Fixed Asset-Double Accounting

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M P Arun (Querist)
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30 August 2007 In the year 2005-06 accounting, we have wrongly accounted a fixed asset (Machinery) twice, one based on the proforma invoice and another based on regular invoice. This came to light in 2006-07 when the party's account was reconciled for payment. We have claimed depreciation twice due to this double accounting of the same machinery.
1.Kindly let me know how we can rectify the same in the current audit period 2006-07? Is there any prescribed rule to make this deletion from fixed asset?
2.What will be the tax implication and the action that will be taken by the IT department?
3.What are the disclosures to be made in the current year?
4.How will this affect the auditor and his report of last year?
5.I want to know whether it is possible to rectify the same without reopening previous years books or without revised returns?

CA Prasanna Krishnan V

CA Prasanna Krishnan V (Expert)
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31 August 2007 Dear Sir

1. You can rectify the mistake in the year 2006-07 in Profit & Loss Appropriation A/c area.

2. Instead of allowing the department to do something, better file revised Income Tax return in time rectifying your mistake. Since Statement of Total Income workings are outside your regular books there is no problem by such revised return.

3. In notes on accounts in respect of AS 1, AS 5, AS 6 and AS 10 your notes to disclose the aforementioned mistake and its impact on current years profitability in exact monetary terms.

4. Auditors position is little troubled. However his working papers to prove his rationale approach otherwise can save him.

5. First of all you can not reopen previous years book generally. Avoiding revised return is not advisable.