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Assessee's liability for penalty under s. 271(1)(c) of the IT Act based on discrepancy in account books. Analysis: The dispute revolved around the assessee's liability for penalty under section 271(1)(c) of the IT Act due to discrepancies in the account books. The Income Tax Officer (ITO) noted that the purchases of the assessee far exceeded the sales, and the closing stock value was inconsistent. The ITO initiated penalty proceedings after the assessee agreed to an addition of Rs. 16,000 to resolve the issue. The assessee claimed that his agreement was to end the litigation and that he was unaware of the penalty implications due to being illiterate. However, the ITO believed the addition was agreed upon after concealment was detected. The Assessing Officer concluded that the assessee had concealed income and levied a penalty of Rs. 7,894, which was later overturned by the Appellate Authority. The main contention raised by the Revenue was that the addition was accepted by the assessee only after being cornered and unable to explain the discrepancies in the account books. The Revenue argued that the concealment was proven beyond doubt as the explanation provided by the assessee was found to be unsubstantiated. However, the Tribunal disagreed with this assertion, emphasizing that not every agreed addition necessarily indicates concealment. Citing precedents like Sohiner Singh and Bros. vs. CIT and CIT vs. Punjab Tyres, the Tribunal highlighted the need for independent evidence to establish concealed income in cases of agreed additions. During the appeal, it was argued that the addition was agreed upon to avoid penalties, and the ITO had assured no penalty for concealment would be imposed. The Tribunal found no material to justify that the discrepancy in the books was due to fraud or wilful neglect by the assessee. The Tribunal noted the personal hardships faced by the assessee and his illiteracy as factors influencing his agreement to the addition. Ultimately, the Tribunal dismissed the appeal, stating that the addition was accepted due to the assessee's circumstances and lack of intent to conceal income, rather than deliberate fraud or neglect. In conclusion, the Tribunal upheld the decision of the Appellate Authority, emphasizing that the addition to the income was not indicative of concealed income but rather a result of the assessee's circumstances and lack of proper documentation. The appeal was dismissed, affirming that there was no concealment of income by the assessee.
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