Assessee-company was engaged in the business of manufacturing and trading in gold bars and ornaments. During the year, assessee made purchases from two related parties. Since the assessee failed to justify the arm’s length price of said purchases, Assessing Officer disallowed a certain amount under section 40A(2)(b).On appeal, the CIT(A) directed the Assessing Officer to adopt an average gross profit rate for the three assessment years 2012-13 to 2014-15 for determining the extent of excessive payment.  On appeal by revenue, the Tribunal held that the determination of fair market value under section 40A(2)(a) requires a factual inquiry into prevailing market rates of relevant goods during the period of transaction. Since the assessee dealt in precious metals and ornaments, prices of which were subject to daily fluctuations, it was incumbent upon the Assessing Officer to examine relevant market data available in the public domain or through comparable independent transactions before arriving at a conclusion regarding excessiveness. However, lower authorities had neither referred to nor relied upon such objective market data to determine the fair value of the purchases in question. Approach adopted by the Assessing Officer in computing disallowance solely based on a fall in gross profit rate, without corroborating the same with market evidence, could not be sustained in law. Accordingly, the matter was to be remanded back to the file of CIT(A)  with a direction to re-adjudicate the issue afresh after examining the fair market value of purchases made from related parties during the relevant period, based on contemporaneous data.  (AY. 2013-14)