Steel Scrap or Tax Trap? ITAT Slams PCIT’s Overreach in Ahmedabad Bizman’s Case [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, overturned a revision order by the Principal Commissioner of Income Tax (PCIT) against Vivaa Tradecom Pvt. Ltd., ruling that the tax authority overstepped its powers under Section 263 of the Income Tax Act, 1961. The case involved alleged bogus transactions in steel scrap trading during the 2015-16 assessment year.

Vivaa Tradecom Pvt. Ltd., an Ahmedabad-based company, had declared a loss of Rs.89.92 lakh in its original return. The Assessing Officer (AO) disallowed Rs.3.47 lakh of claimed losses on steel scrap sales to Yug Tradelink Pvt. Ltd., citing an investigation report that questioned the buyer’s genuineness. However, the PCIT later deemed the AO’s inquiry inadequate and directed a re-examination of all purchase and sales entries, potentially treating them as unexplained cash credits.

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The ITAT bench, comprising Siddhartha Nautiyal (Judicial Member) and Annapurna Gupta (Accountant Member)  held that the AO had conducted sufficient inquiries during the assessment. The tribunal noted that the AO had verified purchase-sale details, sought ledger confirmations, and relied on a Directorate of Investigation (Vadodara) report before disallowing the loss. The judges emphasized that the PCIT cannot substitute the AO’s view merely because he preferred a "more elaborate" inquiry.

Citing the Delhi High Court’s ruling in CIT vs. Sunbeam Auto, the ITAT clarified that Section 263 cannot be invoked for "inadequate inquiry" if the AO had applied his mind to the facts. The bench also referenced the Bombay High Court’s Gabriel India judgment, which bars "fishing expeditions" to reopen concluded assessments. The tribunal concluded that the PCIT’s order was unsustainable, as the AO had taken a legally plausible view after due verification.

The ITAT allowed Vivaa Tradecom’s appeal, setting aside the PCIT’s revisionary order.

To Read the full text of the Order CLICK HERE

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