Section 271(1)(c) Penalty — Concealment of Income and Furnishing Inaccurate Particulars

Section 271(1)(c) of the Income Tax Act empowers the Assessing Officer to levy a penalty ranging from 100% to 300% of the tax evaded when a taxpayer is found to have concealed income or furnished inaccurate particulars of income in their return. Understanding this provision — and the difference between an honest mistake and concealment — is critical for every taxpayer. Here is the complete guide.

Two Limbs of Section 271(1)(c)

• Concealment of income: Deliberately not disclosing income — omitting to include income in the return, hiding cash transactions, not reporting a business or source of income
• Furnishing inaccurate particulars: Providing wrong details about income — claiming incorrect deductions, misclassifying income to reduce tax, overstating expenses, incorrect FMV for capital gains

Penalty Amount

• Penalty: Between 100% to 300% of the amount of tax sought to be evaded
• AO has discretion in fixing the quantum — usually 100% for first-time offenders with full cooperation; higher for deliberate and repeat offences
• The penalty is over and above the tax demand and interest (234A/B/C)

Section 270A — Replaced 271(1)(c) for New Assessments (from AY 2017-18)

Finance Act 2016 replaced Section 271(1)(c) with Section 270A for assessment years 2017-18 onwards. Under Section 270A:

• Under-reporting of income: Penalty at 50% of tax on under-reported income
• Misreporting of income: Penalty at 200% of tax on misreported income (higher, for deliberate misstatement)
• Misreporting examples: False claims, fictitious entries, documents falsely backed, any entry not recorded in books

When Is No Penalty Levied?

• Bona fide mistake: If the taxpayer can prove that the inaccuracy was due to a genuine mistake (e.g., incorrect understanding of tax law, clerical error) — penalty may be waived
• Full disclosure before assessment: If the taxpayer makes a voluntary disclosure of income (before assessment or during assessment proceedings) — courts have held that no penalty should apply
• Income added is debatable: If the addition of income by the AO involves a debatable question of law — courts have held no penalty should apply for a difference of legal opinion
• Section 273A discretion: CCIT/PCIT can waive penalty in genuine cases of financial hardship and full cooperation

Conclusion

Section 271(1)(c) and the new Section 270A penalties are among the most consequential in income tax — making voluntary disclosure and accurate return filing essential. SPOTON provides income tax assessment defence, penalty response and appeal services for taxpayers across Kerala. Contact us for expert tax litigation support.