Income Tax Penalties — Sections 270A, 271, 271AAB, 276 Guide
Authoritative guide — legal provisions, leading case laws, and expert FAQs, all in one place.
What is Income Tax Penalties under Sections 270A, 271 & 276C?
Income tax penalties are governed by Section 270A (under-reporting: 50% of tax, mis-reporting: 200% of tax), Section 271AAB (search-related penalty: 30-60% of undisclosed income), and Section 276C (prosecution for tax evasion). Section 270AA provides immunity from penalty and prosecution if tax and interest are paid within the specified time.
What is Income Tax Penalties under Sections 270A, 271 & 276C?
The Income Tax Act, 1961 prescribes a robust penalty and prosecution framework to deter tax evasion and non-compliance. The Finance Act 2016 replaced the omnibus Section 271 with the more structured Section 270A, which distinguishes between under-reporting of income (50% penalty on tax) and mis-reporting of income (200% penalty on tax) with effect from AY 2017-18.
Key penalty provisions include: Section 270A (under/mis-reporting), Section 270AA (immunity from penalty and prosecution on payment of tax and interest), Section 271AAB (penalties in search cases: 30% to 60% of undisclosed income), Section 271B (failure to get audit), Section 271H (failure to file TDS returns), and Section 271C (failure to deduct TDS).
Prosecution under Sections 276C (wilful attempt to evade tax), 277 (false statements), and 278 (abetment) can result in rigorous imprisonment alongside financial penalties.
Key Legal Provisions
- Section 270A — Penalty for under-reporting: 50% of tax on under-reported income. For mis-reporting (false entry, fraud, suppression of facts): 200% of tax on mis-reported income. Applicable from AY 2017-18.
- Section 270AA — Immunity from 270A penalty and 276C prosecution: taxpayer must pay tax and interest within specified time and not file an appeal.
- Section 271 — Pre-AY 2017-18 penalty: 100% to 300% of tax evaded (concurrent with 270A for periods before AY 2017-18).
- Section 271AAB — Penalty on undisclosed income in search cases: 30% of undisclosed income admitted during search and paid; 60% otherwise.
- Section 271B — Penalty for failure to get accounts audited: 0.5% of turnover or ₹1.5 lakh, whichever is less.
- Section 271C — Penalty equal to TDS amount for failure to deduct.
- Section 276C — Prosecution for wilful attempt to evade tax: 3 months to 7 years' rigorous imprisonment + fine.
Relevant Statutory Sections
§270A — Penalty for under-reporting and misreporting of income
ITA§270AA — Immunity from imposition of penalty
ITA§271 — Failure to furnish returns, comply with notices,...
ITA§271AAB — Penalty where search has been initiated
ITA§271C — Penalty for failure to deduct TDS
ITA§276C — Wilful attempt to evade tax
Frequently Asked Questions All FAQs →
-
Under-reporting under Section 270A(2) includes: income assessed being greater than returned income; deemed total income under MAT/AMT being higher; and income assessed for the first time. The penalty is 50% of tax on the under-reported income. Mis-reporting under Section 270A(9) is a more serious category covering: misrepresentation of facts; failure to record investments in books; claim of expenditure not substantiated; recording false entry in books; failure to report any international transaction; and use of forged documents. The penalty for mis-reporting is 200% of tax on the mis-reported income.
-
Yes, partially. Section 270AA provides immunity from Section 270A penalty and Section 276C prosecution if the taxpayer: (1) pays the tax and interest demanded within 30 days of the assessment order; (2) does not file an appeal against the order. The immunity application is made in Form 68 to the AO. Immunity is NOT available if the case involves mis-reporting (the more serious category).
-
Section 271AAB prescribes penalties on undisclosed income found during search: (1) 30% of undisclosed income if the taxpayer admits the income during the search, specifies how it was earned, pays tax and interest on it, and files a return declaring it; (2) 60% of undisclosed income in all other cases (denial, non-payment, or non-disclosure). The AO has no discretion on the rate once the condition is met.
-
Section 276C applies when a person wilfully attempts to evade payment of tax, penalty, or interest. Wilful evasion is a factual determination — mere non-payment is not sufficient; there must be active concealment or falsification. Punishment: if tax evaded exceeds ₹25 lakh — rigorous imprisonment of 6 months to 7 years + fine; otherwise 3 months to 2 years + fine. Prosecution under 276C can proceed concurrently with penalty proceedings.
-
No. Penalty under Section 270A is not automatic. The AO must initiate penalty proceedings separately (usually flagged in the assessment order). The taxpayer must be given an opportunity to be heard. The burden is on the Revenue to show that the case falls within Section 270A. The AO must pass a separate penalty order with reasons. Merely making an addition in the assessment order does not by itself establish under-reporting or mis-reporting.
+ 3 more questions → View all FAQs
Practical Implications
- Under-reporting vs mis-reporting — Mis-reporting (200% penalty) requires misrepresentation or false documentation; challenge the mis-reporting finding if the error was bona fide.
- Apply for immunity (270AA) — Pay tax and interest within 30 days of penalty order and apply under Section 270AA; immunity is automatic if conditions are met.
- Section 271AAB — During search, admit undisclosed income in the statement and pay tax at 30% + penalty at 30% to limit total exposure to 60%.
- Prosecution threshold — Tax evasion exceeding ₹25 lakh attracts prosecution under Section 276C; apply for compounding if possible.