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2008 (1) TMI 644 - AT - Income TaxValidity of order passed by CIT u/s 263 - Disallowance u/s 40A - of orders prejudicial to interest of revenue - Profit is earned from the purchases made from a sister concern - HELD THAT:- In our opinion the ld. CIT has considered the fair market value of the purchases only by keeping in mind the purchases made from 2 outside parties, i.e., M/s. Tilak Holding and M/s. Mega Power Builders while the sales made by the assessee at the rate of Rs. 7,925 per MT should also be considered as the fair market price of the DoC. In this transaction the assessee is the seller and the party to whom the sale was made is the purchase and the transaction also exhibits price of the goods. This is the reason where a profit is earned from the purchases made from a sister concern, disallowance under section 40A(2)(b) is not justifiable. It is not the case that purchases were made in the past. The sale and purchase of DoC has taken place in a period of 2 months only. The assessee had earned the profit. The ld. CIT cannot expect that assessee should earn how much profit whether it is Rs. 25 or Rs. 725. AO might have not discussed this issue for this simple reason. We also find force in the other arguments raised before the ld. CIT also. The very basis of the enquiry is not available therefore, the ld. CIT is not justified in taking action u/s 263 of the Act. Thus, we allow the appeal and quash the order passed under section 263. In the result, the appeal is allowed.
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