Section 270A replaced s.271(1)(c) from assessment year 2017-18: s.271(7), inserted by the Finance Act 2016, says s.271 does not apply to any assessment for AY 2017-18 or later. Under s.270A the single charge is under-reporting, defined by the seven clauses of sub-section (2) and measured by sub-section (3), and the penalty is fifty per cent of the tax on the under-reported income under sub-section (7); where the under-reporting is in consequence of one of the six kinds of misreporting listed in sub-section (9) it is two hundred per cent under sub-section (8), which also overrides the carve-outs in sub-section (6). Section 270AA buys the penalty out: pay the tax and interest inside the demand-notice period, file no appeal, and apply in Form 68 within one month from the end of the month in which you received the order. Until 28 February 2026 that door was shut to misreporting and shut once a penalty had been levied; the section as substituted from 1 March 2026 offers immunity from imposition or, as the case may be, waiver of the penalty, and opens it on a s.270A(9) charge - whether the penalty has been levied or is only leviable - on payment of additional income-tax of one hundred per cent of the tax on the under-reported income in lieu of the penalty. For income earned from 1 April 2026 the 1961 Act is itself replaced, and the provisions become ss.439 and 440 of the Income-tax Act 2025.
Take the year first, because it decides the section. Section 271(7), inserted by the Finance Act 2016 with effect from 1 April 2017, reads: "The provisions of this section shall not apply to and in relation to any assessment for the assessment year commencing on or after the 1st day of April, 2017." So s.271(1)(c) covers AY 2016-17 and earlier and nothing after it. Section 270A, inserted by the same Finance Act with effect from 1 April 2017, covers AY 2017-18 onwards. There is now a third band: the Income-tax Act 2025 came into force on 1 April 2026, and the Board's own transition note puts it plainly - income earned in FY 2025-26 is governed by the 1961 Act and assessed in AY 2026-27, and income earned from 1 April 2026 is governed by the 2025 Act and assessed for tax year 2026-27 onwards. The repealed Act continues to apply to proceedings pending on 1 April 2026 and to proceedings started after that date for an earlier year. A penalty notice arriving now will therefore almost always still be a s.270A notice.
Under-reporting is defined, not described. Section 270A(2) says a person shall be considered to have under-reported his income if one of seven things is true, and there are seven, not six: (a) the income assessed is greater than the income determined in the return processed under s.143(1)(a); (b) the income assessed is greater than the maximum amount not chargeable to tax, where no return has been furnished or the return was furnished for the first time under s.148; (c) the income reassessed is greater than the income assessed or reassessed immediately before; (d), (e) and (f) apply those same three tests to deemed total income assessed under s.115JB or s.115JC; and (g) the income assessed or reassessed has the effect of reducing the loss or converting a loss into income. The test is arithmetical and there is no threshold. Every rupee by which the assessed figure exceeds the returned figure is under-reported income unless sub-section (6) takes it out.
Sub-section (3) measures it. Where you filed a return and this is the first assessment, the under-reported income is the difference between the income assessed and the income determined under s.143(1)(a). Where no return was filed, or the return was filed for the first time under s.148, it is the whole of the income assessed if you are a company, a firm or a local authority, and the difference between the income assessed and the maximum amount not chargeable to tax if you are anybody else. In any other case - a reassessment or recomputation - it is the difference between the income reassessed or recomputed and the income assessed, reassessed or recomputed in the order immediately preceding. Where s.115JB or s.115JC applies the proviso gives a formula, (A minus B) plus (C minus D): A is the total income assessed under the general provisions, B is what that would have been had it been reduced by the under-reported amount, C is the deemed total income assessed under s.115JB or s.115JC, and D is what that would have been had it been reduced by so much of the under-reported amount as relates to the deemed income. The point of the formula is that an amount appearing in both computations is not penalised twice.
Sub-section (10) turns the income into tax, and the rate is applied to the tax, not to the income. Where no return was furnished, or the return was furnished for the first time under s.148, the tax is computed on the under-reported income as increased by the maximum amount not chargeable to tax, as if that were the total income. Where the total income determined is a loss, it is the tax on the under-reported income as if that were the total income. In every other case it is X minus Y: X is the tax on the under-reported income plus the total income determined in the preceding order, and Y is the tax on that preceding total income. That is, the incremental tax. Sub-section (11) stops the same amount being penalised twice across years. Sub-section (12) requires the penalty to be imposed by an order in writing. Sub-section (11A), inserted by the Finance Act 2026 with effect from 1 March 2026, provides that where additional income-tax is paid under s.140B(3A) the income on which it was paid cannot be the basis of a penalty under s.270A.
The rate for under-reporting is fifty per cent. Sub-section (7): "The penalty referred to in sub-section (1) shall be a sum equal to fifty per cent of the amount of tax payable on under-reported income." Note also who may impose it. Sub-section (1) says the Assessing Officer, the Joint Commissioner (Appeals), the Commissioner (Appeals), the Commissioner or the Principal Commissioner "may direct" that the person be liable. It is a discretion, and it has to be exercised on the facts rather than recited. The rate for misreporting is two hundred per cent, and the drafting matters more than the number. Sub-section (8) opens: "Notwithstanding anything contained in sub-section (6) or sub-section (7), where under-reported income is in consequence of any misreporting thereof by any person, the penalty referred to in sub-section (1) shall be equal to two hundred per cent of the amount of tax payable on under-reported income." Two things follow. The two hundred per cent displaces the fifty. And it displaces sub-section (6) as well, so the carve-outs - including the bona fide explanation - do not answer a misreporting charge at all. Misreporting is then defined by sub-section (9), which is a closed list of six cases: (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 the books of account having a bearing on total income; and (f) failure to report any international transaction, any transaction deemed to be an international transaction, or any specified domestic transaction to which Chapter X applies. Read them against your own facts one at a time. Three of the six turn on books of account, which a person not carrying on a business may not be required to keep; one is confined to transfer pricing. What is left in most disputes is clause (a), and that is where the officer will put everything unless he is made to be specific.
Sub-section (6) is what takes an amount out of under-reported income altogether, and it has five clauses. Clause (a) excludes an amount for which you offer an explanation where the Assessing Officer, the Joint Commissioner (Appeals), the Commissioner (Appeals), the Commissioner or the Principal Commissioner is satisfied that the explanation is bona fide and that you have disclosed all the material facts to substantiate it - both halves have to be met. Clause (b) excludes an amount determined on an estimate where your accounts are correct and complete to the officer's satisfaction but the method employed is such that income cannot properly be deduced from them. Clause (c) excludes an amount determined on an estimate where you had yourself estimated a lower addition or disallowance on the same issue, included it in your computation and disclosed all the facts material to it. Clause (d) excludes a transfer-pricing addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where you maintained the information and documents prescribed under s.92D, declared the international transaction under Chapter X and disclosed all the material facts relating to it. Clause (e) excludes undisclosed income referred to in s.271AAB, which carries its own penalty in a search case. Remember the sting in sub-section (8): none of these five answers a misreporting charge.
Section 270AA is the way out, and it was rewritten by clause 21 of the Finance Act 2026 (Act No. 4 of 2026, assented to on 30 March 2026) with effect from 1 March 2026. Read the opening words of sub-section (1) carefully, because they are wider than the old section and wider than the section's own heading: you may apply for "immunity from imposition or, as the case may be, waiver of penalty under section 270A" and from proceedings under s.276C or s.276CC. Immunity is what you get before the penalty is imposed; waiver is what you get after it has been levied, and that second route did not exist before 1 March 2026. Three conditions: (a) the tax and interest payable as per the order of assessment under s.143(3) or reassessment under s.147 has been paid within the period specified in the notice of demand; (b) where penalty "has been levied or, as the case may be, leviable" under the circumstances referred to in s.270A(9), additional income-tax of one hundred per cent of the tax payable on the under-reported income has been paid within that same period, in lieu of the penalty; and (c) no appeal has been filed against the order. Sub-section (2) requires the application within one month from the end of the month in which the order referred to in clause (a) and clause (b) was received - it now speaks of both orders, which is what makes the post-levy route work - in the prescribed form, Form No. 68, headed on the department's own site "Form of application under section 270AA(2) of the Income-tax Act, 1961". Sub-section (3) says the Assessing Officer shall grant it where the conditions are met and the period for filing an appeal under s.249(2)(b) has expired. Sub-section (3A) is the new bar: no immunity or waiver where any proceeding has been initiated under Chapter XXII, the prosecution chapter. Sub-section (4) gives the officer three months from the end of the month in which the application is received to accept or reject it - his limit has been three months since 1 April 2025, substituted for one month by the Finance Act 2025 - and its proviso forbids rejection without an opportunity of being heard. Sub-section (5) makes that order final. Sub-section (6) closes the appeal: once an accepting order is made, no appeal under s.246 or s.246A and no revision under s.264 lies against the assessment or reassessment.
What changed on 1 March 2026, and what did not. Before that date sub-section (3) directed the officer to grant immunity only "where the proceedings for penalty under section 270A has not been initiated under the circumstances referred to in sub-section (9)" - a recorded finding of misreporting shut the door completely, and once the penalty had been levied there was nothing left to apply for. That is why so much of the case law is about forcing the officer to name the clause he relies on. The substituted section keeps the under-reporting immunity free of any extra payment, prices the misreporting route at one hundred per cent additional income-tax, and - because it now speaks of waiver of a penalty that "has been levied" - keeps the route open after the penalty order has gone out. The limb therefore still decides the money. Work it: on under-reported income of Rs 10,00,000 carrying tax under sub-section (10) of Rs 3,00,000, an under-reporting penalty is fifty per cent of Rs 3,00,000, or Rs 1,50,000; a misreporting penalty is two hundred per cent of Rs 3,00,000, or Rs 6,00,000; immunity on an under-reporting charge costs the Rs 3,00,000 of tax plus interest and nothing more; and the misreporting route costs the Rs 3,00,000 of tax plus interest plus Rs 3,00,000 of additional income-tax, which is Rs 3,00,000 less than the penalty it replaces. In every version you give up the appeal against the assessment for that year. Two protections survive a refusal: the second proviso to s.249(2) excludes the period from the date the application is made to the date the rejection order is served in computing the time to appeal, so a rejection does not cost you the appeal; and CBDT Circular No. 5/2018 dated 16 August 2018 is the Board's clarification on the immunity, which is worth reading in the original before you rely on it - the number, date and subject are on the department's site, the text is in a PDF, and the gaps note says what I could and could not check.
Does the defective-notice argument run here the way it runs under s.274 for a s.271(1)(c) penalty? Yes, but not in the same shape, and this library's page on s.274 sets out the case law and how to take the point rather than repeating it here. In short: s.274(1) governs every penalty in Chapter XXI and s.270A is in that chapter, so the notice has to give you a charge you can answer - and since 1 March 2026 the sub-section requires that the opportunity of being heard be given "by way of a show cause notice to that effect", words inserted by clause 22(a) of the Finance Act 2026 and deemed to have been there from that date. But there are no two limbs to strike out. Under-reporting is the only charge, and what the notice must carry is whether misreporting is alleged, under which clause of s.270A(9), and on what material. The decisions that make the officer be specific are Schneider Electric South East Asia (HQ) Pte Ltd v ACIT (Delhi High Court, W.P.(C) 5111/2022, 28 March 2022), Prem Brothers Infrastructure LLP v NFAC (Delhi High Court, W.P.(C) 7092/2022, 31 May 2022), GE Capital US Holdings Inc v DCIT (Delhi High Court, W.P.(C) 1646/2022 and 3312/2022, 31 May 2024) and Chambal Fertilizers and Chemicals Ltd v PCIT, Udaipur (Rajasthan High Court at Jaipur, D.B. Civil Writ Petition No. 10198/2023, 4 January 2024); and Mithibai College Employees Co-operative Credit Society Ltd v ITO (ITAT Mumbai, ITA No. 188/Mum/2026, 30 June 2026) is the case where the notice charged under-reporting and the order imposed misreporting with no clause named. One change to the machinery is already on the statute book. Clause 22(b) of the Finance Act 2026 inserted s.274(4): where a draft of the proposed order under s.144C, or an assessment under s.143 or a reassessment under s.147, is made on or after 1 April 2027 in respect of AY 2026-27 or any earlier year, "the penalty under section 270A, if any" forms part of that draft or is imposed as part of that order - the words "if any" take in a misreporting penalty as well as an under-reporting one - and a reference in the Act to the assessment order or to the s.270A penalty order is read as a reference to that combined order. Section 274(5) then deems the Joint Commissioner's approval of the assessment to be approval of the penalty forming part of it. From that date the separate penalty order disappears for these years, and with it the sequence the notice case law was built on.
Finally, the numbering after the changeover. For income earned from 1 April 2026 the provisions are s.439 of the Income-tax Act 2025, "Penalty for under-reporting and misreporting of income" - fifty per cent in sub-section (9), two hundred per cent in sub-section (10), and the misreporting cases in sub-section (11), which now has a seventh clause (g), income referred to in s.195(1)(b), inserted by the Finance Act 2026 with effect from 1 April 2026 - and s.440, "Waiver of penalty and immunity from prosecution", substituted by the same Act from the same date, which prices the waiver at additional income-tax of one hundred per cent for clauses (a) to (f) of s.439(11) and one hundred and twenty per cent for clause (g). Do not carry those numbers back into a s.270A file, and do not carry s.270A case law forward into a s.439 file without checking the words.
The commonest error in a penalty file is running s.271(1)(c) material against a s.270A notice, or the reverse. They are different sections with different charges, different defences and different settlement routes, and s.271(1)(c) has been spent since AY 2017-18. A reply built on concealment and inaccurate particulars answers nothing the officer has actually charged.
The second commonest is missing the s.270AA window. One month from the end of the month in which you received the assessment order, with the tax and interest already paid inside the period in the demand notice, and no appeal filed. There is no condonation provision in the section, and the three months in sub-section (4) belongs to the officer, not to you.
When I reduce export profits from book profit under section 115JB, do I take the full section 80HHC(3) figure or only the 80 per cent the phase-out allows?
Additions were made to my book profits in earlier years. Can I use that money to explain a cash credit or an unexplained payment in a later year?
The penalty provision was made harsher after my assessment year but before I filed the return. Which version applies to my concealment penalty?
Valuables were found at my premises and I say they are not mine. Who has to prove ownership?
My explanation for a cash deposit was rejected in the assessment and an addition was made — does that by itself mean penalty for concealment follows?
Is penalty under s.271(1)(c) criminal, quasi-criminal or civil?
My return declared a loss and even after the addition the assessed figure is still a loss. Can concealment penalty under section 271(1)(c) be levied when no tax is payable?
The assessment in which the s.271E satisfaction was recorded has been set aside. Can the penalty stand?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.
