ALANG STEEL RECYCLING PRIVATE LIMITED,BHAVNAGAR vs. THE PR. CIT-1, AHMEDABAD

Facts

The assessee's assessment for AY 2018-19 was reopened based on allegations of bogus purchase bills. During reassessment, the AO disallowed ₹77,61,745/- as non-genuine business expenditure under section 37. The PCIT invoked revisionary powers under section 263, contending that the disallowance should have been made under section 69C read with section 115BBE, as the AO failed to invoke the correct provisions of law, rendering the assessment order erroneous and prejudicial to revenue.

Held

The Tribunal held that the AO had taken a legally permissible and plausible view by disallowing the amount under section 37, as purchases were recorded in books and payments made via banking channels, thereby explaining the source of expenditure. The mere preference of the PCIT for section 69C/115BBE did not render the assessment order erroneous or prejudicial, and disallowing non-genuine business expenditure under section 37 does not automatically convert it into unexplained expenditure under section 69C. Consequently, the impugned revisionary order was set aside.

Key Issues

Whether the PCIT was justified in invoking revisionary jurisdiction under section 263 on the ground that the Assessing Officer ought to have disallowed bogus purchases under section 69C read with section 115BBE instead of section 37 of the Income Tax Act.