Income Tax Act 1961 Section 271: Penalty for Concealment (2026)

Explainer · Income Tax · Penalty

Updated for 2026 · Claw Editorial

Section 271 of the Income Tax Act, 1961, and in particular Section 271(1)(c), was the well-known penalty for concealing income or furnishing inaccurate particulars of income. It carried a heavy charge, from 100% up to 300% of the tax sought to be evaded. There is one point you must know before anything else. For assessment year 2017-18 onwards, Section 271(1)(c) has been made inoperative and replaced by Section 270A, which penalises under-reporting and misreporting of income. So Section 271(1)(c) now only governs older years. This explainer sets out how it worked and what applies today. Last verified October 2026.

01An important note on the year

If you are reading about Section 271 to understand a current penalty, start here. The Finance Act, 2016 inserted Section 270A and put a sunset clause in Section 271. The effect is that:

• Up to assessment year 2016-17: the penalty for concealment runs under Section 271(1)(c).
• Assessment year 2017-18 onwards: there is no concealment penalty under Section 271(1)(c); instead, Section 270A applies for under-reporting and misreporting of income.

02What Section 271(1)(c) covered

For the years it still governs, Section 271(1)(c) lets the Assessing Officer levy a penalty where, in the course of any proceeding, a person has:

• concealed the particulars of income; or
• furnished inaccurate particulars of income.

The penalty is in addition to the tax. It is not automatic, and courts have held the officer must record how the case falls within one of these two limbs, and must give the taxpayer a hearing before levying it.

03The penalty range

The penalty under Section 271(1)(c) is a band, not a fixed figure.

The officer fixes the amount within this range based on the facts. Because the penalty depends on the "tax sought to be evaded", the exact calculation is often a point of dispute, especially where part of the addition is deleted in appeal.

04Concealment against inaccurate particulars

The two limbs are different, and the difference matters. Concealment is hiding income, such as not disclosing a receipt. Furnishing inaccurate particulars is giving wrong details, such as a false claim of expense. The Supreme Court, in CIT v. Reliance Petroproducts, held that a claim that is simply not accepted, without anything false, does not by itself attract the penalty.

Courts have also set aside penalties where the notice did not say which limb was alleged, because the taxpayer could not then meet the case. So the wording of the penalty notice is often decisive.

05The move to Section 270A

Section 270A, which applies from assessment year 2017-18, replaced the subjective concept of concealment with a more mechanical test based on the difference between the assessed income and the returned income.

• Under-reporting of income attracts a penalty of 50% of the tax on the under-reported income.
• Misreporting, which is the more serious category, attracts 200% of that tax.

Section 270AA also allows immunity from the 270A penalty in some cases if the tax and interest are paid and no appeal is filed.

06A practical note

If you face a penalty, first fix the assessment year, because that decides whether it is a Section 271(1)(c) matter or a Section 270A matter. Then check the penalty notice. For an older year, see whether it states the correct limb, concealment or inaccurate particulars. For a recent year, see whether it correctly puts the case as under-reporting or misreporting.

A penalty order can be appealed. See how to appeal an income tax order to the CIT (Appeals) and ITAT. Penalty often falls away if the underlying addition is deleted in the quantum appeal.

07Where Claw fits

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

Penalty disputes are won and lost on earlier rulings, from the wording of the notice to how the "tax sought to be evaded" is worked out. Claw lets you search more than 30 crore judgments and orders, with results in under 5 seconds, so you can find how the Supreme Court, High Courts and the ITAT have read Section 271(1)(c), the Reliance Petroproducts line of cases, and the new Section 270A. Reported authority runs from Supreme Court rulings of 1950 and High Court rulings of 1990 to recent orders. You can also track a live matter, with its orders and hearings, by party name across 9,102 courts, benches and forums. Claw does not use the documents you upload to train its AI models.

Create a FREE Claw account to track a penalty appeal and its hearings, and use case search across Indian courts to find how Section 271 and Section 270A have been applied. For ongoing files, teams use income tax appeals tracking.

08Sources and further reading

• India Code (Income Tax Act, 1961 bare text): indiacode.nic.in
• Income Tax Department (law and acts): incometaxindia.gov.in
• Income Tax e-filing portal: incometax.gov.in
• Claw: clawlaw.in

This explainer is general information, not legal or tax advice. Tax law changes through the annual Finance Acts and judgments, so check the current text and take advice from a professional before you act.

09Frequently asked questions