AO Cannot Alter Book Profit u/s 115JB Income Tax Through MAT Adjustment on Alleged Bogus Loss: ITAT [Read Order]
ITAT Delhi held that alleged bogus loss disallowed while computing regular income cannot be added back while computing MAT book profit under Section 115JB
![AO Cannot Alter Book Profit u/s 115JB Income Tax Through MAT Adjustment on Alleged Bogus Loss: ITAT [Read Order]](https://images.taxscan.in/h-upload/2026/05/19/2137390-ao-cannot-alter-book-profit-itat-delhi-taxscan.webp "AO Cannot Alter Book Profit u/s 115JB Income Tax Through MAT Adjustment on Alleged Bogus Loss: ITAT [Read Order]")
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, deleted MAT adjustment made under Section 115JB of the Income Tax Act in respect of alleged bogus loss arising from penny stock transactions after finding that such loss could not be added back while computing book profit under the MAT provisions. The assessee, Bihariji Consultancy Pvt. Ltd., had booked losses on sale of scrip...
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, deleted MAT adjustment made under Section 115JB of the Income Tax Act in respect of alleged bogus loss arising from penny stock transactions after finding that such loss could not be added back while computing book profit under the MAT provisions.
The assessee, Bihariji Consultancy Pvt. Ltd., had booked losses on sale of scrip of SRK Industries Ltd. during AY 2014-15. During scrutiny assessment under Section 143(3) of the Income Tax Act, the AO treated the losses as bogus in light of information relating to suspicious penny stock transactions and added the amount while computing book profit under Section 115JB of the Act.
Aggrieved, the assessee preferred appeals before the CIT(A), who upheld the additions made by the AO.
Before the Tribunal, the assessee contended that book profit has to be computed on the basis of profit and loss account prepared in accordance with the Companies Act and that alleged bogus loss did not fall within any of the adjustments prescribed under Explanation 1 to Section 115JB.
The Revenue supported the orders passed by the lower authorities and contended that the alleged bogus loss had been rightly added while computing book profit under the MAT provisions.
The Tribunal comprising S. Rifaur Rahman (Accountant Member) and Sudhir Kumar (Judicial Member) observed that computation of book profit is governed strictly by the adjustments prescribed under Explanation 1 and no further adjustment can be made beyond the statutory framework.
It further observed that alleged bogus loss arising from penny stock transactions did not fall within any of the prescribed adjustments under Section 115JB and therefore could not be added back while computing book profit under the MAT provisions.
Accordingly, the Tribunal directed deletion of the MAT adjustment made in respect of the alleged bogus loss.
The assessee’s appeals were partly allowed for statistical purposes
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
