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TMI Blog1984 (9) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... id firm ? " The assessee carries on the business of manufacture and sale of sugar. It has factories at Sakarwadi and Lakshmiwadi. It owns a sugarcane farm. It is a partner with a 25% share in profits in two firms, Somaiya Farms, Lakh, and Somaiya Farms, Khanapur. It purchases sugarcane from these two firms as also from outsiders, bagaitdars. It also uses sugarcane grown at its own farm. Sugarcane was procured by the assessee in this manner during the assessment year with which we are here concerned, namely, 1962-23. The previous year ended on May 31, 1961. The State of Maharashtra fixes minimum price at which sugar factories can purchase sugarcane. The price is fixed with reference to each sugarcane factory. For the relevant assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence to support the very high price of Rs. 57.50 per ton. It is interesting to note that even for the alleged superiority of the assessee's own sugarcane, the maximum price claimed was Rs. 53 per ton. In our opinion, the disallowance was justified." Mr. Dastur, learned counsel for the assessee, submitted that the ITO had no power to disallow any expenditure that had been incurred on the ground that it was excessive. The deduction for the expenditure was claimed under s. 37 as being expenditure laid out or expended wholly and exclusively for the purposes of the assessee's business. The only power at the relevant time which the ITO had to disallow expenditure was that contained in s. 40(c) as it then read. The provisions of s. 40(c) did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice requiring him to attend and produce the evidence on which he relies in support of his return. The power to " verify the correctness and completeness " of an assessee's return does not, patently, invest the ITO with the power to disallow expenditure which has been in fact incurred by the assessee for the purposes of his business upon the ground that such expenditure is excessive or unreasonable. Section 143(2)(b) does not, therefore, assist the Revenue. The Revenue does not rely upon the provisions of s. 40(c), to which Mr. Dastur adverted. We need not, therefore, consider them. In our view, the case before us is squarely covered by the judgment of the Gujarat High Court in Margabhai Kishabhai Patel & Co. v. CIT [1977] 108 ITR 54, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se transactions was other than the one set out in the books of account of the firm. In these circumstances, it appears to the learned judges that the taxiing authorities had no right to substitute either the market price or the average price in place of the price or value agreed to between the parties to the transaction. In the instant case also, it is not the Revenue's case that the transaction of sale was not bona fide or was sham or that the price was other than the price shown in the assessee's books. It is only if this was established by the Revenue that it would be entitled to treat the price paid as excessive and disallow the excess. It is not enough for the Revenue to say, as was done before us, that because there is relationship b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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