Court sets aside Rs. 6,58,965 income addition based on rice bran price difference. Authorities unjustified. Appeal allowed.

The court ruled in favor of the appellant, setting aside the addition of Rs. 6,58,965 as income related to the rice bran price difference. The court concluded that the authorities were unjustified in adding income based on the price difference of rice bran purchased and sold. The appeal was allowed, and the appellant succeeded in challenging the deemed additional sale price assessment.

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Issues involved:
Assessment of additional income on sale of rice bran based on deemed additional sale price without basis.

Analysis:
The appellant challenged the addition of Rs. 6,58,965 as additional income due to the sale of rice bran to a concern. The Assessing Authority contended that the appellant bought rice bran at a higher rate and sold it at a lower rate to reduce profit, benefiting the concern operating adjacent to the appellant. Consequently, the Assessing Authority rejected the appellant's accounts under Section 145(3) of the Income Tax Act. The appellant's appeal to the Commissioner of Income-tax (Appeals) and subsequent second appeal were both dismissed, leading to the current appeal.

The court referred to the case of CIT v. Calcutta Discount Co. Ltd., where it was established that if a trader sells goods at a price below market value in a genuine transaction, tax authorities cannot ignore the actual price received to determine profit. The court also cited the case of CIT v. Keshavlal Chandulal, emphasizing that there is no obligation under income tax law to sell goods at market price if sold at a concessional rate. The court noted that the exception under Section 40(A)(2a) did not apply as there was no relationship specified between the parties.

Based on the legal precedents, the court concluded that the authorities were unjustified in adding income based on the price difference of rice bran purchased and sold. The court ruled in favor of the appellant, setting aside the impugned orders and the addition of Rs. 6,58,965 as income related to the rice bran price difference. The appeal was allowed, and the appellant succeeded in challenging the deemed additional sale price assessment.

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