Ruby Mills Limited Vs ACIT (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal partly allowed the appeal filed by Ruby Mills Limited for AY 2007-08 against the order dated 30.12.2025 passed by the CIT(A)-50, Mumbai. The assessee, a public listed company engaged in textile manufacturing and letting out commercial property, challenged several additions and disallowances made in assessment under section 143(3) of the Income-tax Act, 1961.
The Tribunal deleted the ad-hoc additions relating to alleged undervaluation of closing stock and alleged unaccounted consumption of raw material/production. The Assessing Officer had made an addition of Rs. 1,72,64,110, being 10% of closing stock stated at Rs. 17,26,41,098, and a further addition of Rs. 2,61,70,000 under section 69C, being 10% of the stated raw-material cost. The assessee had furnished quantitative details, reconciliations and explanations concerning inventory valuation, consumption, production, work-in-progress and normal process losses. The assessee also contended that the valuation method had been consistently followed and was based on recognised accounting principles.
The Tribunal held that section 69C, concerning unexplained expenditure, could be invoked only where a finding regarding the incurring of expenditure was first brought on record. In the present case, the Assessing Officer had not identified any specific instance of unaccounted consumption, the corresponding vendor from whom alleged purchases were made, or the customer to whom alleged unaccounted production was sold. The Tribunal therefore found that the section 69C addition was based on conjectures and surmises and was not sustainable.
