AO Cannot Alter Net Profit In Profit & Loss Account Except Under Explanation To S.115J Of Income Tax Act: Bombay High Court

The Bombay High Court has clarified the jurisdiction of an Assessing Officer (AO) when computing the book profit for the levy of Minimum Alternate Tax (MAT) under Section 115J of the Income Tax Act. The court ruled that an AO cannot go behind the net profit as shown in the company's audited Profit and Loss Account, which is prepared in accordance with the Companies Act. The AO's power to make adjustments to this net profit is strictly limited to the specific additions and deductions mentioned in the explanation to Section 115J. The High Court held that the AO does not have the authority to re-scrutinize or re-calculate the net profit based on their own interpretation of accounting standards. This judgment upholds the sanctity of the audited financial statements for the purpose of MAT calculation and prevents the AO from making arbitrary adjustments.