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Facts
The assessee filed an appeal against the order of the Pr.CIT, who invoked Section 263 of the Act. The AO had disallowed purchases under Section 37(1) for failure to prove transactions. The Pr.CIT directed that Section 69C should be applied instead of Section 37(1).
Held
The Tribunal held that the Pr.CIT's action of directing the AO to apply Section 69C instead of Section 37(1), when the AO had already taken a view under Section 37(1), amounts to a change of opinion, which is not permissible under Section 263. The Tribunal followed a coordinate bench decision.
Key Issues
Whether the Pr.CIT's direction to apply Section 69C instead of Section 37(1) under Section 263 was justified, or if it amounted to an impermissible change of opinion.
Sections Cited
37(1), 263, 69C
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
(�नधा�रण वष� / Assessment Year : 2018-2019) M/s Balluram Steels Pvt. Ltd, Vs Pr.CIT, Central Circle, 1st Floor, Purohit Market Complex Visakhapatnam Main Road, Rourkela-769012 PAN No. :AACCB 7253 P (अपीलाथ� /Appellant) (��यथ� / Respondent) .. �नधा�रती क� ओर से /Assessee by : Shri P.K.Mishra, AR राज�व क� ओर से /Revenue by : Shri Ashim Kumar Chakraborty, CIT-DR सुनवाई क� तार�ख / Date of Hearing : 02/12/2025 घोषणा क� तार�ख/Date of Pronouncement : 02/12/2025 आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order passed by the ld. Pr.CIT(Central), Visakhapatnam, dated 28.03.2025 for the assessment year 2018-2019.
It was submitted by the ld. AR that in the course of assessment u/s.147 of the Act, the AO had disbelieved the transaction of the purchase of iron ore and had invoked the provisions of Section 37(1) of the Act and had made the disallowance of purchases. It was the submission that the ld. Pr.CIT has invoked his powers u/s.263 of the Act and had directed that the provisions of Sectiion 37(1) of the Act is not to be applied but the provisions of Section 69C of the Act are to be applied. It was the submission that the issue is now squarely covered by the decision of the coordinate bench of the Tribunal in the case of Bajrang Steel and Alloys Private Limited, passed vide order dated 22.09.2025, wherein the coordinate bench of the Tribunal has held as under :- 4. We have considered the rival submissions. A perusal of the order of the Principal CIT shows that, at the outset, the addition of Rs. 60,33,481 as raised in the assessment, has been challenged by the assessee in appeal before the CIT(A). Whether the same is to be assessed under s. 37(1) or under s. 69(C) of the Act, was well within the purview of the learned CIT(A), insofar as, obviously the AO should also have been granted another opportunity to represent its case before the learned CIT(A). It is admitted fact the learned AO in the show-cause notice has referred to the provision of s. 69C of the Act in respect of said addition but the AO wisdom had applied his mind and has made the addition under s. 37(1) of the Act. The act of learned Principal CIT in invoking its powers under s. 263 of the Act to direct the AO to assess the said amount under s. 69C of the Act, is nothing but a change of opinion, insofar as, he is proposing to impose his views over that of the AO. This is not permissible under the provisions under s. 263 of the Act. The AO having taken a view on the issue and applied a particular section the action of the learned Principal CIT in directing that another section is to apply is not permissible and on this ground, we find that order passed under s. 263 of the Act is unsustainable and consequently we quash the same.
It was also submitted by the ld. AR that this Bench of the Tribunal has also decided the similar issue in the case of T.R.Chemicals Limited, passed in order dated 01.12.2025. It was the submission that the order of the ld. Pr.CIT is liable to be quashed.
In reply, ld. Sr. DR vehemently supported the orders of the AO and ld. CIT(A). It was the submission that the transactions for the purchases of iron ore is itself is bogus and as the transaction is bogus the provision of Section 69C is to be invoked. It was submission that vehicles used for the alleged transportation of the Iron ore were not vehicles which could carry the Iron Ore. It was submission that one of the vehicles was the motor cycle. It was submission that this information has also been extracted from the RTO. It was submission that the order of the ld.PCIT u/s.263 of the Act is liable to be upheld.
We have considered the rival submissions. A perusal of the original assessment order clearly shows that the expenses in respect of purchases of raw materials have been disallowed by the AO by invoking the provisions of Section 37(1) of the Act. This is because the assessee was not able to prove the transactions with M/s Jai Ambey Enterprises. A perusal of the provisions of Section 69C of the Act shows that it is in respect of unexplained expenditure. It is a case where the assessee offered no explanation about the source(source) of such expenditure or part thereof. The case before the AO is not in respect of the explanation for the sources for the payment to M/s Jai Ambey Enterprises. It is in regard to the purchases from M/s Jai Ambey Enterprises. Admittedly, it is for the assessee to prove that he has made purchases from M/s Jai Ambey Enterprises. This issue is in any case pending in appeal before the ld. CIT(A). The AO having taken a stand of making disallowance by invoking the provisions of Section 37(1) of the Act, we are of the view that the provisions of Section 69C of the Act does not apply to the facts of the case. Respectfully following the decision of the coordinate bench of the Tribunal, referred to supra, the order of the ld. Pr.CIT passed u/s.263 of the Act is found to be unsustainable and consequently the same stands quashed.