Rs 3.99L penalty for under-reporting income

Mr Sharma from Sikar, India, failed to file an income tax return, leading the Income Tax Department to send him a tax notice. Sharma subsequently filed an Income Tax Return (ITR) declaring an income of Rs 12.9 lakh for the Assessment Year (AY) 2018-19. However, the Income Tax Assessing Officer (AO) believed that if Sharma had not been notified, his unreported income would have gone unnoticed.

Consequently, the AO initiated tax penalty proceedings under Section 270A of the Income Tax Act, which could levy up to 200% of the tax owed. The tax on the unreported income was Rs 1.99 lakh, and the AO levied a penalty of Rs 3.99 lakh (200%) on Sharma. The Commissioner of Appeals (CIT A) confirmed this penalty, but Sharma appealed to the Income Tax Appellate Tribunal (ITAT) in Jaipur. The case was won by Sharma, who hired legal counsel to contest the penalty.