Rule 7 valuation governs tea transfer income; revision failed on an incorrect factual assumption.

For agricultural income computed on tea leaf transfers to an instant tea unit, the note states that the rule 7 valuation, not the internal book value credited in the accounts, governed the assessment because the record showed the transfer value had already been finally worked out under that rule. It further notes that the revisional authority proceeded on a mistaken assumption that the Income-tax Officer had not accepted the rule 7 value, making the revisional order unsustainable as it rested on an incorrect factual premise. The revised assessment was therefore set aside, and the assessing authority was left to act in accordance with the Tribunal's directions.

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Issues: Whether, for computing the agricultural income attributable to green tea leaves transferred to the instant tea unit, the value credited in the assessee's accounts could be adopted instead of the value computed under rule 7 of the Income-tax Rules; and whether the revisional order was vitiated by an erroneous assumption of fact.

Analysis: The accounting and assessment materials showed that the value of the green tea leaves transferred to the instant tea division had been finally worked out under rule 7, and that the difference between the notional value in the accounts and the rule 7 value had been dealt with in the assessments. The revisional authority proceeded on the footing that the Income-tax Officer had not accepted the rule 7 value and that the notional value alone should govern. That assumption was contrary to the record. An order founded on such an incorrect factual premise was liable to be treated as vitiated by error apparent on the face of the record. The earlier directions of the Tribunal also supported computation on the rule 7 basis.

Conclusion: The notional transfer value in the accounts could not be substituted for the rule 7 value, and the revisional order could not stand.

Final Conclusion: The revision succeeded, the impugned revisional order and the consequential revised assessment were set aside, and the assessing authority was left free to proceed in accordance with the Tribunal's directions.

Ratio Decidendi: Where the record shows that the transfer value of goods used in a mixed agricultural and industrial operation has been finally determined under the applicable rule, a revisional authority cannot substitute an internal notional account value on a mistaken factual assumption; an order based on such an error is unsustainable.

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