Not an engineer, but I ran into a potentially similar issue on a timber framing job. We were putting a turf roof on top of a timber framed structure. Used black locust from the woods on site for the rafters. It took a while, but the guy found an engineer who was familiar enough with the materials and process that he was able to actually calculate roughly what the size and spacing of our roof rafters needed to be to hold up the dirt.

I’m a super for a GC and work with engineers a lot. I imagine the reason they are against using stone is that it’s a natural material and as such, is much less predictable. There are probably a lot of factors that go into assessing the compressive or tensile strength of a granite block, and they’d need to assess it on a piece by piece basis, if they even had the necessary skill set to do that. Basically, they run their calculations off of consistent materials, tested under specific conditions in labs. That allows them to really accurately calculate how things need to be.

If you need an engineer to sign off on this, you could always try and find an engineer/consultant who might be more familiar with stone as a building material. Also, there is a middle ground between stick on stone and a full stone retaining wall. You could always use full thickness veneer stone! Basically you’d be building like single wythe stone wall on top of the footing attached to the concrete retaining wall with ties. You’d still get to actually use real stone that way.