Case Law Details
Bihariji Consultancy Pvt Ltd Vs ITO (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, heard connected appeals relating to assessment orders passed under Sections 143(3) and 154 of the Income Tax Act for Assessment Year 2014-15. The Assessing Officer had treated losses arising from the sale of shares of SRK Industries Ltd. as bogus, relying heavily on an Investigation Wing report and treating the scrip as a suspicious penny stock transaction. The assessee argued that the transactions were not properly verified and relied on the coordinate bench ruling in Vishwas Marketing Services Pvt. Ltd. vs. ITO, where a similar issue had been remitted back to the Assessing Officer for fresh examination.
The Tribunal observed that the facts were similar to the earlier precedent and noted that the Assessing Officer had relied mainly on the Kolkata Investigation Wing report without adequately verifying the transactions undertaken by the assessee. The Tribunal also referred to information obtained through the Right to Information Act, which, according to the earlier decision, went to the root of the investigation. Accordingly, the Tribunal restored the issue to the file of the Assessing Officer for denovo assessment after granting proper opportunity of hearing and considering all relevant material.
On the issue of Minimum Alternate Tax under Section 115JB, the Tribunal held that the Assessing Officer had no jurisdiction to alter the book profit by disallowing the alleged bogus loss from the scrip transaction. It observed that the assessee had prepared the Profit and Loss Account in accordance with Schedule III of the Companies Act, 2013, and that no provision under Explanation 2 to Section 115JB permitted such adjustment. The MAT adjustment was therefore deleted.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. These appeals are filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 13.09.2024 and 07.03.2025 for the Assessment Year 2014-15 against the order passed by ld. CIT (A) relating to assessment framed u/s 143(3) and u/s 154 of the Income-tax Act, 1961 (for short ‘the Act’)
2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. For the sake of brevity, we are taking the facts from the appeal being ITA No.2701/Del/2025 as lead case.
3. At the time of hearing, ld. AR of the assessee brought to our notice detailed facts in the present case wherein AO observed from the purchase and sale of scrip that the assessee on the sale of SRK Industries Ltd. scrip had booked losses and treated the same as bogus heavily by relying on the information collected on the Investigation Wing Report without verifying the transactions under consideration. The ld. AR of the assessee submitted that on the similar issue, coordinate Bench in the case of Vishwas Marketing Services Pvt. Ltd. vs. ITO in ITA No.3827 & 3572/Del/2019 dated 06.11.2024 remitted the issue back to the file of AO to verify the transactions under consideration and redo the assessment afresh. He prayed that since the facts in the present case are exactly similar to the issue under consideration, the same may also be remitted back to the AO for proper appreciation on facts.
4. Further ld. AR of the assessee submitted that adjustment made by the AO on the book profit determined under section 115JB of the Act by disallowing the loss declared by the assessee in the sale transaction of scrip of SRK Industries Limited as discussed above. He submitted that the AO cannot disturb the book profit determined as per the profit & loss which was compiled as per the Companies Act. There are no provisions of Explanation 2 to section 115JB of the Act which attracts to make the adjustment to the said book profit and he prayed that the same may be directed to be deleted.
5. With regard to appeal being ITA No.2702/Del/2025, he submitted that the issue is similar to the issue raised in AY 2014-15 on sale of scrip of M/s. SRK Industries Limited.
6. On the other hand, ld. DR of the Revenue supported the findings of the lower authorities as the scrip involved is suspicious transaction falls under penny stock.
7. Considered the rival submissions and material placed on record. We observed that the issue in the present case is exactly similar to the facts in the case of Vishwas Marketing Services (supra). Since the facts are exactly similar we are inclined to remit this issue to the file of AO to redo the assessment as per the facts and appreciate the relevant details on record relating to the sale/purchase of this scrip. The relevant findings of the coordinate Bench is reproduced as under :-
“13. Considered the rival submissions of both parties and perused the material available on record. We observed that in this case, the AO has observed from the statement of sale/purchases of scrips that the assessee has that the assessee has booked loss on sale of SRK scrips and merely relying on the Kolkata Investigation Wing report and the finances of the SRK, came to the conclusion that the assessee has involved in booking bogus loss without properly verifying the transactions carried on by the assessee. This is clearly visible from the information collected by the assessee through Right to Information Act (“RTI”) wherein several important information are collected by him and not carried out proper verification/investigation before rejecting the claim of the assessee.
As per the assessment record available on record, the AO has completed assessment hurriedly without properly appreciating the various information collected by him during the assessment proceedings. We observe that the information collected by the assessee through “RTI” goes to the root of the investigation and the relevant addition proposed by the AO. Therefore, we deem it fit and proper to remit this issue back to the file of AO to redo the assessment denovo after giving proper opportunity of being heard to the assessee and to consider the information available in the assessment records itself. Grounds raised by the assessee are accordingly, allowed for statistical purposes.”
8. Respectfully following the above precedent, we restore this issue in both the appeals to the file of AO as per the directions given above and accordingly, this issue is allowed for statistical purposes in both the appeals.
9. With regard to the issue relating to section 115JB, we observed that the AO has adjusted book profit by disallowing the loss claimed by the assessee in the abovesaid scrip considering it as bogus. However as per the provisions of section 115JB, there are no provisions to exclude the abovesaid transaction and it did not fall under any of the explanation to the above section, therefore, the AO has no jurisdiction to adjust profit. As per the records, we observed that assessee has prepared its statement of Profit & Loss Account in accordance with the provisions of Schedule III to the Companies Act, 2013. Therefore, the AO cannot make such adjustment to the book profit, hence this ground raised by the assessee is allowed.10. In the result, the appeal preferred by the assessee in ITA No.2701/Del/2025 is allowed for statistical purposes. Another appeal being ITA No.2702/Del/2025 against the 154 order, since the issues are common, the same is allowed for statistical purposes. The issue involved in the Assessment Year 2014-15, the second appeal of the assessee is infructuous. Therefore, the common issue raised in ITA No.2701/Del/2025 alone is remitted back to Assessing Officer.
Order pronounced in the open court on this 8th day of May, 2026.
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