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Issues:
1. Satisfaction for initiating penalty proceedings under section 271(1)(c) 2. Valuation of stock and relief granted by CIT(A) 3. Imposition of penalty in relation to the addition of Rs. 3,14,867 Issue 1 - Satisfaction for Penalty Proceedings: The Third Member found the issue redundant due to a legislative amendment under the Finance Act, 2008, retroactively affecting section 271(1B) of the Income-tax Act, 1961. The legislative amendments were deemed to satisfy the requirement of the Assessing Officer's satisfaction for initiating penalty proceedings. The learned counsel for the assessee conceded that the issue favored the department, leading to upholding the Accountant Member's order over the Judicial Member's. Issue 2 - Valuation of Stock and Relief Granted: The dispute arose from the addition of Rs. 6,91,836 for excess stock found during a survey. The CIT(A) accepted the stock as belonging to a sister concern based on evidence provided by the assessee. The penalty was deleted to the extent of Rs. 1,50,788 as no concealment was established. However, in the case of the remaining addition of Rs. 3,14,867, the CIT(A) sustained the penalty as concealment was deemed established. The Judicial Member supported the CIT(A)'s decision, citing the Supreme Court's decision in T. Ashok Pai v. CIT. In contrast, the Accountant Member dissented, justifying the penalty imposition based on lack of substantiated claims by the assessee. Issue 3 - Imposition of Penalty: The disagreement continued regarding the ownership of stock found during the survey. The Judicial Member and the Third Member agreed that the stock belonging to the sister concern was adequately proven, justifying the deletion of penalty. However, in the case of the remaining addition related to the claim of a 40% markup on stock prices, the Accountant Member's stance was upheld. The Accountant Member found the claim unsubstantiated, leading to the sustained penalty. The Third Member supported the Accountant Member's decision, emphasizing the lack of evidence to support the claimed rebate and the need for penalty imposition based on the actual physical stock found. In conclusion, the matter was referred back to the regular Bench for further proceedings based on the majority opinion.
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