Accounting treatment for expenses disallowed of previous year

This query is : Resolved

Anil Jain (Querist)
Follow

18 April 2015 What should be the accounting treatment for expense disallowed in the assessment of previous FY. Can we show misc. income in the year of demand raised. For e.g. if Rs. 10 lakhs disallowed as expenses during assessment or survey for FY 2011-12. and now after completion of survey.. demand is raised during FY 2013-14. For Rs.3 lakh as tax and Rs. 1 lakh for interest. Please confirm can we treat Rs. 10 Lakh as misc income during FY 2013-14. And accordingly provision can me made for income tax and interest liability?

CA Subham Verma

CA Subham Verma (Expert)
Follow

20 April 2015 Income Tax act is different and books of accounts is different.
If any expense is disallowed then no provision is required for disallowed expenses in any year, however provision for tax, intt, penalty etc are required to make in the books in the year in which demand is raised.

In your example, only provision for income tax of Rs. 3 lakh and Rs. 1 lakh for interest are required to make in FY 2013-14 if demand is raised in 2013-14.