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Section 271AAC of the Income Tax Act deals with penalties for underreporting income. Under this provision, if the assessing officer determines that a taxpayer has underreported his or her income, then the taxpayer will be liable to pay a penalty of 50% of the amount of tax payable on the underreported income.

Procedure. 274. (1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard.

(2) 6 No order imposing a penalty under this Chapter shall be made- (a) by the Income- tax Officer, where the penalty exceeds ten thousand rupees; (b) by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Deputy Commissioner.]

CBDT notifies Form 69 for making application for recomputation of income. The Finance Act, 2022 inserted an Explanation 3 with retrospective effect from the Assessment Year (AY) 2005-06 providing that for Section 40(a)(ii), the term 'tax' shall include and be deemed to have always included 'surcharge' or 'cess'.

274. (1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard.

With the use of Rule 132, taxpayers who have claimed a cess or surcharge deduction can disclose information about their taxable income, tax liability, and the remaining cess or surcharge to be paid. Form 69 must be used to electronically submit the required information.

274/271(1)(c) of the Act has acknowledged the initiation of penalty proceedings for furnishing of inaccurate particulars of income, therefore, the penalty levied by the Assessing Officer and affirmed by the ld. Commissioner does not require any interference on this score.