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Judgment
PER S.RIFAUR RAHMAN,AM:
This appeal is filed by the assessee against the order passed by the ld. Commissioner of Income-tax/National Faceless Appeal Centre (NFAC), Delhi [for short ‘ld. CIT (A)] dated 16.02.2026 for the Assessment Year 2016-17 affirming the penalty order dated 14.02.2022 passed under section 271(1)(c) of the Income-tax Act, 1971 (for short ‘the Act’).
At the time of hearing, ld. AR of the assessee brought to our notice that the penalty levied by the AO on the basis of disallowance of depreciation and set off of losses claimed by the assessee in the quantum proceedings. He also brought to our notice that vide penalty order, the AO proceeded to levy the penalty on the above claim of the assessee.
On the other hand, ld. DR of the Revenue has not objected to the factual position explained by the ld. AR.
Considered the rival submissions and material placed on record. We observed that in the quantum proceedings, the AO has rejected the depreciation claimed by the assessee and also rejected the set off of losses claimed by the assessee. We observe that it is a basic requirement of the provisions of law that definite finding is required to be recorded by the AO for reaching to a conclusion with regard to concealment of income or furnishing of inaccurate particulars of income and without any such findings, there cannot be any question of imposition of any penalty u/s 271(1)(c) of the Act. We observe that assessee cannot be penalized for making a claim of expenditure, which is not acceptable to AO. We observe that the AO has not brought on record anything contrary to establish that claim of assessee does not pertain to the expenses incurred except assessee failed to furnish the required details and not preferred appeal before first appellate authority. In this regard, we find force from the decision of Hon’ble Supreme Court in the case of Reliance Petroproducts Ltd. reported in 322 ITR 158 (SC) wherein it is held that an incorrect claim does not amount to furnishing of inaccurate particulars of income. Keeping in view the totality of the facts and circumstances of the case, we are of the considered view that penalty under section 271(1)(c) of the Act cannot be imposed on the basis of disallowance of expenditure. Accordingly, the penalty levied is deleted and the appeal of the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.