The assessee initially claimed depreciation, which was disallowed because the cost of the asset was already considered as an application of income. However, the claim of depreciation was not made with a deliberate intent to furnish inaccurate particulars. The trust later withdrew its ground of appeal before the Commissioner (Appeals), acknowledging that the depreciation claim was erroneously made.

Held that the voluntary withdrawal of the appeal and acceptance of the disallowance indicates a bonafide mistake rather than an intentional misrepresentation.

Held that the AO was not correct in levying a penalty u/s. 271(1)(c), as the claim of depreciation was not made with a fraudulent or malafide intent. The assessee voluntarily agreed to the error and withdrew the appeal before the Commissioner (Appeals). Penalty u/s. 271(1)(c) should not be sustained.(AY. 2016-17)