Income tax treatment on stock variation in vat survey
This query is : Resolved
06 November 2014
Dear Sir, M/s XYZ is a Partnership Firm.
During Previous Year, an Enforcement Survey was done by the Vat Authority. They found that there was variation in Stock and Cash.
The Physical Stock verified by them was lower than the Stock Ledger as per book. Due to Stock Variation, they took the variance in stock as Undisclosed Sales, and also charged VAT (+Penalty) on the Undisclosed Sales.
They treated it as Sale without Bill and charged Tax accordingly and also 20% Penalty on the Tax Amount.
Similarly, they charged VAT (+Penalty) on Variance in Cash.
Now, the problem is regarding Income Tax Treatment of the Stock Variation, VAT & Penalty.
Am I Right? If,I
1. Take Penalty as Revenue Expenditure and Disallowed in 44AB report.
2. Make an entry for Cash Sales for Stock Variation amount.
3. I am afraid, If I show Cash Sales in the Books of Accounts for the Short Stock, Will ITO not Challenge the Books of Accounts.
4. In Sales Tax Quarterly Returns, no effect of VAT Survey has been reflected.
Clarify me Please about the Treatment in XYZ Books for the Above Query for Income Tax Purpose.
Can somebody throw light on my issues that how to treat this concealed Sale and Tax & Penalty in filing Income Tax Return as well as Sale Tax Return.
Thanks in Advance
During Previous Year, an Enforcement Survey was done by the Vat Authority. They found that there was variation in Stock and Cash.
The Physical Stock verified by them was lower than the Stock Ledger as per book. Due to Stock Variation, they took the variance in stock as Undisclosed Sales, and also charged VAT (+Penalty) on the Undisclosed Sales.
They treated it as Sale without Bill and charged Tax accordingly and also 20% Penalty on the Tax Amount.
Similarly, they charged VAT (+Penalty) on Variance in Cash.
Now, the problem is regarding Income Tax Treatment of the Stock Variation, VAT & Penalty.
Am I Right? If,I
1. Take Penalty as Revenue Expenditure and Disallowed in 44AB report.
2. Make an entry for Cash Sales for Stock Variation amount.
3. I am afraid, If I show Cash Sales in the Books of Accounts for the Short Stock, Will ITO not Challenge the Books of Accounts.
4. In Sales Tax Quarterly Returns, no effect of VAT Survey has been reflected.
Clarify me Please about the Treatment in XYZ Books for the Above Query for Income Tax Purpose.
Can somebody throw light on my issues that how to treat this concealed Sale and Tax & Penalty in filing Income Tax Return as well as Sale Tax Return.
Thanks in Advance
06 November 2014
01. Yes. Do it that way only.
02. when did survey take place? Q1, Q2, Q3 or Q4.....Accordingly ask the trader to file the revised VAT return.
03. In income tax...which stock is shown in books.....the one as per books or as per VAT survey?
02. when did survey take place? Q1, Q2, Q3 or Q4.....Accordingly ask the trader to file the revised VAT return.
03. In income tax...which stock is shown in books.....the one as per books or as per VAT survey?
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07 November 2014
Thanks for Replying...
The Survey took place in Q3 of FY 2013-14.
We have taken the stock as per Vat Survey.
How do we adjust the excess stock with reference to VAT Survey appearing in the books of accounts at the end of the Financial Year.
VAT Survey Team has already collected VAT on Short Stock by considering Short Stock as undisclosed Sales.
If we decide to make entry in the Books of Accounts for the Short Sales, How can we raise Invoice now? and What entry to be made in the Books of Accounts.
Are there any other alternatives? If, yes, what are the different option, XYZ can opt for the such adjustment?
Please clarify...
The Survey took place in Q3 of FY 2013-14.
We have taken the stock as per Vat Survey.
How do we adjust the excess stock with reference to VAT Survey appearing in the books of accounts at the end of the Financial Year.
VAT Survey Team has already collected VAT on Short Stock by considering Short Stock as undisclosed Sales.
If we decide to make entry in the Books of Accounts for the Short Sales, How can we raise Invoice now? and What entry to be made in the Books of Accounts.
Are there any other alternatives? If, yes, what are the different option, XYZ can opt for the such adjustment?
Please clarify...
07 November 2014
01. After the VAT return is revised, make a reco statement of VAT sales and sales as per books of accounts.
02. At the end of the year pass the entry by debiting Cash, if cash is available with firm ELSE debit the partners' capital account in the loss sharing proportion AND credit be given to "Sales as per reco"
03. You dont have to be afraid of ITO challenging the books of account
Your views please.
02. At the end of the year pass the entry by debiting Cash, if cash is available with firm ELSE debit the partners' capital account in the loss sharing proportion AND credit be given to "Sales as per reco"
03. You dont have to be afraid of ITO challenging the books of account
Your views please.
07 November 2014
Thanks Again Sir...
The Firm has a Stock Variance of about Rs.27.00 Lac.
If we go with the Cash Sales point, we would have a Heavy Cash in Hand at the end of the year.
Does the heavy cash in hand won't make a different effect on Books.
And also please advise, when this Cash Sales entry to be made (Date of Entry?)
The Firm is maintaining stock in the Computer.
Which Items of Stock or How the Stock to be adjusted while doing Sales Entry.
Can I have some Case Laws or Articles for the related query regarding Impact of VAT Survey on Income Tax.
Once Again Thanks in Advance
The Firm has a Stock Variance of about Rs.27.00 Lac.
If we go with the Cash Sales point, we would have a Heavy Cash in Hand at the end of the year.
Does the heavy cash in hand won't make a different effect on Books.
And also please advise, when this Cash Sales entry to be made (Date of Entry?)
The Firm is maintaining stock in the Computer.
Which Items of Stock or How the Stock to be adjusted while doing Sales Entry.
Can I have some Case Laws or Articles for the related query regarding Impact of VAT Survey on Income Tax.
Once Again Thanks in Advance
07 November 2014
You have not mentioned the name of software. Assuming it to be Tally ERP......Pass the STOCK entry on the date of survey or date of acceptance of survey results by the partners, for the stock addition.
No any question of heavy CASH, because cash was not found in the cash box. So debit partners' capital account in the LOSS sharing ratio for this addl sales.
No any question of heavy CASH, because cash was not found in the cash box. So debit partners' capital account in the LOSS sharing ratio for this addl sales.
07 November 2014
Thanks for the Advice...
07 November 2014
Thanks for the Advice...
07 November 2014
Thanks for the Advice...
07 November 2014
Thanks for the Advice...
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