did, if your case is not a fake-invoice or input-tax-credit case at all. Do not assume s.270A(11) will keep the two penalties from stacking. Plead it, but plead the limb defect and the merits as well — that is what actually won here. Where the year is a search year, check whether the AO proceeded under s.143(3) alone when the s.148 machinery was required. The Tribunal here held the assessment invalid on that ground and held it could be taken collaterally in the penalty appeal, even though it had not been taken in a quantum appeal.
Validity check could not be completed. Validity check could not be completed. The order is dated 21 August 2026 and is recent; I did not search for any appeal against it or any later Tribunal or High Court decision doubting it, and no such search should be assumed. It follows a coordinate bench (MSN Laboratories, Hyderabad) rather than any High Court authority, so it sits in a line of Tribunal decisions on the s.270A(9) limb point rather than on binding authority; the contrary view taken by the Commissioner (Appeals) — that misreporting is a complete statutory category needing no sub-clause — is the Revenue's standard argument and has not been tested at High Court level in anything I read. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read through indiankanoon ?type=print on two document IDs for the same order (/doc/188357553/ and /doc/72127922/). The renders are NOT stable: one numbered the Tribunal's own finding on s.271AAD as paragraph 33, the other numbered the assessee's submission on s.271AAD as paragraph 33, and one render truncated before the disposal. Because of that instability I have quoted only the passage on s.270A(9), which came back word for word identical from both document IDs; I have NOT quoted the s.271AAD passage, whose substance was consistent across renders but whose paragraph number I could not fix. The intended exact-phrase index check on the quoted sentence could not be completed — indiankanoon's /search/ endpoint returned HTTP 429 on repeated attempts. The order at one point writes "section 270(9)" where "section 270A(9)" is plainly meant. The disposal was subsequently recovered by fragment retrieval on doc 72127922: para 27 reads "In the result, appeals filed by the assessee in ITA Nos.172/VIZ/2026 and" — indiankanoon's text extraction truncates the sentence at the page break, but the operative directions at paras 22 and 26 direct deletion of both penalties. The Tribunal DID rule on the collateral challenge: at paras 21, 22 and 25 it held that the assessment under s.143(3) was invalid because the AO had not followed the s.148 procedure in a search year, that there is no bar to questioning the validity of the assessment in collateral penalty proceedings (following Shri Valley Refractories Limited v. DCIT, ITA 1102/KOL/2023), and that "on this count also" both penalties could not be upheld. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Both appeals allowed. The orders of the Commissioner (Appeals) were set aside and the AO was directed to delete both the penalty under s.270A(9) and the penalty under s.271AAD(1)(ii). The s.270A penalty was held bad because the show-cause notice under s.274 read with s.270A did not specify the sub-clause of s.270A(9) under which the proceedings were initiated, which the Tribunal characterised as non-application of mind vitiating the whole proceeding. The s.271AAD(1)(ii) penalty was held unsustainable because the assessee had admitted the additional income in a revised statement of total income filed during the assessment and paid the tax on it, so the question of an omission of an entry relevant to the computation of total income did not arise. Independently and as a second ground, the Tribunal held the assessment order under s.143(3) itself invalid because the AO had not followed the procedure under s.148 required in a search year, held that this could be raised collaterally in the penalty appeal, and directed deletion of both penalties on that count also (paras 21, 22, 25).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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My return was only processed under 143(1). Does that stop the department reopening it later?
How much am I actually required to disclose — and can they reopen because the officer drew the wrong conclusion?
The sanctioning authority just wrote 'yes' and signed. Is that a sanction?