The addition is the gap between my valuer's figure and the officer's. Can that be under-reporting, or misreporting?
It depends, and the statute gives you three separate answers to run. Section 270A(6) takes out of under-reported income an amount the assessee has explained bona fide with all material facts disclosed, and an amount determined on an estimate where the accounts are correct and complete but the method employed does not properly yield the income. A figure produced by a prescribed formula, certified by a professional the rule accepts, drawn from the audited balance sheet and disclosed in the return is the strongest form each of those exceptions takes. Misreporting is a separate and higher charge and has to be made out on the limbs in s.270A(9), which are about misrepresentation, suppression and false entries — not about a valuation the officer disagrees with.
Take the exceptions in the order they are printed on the department's page for s.270A.
Clause (a) of sub-section (6) takes out "the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered;". A valuation dispute is the paradigm case for this clause, and the material facts are unusually easy to identify: the certificate, the sub-rule it was drawn under, the balance sheet each input came from, the date it was drawn as at, and the working papers. Where all of that was filed during the assessment, the explanation is on the record and the only question left is whether it was bona fide — which a certificate under the rule the statute itself prescribes, signed by a certifier that rule accepts, ordinarily is.
Clause (b) takes out "the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom;". This is the clause for the assessment where the officer has not faulted the books at all — he has accepted the balance sheet and changed one input, or preferred a price from a different transaction. If the accounts are not impugned, the addition is on the officer's own estimate of value, and the clause is engaged on its terms.
Clause (c) takes out an estimated amount where the assessee "has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance;". That clause is for the file where something was offered and the officer wanted more; it does not help where nothing was offered.
Misreporting has to be argued separately, because it carries two hundred per cent rather than fifty and because it shuts the door on immunity. The limbs in sub-section (9) are misrepresentation or suppression of facts, failure to record investments in the books, an unsubstantiated claim of expenditure, false entries in the books, failure to record receipts affecting total income, and failure to report international or specified domestic transactions. A valuation certificate filed with the return and a computation drawn from it are none of those. The library already carries the two decisions that matter on the procedure: an order refusing s.270AA immunity by calling the same addition misreporting without saying why has been set aside, and a penalty cannot be levied for a limb the notice did not charge. Both points are worth taking in the reply to the show cause rather than saved for appeal.
What the Supreme Court has said about valuation under the earlier penalty provision still frames the argument. The library's entry on Dilip N. Shroff carries the proposition that a valuation an assessee puts on an asset is not, without more, inaccurate particulars merely because the officer takes a different view. Section 270A is differently drafted, and that decision is not authority on the new section, but the exceptions in sub-section (6) are the drafting that carries the same idea forward.
A caution on sequence. Immunity under s.270AA is available only where the penalty is initiated for under-reporting and not for misreporting, and it requires the tax and interest to be paid and the assessment not to be appealed. So the choice between fighting the addition and buying immunity has to be made on the assessment order, not after the penalty order, and the reply to the s.274 notice should in any event put the sub-section (6) exceptions on the record whichever route is chosen.
The penalty is measured on the tax, not on the addition: fifty per cent of the tax payable on the under-reported income under s.270A(7), and two hundred per cent of it where the under-reporting is in consequence of misreporting under s.270A(8). So a valuation gap that produces a tax of one rupee produces a bill of one and a half rupees on the under-reporting limb and three on the misreporting limb, and it is that exposure which decides whether a client fights or settles. The exceptions in s.270A(6) are statutory and are pleaded on the assessment record, not discovered at the penalty stage, so the reply that puts the certificate and its working papers on the file is doing double duty. The misreporting label is the point to resist first, because it removes the immunity route.
The shares are listed but locked in. Do I value them at the market quotation?
Our family settled a property dispute orally and only filed a memorandum with the authorities. Someone now says the settlement is void because it was never registered. Is it?
Can the officer reject a s.270AA immunity application without a hearing and without saying which clause of s.270A(9) applies?
I withdrew my education cess claim after the Finance Act 2022 inserted section 155(18). Can the officer still treat it as under-reported income and levy penalty?
The officer refused immunity under s.270AA saying the penalty was for misreporting. Must he show which clause of s.270A(9) applies?
I asked NFAC for a video hearing in my appeal and never got a link. Can that order stand?
My APA was signed after the assessment and I filed a modified return under s.92CD(1) offering a smaller figure. The officer has levied s.270A penalty on the pre-APA assessed income. Is there anything I can do about it now?
The faceless order says I filed no reply when I did, and my hearing request was ignored. Is it valid?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.
