Central Board of Direct Taxes amends Form 161 to extend penalty waiver route to income misreporting cases

Key facts

• The Central Board of Direct Taxes (CBDT) notified a revised Form 161 on October 8, 2026, bringing misreporting cases within the penalty waiver process under section 440(2) of the Income-tax Act, 2025.
• Form 161 allows taxpayers to seek immunity from penalty under section 439 and prosecution under sections 478 or 479 if they accept the assessment order, pay the full tax and interest demand, and do not file an appeal.
• Form 161 must be filed within one month after the end of the month in which the assessment or reassessment order is received, and the Assessing Officer must decide within three months from the end of the month of receipt.
• The revised form requires under-reported income to be reported in three categories: misreporting under section 439(11)(a) to (f), misreporting under section 439(11)(g), and under-reporting not arising from misreporting.
• Additional tax payable in lieu of penalty is 100% of tax for the first misreporting category and 120% for the second, while section 439 penalties are 50% of tax for under-reporting and 200% for misreporting.
• Key changes include replacing 'Assessment Year' with 'Tax Year', mandatory e-filing through the income tax portal, structured PAN-based identity fields, repeatable BSR/challan payment rows, and Rule 231 amended to expressly cover waiver.
• Under the Income-tax Act, 1961, relief was available under section 270AA read with Rule 129 and Form 68 and covered only under-reporting; the Finance Act, 2026 extended section 440 benefit to misreporting cases provided the additional tax is paid.
• Documents required for filing include assessment or reassessment order details, notice of demand details, proof of payment (BSR Code, challan serial number, date, amount), and PAN of the applicant.