Penalty u/s 270A vs 271AAC is a common area of confusion in income-tax penalty proceedings. Though both provisions deal with penalties, they apply to different situations, operate under different conditions, and carry different consequences. Understanding the distinction is critical for both taxpayers and practitioners.
What the Law Says – Penalty u/s 270A vs 271AAC
- Section 270A applies to under-reporting or misreporting of income
- Section 271AAC applies to specified income detected during search
They are not interchangeable.
Key Differences Between Penalty u/s 270A and 271AAC
- Nature of default
- Quantum of penalty
- Opportunity of defence
- Applicability conditions
Applying the wrong section makes the penalty unsustainable.
Applicability of Penalty u/s 270A
Section 270A applies in cases of under-reporting or misreporting of income arising during assessment or reassessment proceedings. The provision contemplates a comparison between returned income and assessed income.
Opportunity of defence is available, and penalty is not automatic.
Applicability of Penalty u/s 271AAC
Section 271AAC applies in cases involving specified income detected during search and covered by sections such as 68, 69, 69A, 69B, and 69C. The provision is harsher and operates in a limited but serious category of cases.
The scope of defence under section 271AAC is significantly narrower.
Scope of Penalty u/s 270A
Section 270A applies where income is under-reported or misreported during assessment or reassessment proceedings. The provision allows the assessee an opportunity to explain the difference between returned and assessed income.
Penalty under this section is not automatic and depends on facts and conduct.
Scope of Penalty u/s 271AAC
Section 271AAC applies to specified income detected during search proceedings, particularly in relation to unexplained cash, investments, or expenditure covered under sections 68, 69, 69A, 69B and 69C.
The provision is stringent and leaves limited scope for defence once conditions are satisfied.
Opportunity of Hearing and Defence
Under section 270A, the assessee can demonstrate:
- Bona fide explanation
- Full disclosure of material facts
- Absence of misreporting
Under section 271AAC, penalty is largely consequence-driven once conditions are satisfied.
Consequences of Applying the Wrong Section
Applying section 271AAC in a case falling under section 270A (or vice versa) renders the penalty legally unsustainable. Courts and tribunals have consistently held that penalty provisions must be strictly construed.
Wrong application goes to the root of jurisdiction.
What you should check immediately
- Nature of addition
- Whether search was conducted
- Whether income is “specified income”
- Whether correct section is invoked
Practical Takeaway
Penalty u/s 270A and 271AAC operate in distinct fields. Understanding the correct provision is essential, as applying the wrong section can itself be a valid ground for quashing penalty proceedings.
Penalty provisions under the Income-tax Act are available on the official Income-tax Department website.
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