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Issues Involved:
1. Legality and factual correctness of the CIT(A)'s order under section 250(6) of the I.T. Act. 2. Confirmation of the penalty imposed under section 271(1)(c) of the I.T. Act, 1961. Issue-wise Detailed Analysis: 1. Legality and Factual Correctness of the CIT(A)'s Order: The assessee challenged the CIT(A)'s order dated 18-10-2004, claiming it was contrary to law and facts. The assessee declared an income of Rs. 51,130 and filed a return on 31-12-1996, accompanied by relevant financial documents. The assessee's business involved running a hotel and restaurant. The trading and profit and loss account showed Rs. 1,70,436 as provisions/raw materials consumed and Rs. 1,90,954 as food and beverage sales. The Assessing Officer (AO) found the material consumption rate of 89.77% in the restaurant account to be high. The AO requested detailed records, including menu cards and daily consumption of raw materials. Upon examination, discrepancies were found between the stock register and the regular books of account. The AO computed the total income at Rs. 1,72,030 and initiated penalty proceedings under section 271(1)(c), imposing a penalty of Rs. 65,004. The CIT(A) confirmed this penalty, leading to the current appeal. 2. Confirmation of the Penalty Imposed Under Section 271(1)(c): The assessee argued that the quantum addition was based on estimates and lacked concrete evidence. The assessee cited several judicial precedents to support their stance. The revenue countered that a survey revealed duplicate books that did not match the regular accounts, justifying the penalty. The Tribunal reviewed the arguments and records, noting that the penalty was not solely based on estimates but on discrepancies and suppression of sales leading to income concealment. The Tribunal referenced multiple judicial pronouncements, including CIT v. Dhillon Rice Mills and Harigopal Singh v. CIT, emphasizing that penalties should not be based on estimates alone. However, in this case, the penalty was justified due to the assessee's failure to provide a satisfactory explanation for the discrepancies. The Tribunal further noted that the AO had found defective and incomplete books, with duplicate stock registers showing discrepancies in raw material consumption and sales. The Tribunal upheld the AO's findings, stating that the judicial precedents cited by the assessee were not applicable due to the specific facts of the case. The Tribunal concluded that the penalty was not based on mere estimation but on concrete evidence of inaccurate particulars and income concealment. Conclusion: The Tribunal upheld the CIT(A)'s order, confirming the penalty under section 271(1)(c) due to the assessee's failure to maintain accurate books and explain discrepancies, leading to income concealment. The appeal was dismissed.
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