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Facts
The assessee filed an appeal against the order passed by the Principal CIT. The original assessment order disallowed purchases under Section 37(1) of the Act. The Principal CIT invoked Section 263, directing the AO to assess the amount under Section 69C instead, deeming the AO's original order erroneous and prejudicial to revenue.
Held
The Tribunal held that the AO's action of disallowing purchases under Section 37(1) of the Act was a concluded view. The Principal CIT invoking Section 263 to direct the AO to apply Section 69C constituted a change of opinion, which is not permissible. The issue of whether Section 69C applies was pending before the CIT(A).
Key Issues
Whether the Principal CIT erred in invoking Section 263 to change the AO's assessment section from 37(1) to 69C, constituting a change of opinion.
Sections Cited
37(1), 147, 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) T R Chemicals Limited, Vs Pr.CIT, Sambalpur Main Road, Subash Chowk, Rajgangpur, Odisha-770017 PAN No. :AABCT 1919 M (अपीलाथ� /Appellant) .. (��थ� / Respondent) िनधा�रती की ओर से /Assessee by : Shri K.K.Bajoria & Shri Yogesh Banka, ARs राज� की ओर से /Revenue by : Shri Vijay Singh, Sr. DR सुनवाई की तारीख / Date of Hearing : 01/12/2025 घोषणा की तारीख/Date of Pronouncement : 01/12/2025 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, Sambalpur, dated 15.01.2025 for the assessment year 2018-2019.
It was submitted by the ld. AR that the return filed by the assessee came to be processed and the assessment came to be completed u/s.147 of the Act wherein the purchases from M/s Mideast Integrated Steel Ltd. were disallowed by invoking the provisions of Section 37(1) of the Act. It was the submission that the ld. Pr.CIT invoked his power u/s.263 of the Act on the ground that the disallowances made by the AO u/s.37(1) of the Act instead of Section 69C of the Act, is erroneous and prejudicial to the interest of revenue. It was submitted that the issue is now squarely covered by the decision of the coordinate bench of the Tribunal in the case of Bajrang Steel & Alloys (P) Ltd., passed in order dated 22.09.2025/(2025) 39 NYPTTJ 2034 (Cuttack), wherein the coordinate bench of the Tribunal in para 4 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 the submission that the order u/s.263 of the Act passed by the ld Pr.CIT is liable to be quashed.
In reply, ld. CIT-DR submitted that the transactions were clearly bogus in respect of M/s Mideast Integrated Steel Ltd. It was the submission that admittedly the AO should have invoked the provisions of Section 69C of the Act which he had erroneously not done. It was the submission that this has caused prejudicial to the interest of revenue and the ld. Pr.CIT has rightly invoked his power u/s.263 of the Act.
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 M/s Mideast Integrated Steel Ltd. 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 Mideast Integrated Steel Ltd. It is in regard to the purchases from M/s Mideast Integrated Steel Ltd. Admittedly, it is for the assessee to prove that he has made purchases from M/s Mideast Integrated Steel Ltd. 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.
In the result, appeal of the assessee is allowed. Order dictated and pronounced in the open court on 01/12/2025. Sd/- Sd/- (राजेश कुमार) (जाज� माथन) (RAJESH KUMAR) (GEORGE MATHAN) लेखा सद�य/ ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER �दनांक Dated 01/12/2025 Prakash Kumar Mishra, Sr.P.S. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant - 2. ��थ� / The Respondent- 3. आयकर आयु�(अपील) / The CIT(A),