Mr. Kabir filed his return of income for A.Y.2025-26, declaring total income of 35 lakhs, on 2nd June, 2025. He has opted out of the default tax…

CA Final · Direct Tax Laws and International Taxation · RTP · September 2025
Mr. Kabir filed his return of income for A.Y.2025-26, declaring total income of 35 lakhs, on 2nd June, 2025. He has opted out of the default tax regime. On processing of return, the total income determined under section 143(1)(a) was 45 lakhs. Thereafter, on scrutiny, the Assessing Officer made some additions under section 40(a)(ia) and section 43B and passed an assessment order under section 143(3) assessing total income of 85 lakhs. Later on, the Assessing Officer noticed that certain income had escaped assessment and issued notice for reassessment under section 148. The total income reassessed under section 147 was - 1.05 crores. Considering that none of the additions or disallowances made in the assessment or re-assessment as above qualifies under section 270A(6), compute the amount of penalty to be levied under section 270A of the Income-tax Act, 1961 at the time of assessment under section 143(3) and at the time of reassessment under section 147 (Assume under-reporting of income is not on account of misreporting).

Suggested Answer and Working Notes:

Mr. Kabir is deemed to have under-reported his income since: (1) his income assessed under 143(3) exceeds its income determined in a return processed under section 143(1)(a); and (2) the income reassessed under section 147 exceeds the income assessed under section 143(3). Therefore, penalty is leviable under section 270A for under-reporting of income. Computation of penalty leviable under section 270A Particulars Particulars ₹ Assessment under section 143(3) Under-reported income: Total income assessed under section 143(3) 85,00,000 (-) Total income determined u/s 143(1)(a) 45,00,000 40,00,000 Tax payable on under-reported income plus income determined u/s 143(1)(a) i.e., on 85 lakhs [(30% of 75lakh +1,12,500) + Surcharge @10% + HEC@4%] 27,02,700 Less: Tax payable on income determined u/s 143(1)(a) i.e., on 45 lakhs [(30% of 35lakh +1,12,500) + HEC@4%] 12,09,000 14,93,700 Penalty leviable@50% of tax payable 7,46,850 Reassessment under section 147 Under-reported income: Total income reassessed under section 147 1,05,00,000 (-) Total income assessed under section 143(3) 85,00,000 20,00,000 Tax payable on under-reported income plus income determined u/s 143(3) i.e., on 1.05 crores [(30% of 95lakh +1,12,500) + Surcharge @15% + HEC@4%] 35,43,150 Less: Tax payable on income determined u/s 143(3) i.e., on 85 lakhs [(30% of 75lakh +1,12,500) + Surcharge @10% + HEC@4%] 27,02,700 8,40,450 Penalty leviable@50% of tax payable 4,20,225

Topics: Provisions to Counteract Unethical Tax Practices

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