Method of accounting sec 145

Tax queries 1730 views 3 replies

HIMANSHU SHARMA

STUDENT

117 Points Joined August 2011

we follow receipt basis of accounting on interest on FDR instedad of accural basis of accounting, and regularly followed as per section 145, at the time of assessment assessing officer added interest on accural basis in total income, treated as seperate income in the head of other source and raise demand u/s 271 (1) (c) concealment panelty.

Advice on points.

1. If we paid panelty as per order on accural basis, what about the tax amount which were paid on interest income in next year on received basis, is it double taxaton, what is procecure for refund the same, revise return not possible.

2. advice for ground of appeal to ITAT Appeal

waiting for reply

Replies (3)

AMIT KUMAR JAIN

94 Points Joined January 2010

Firstly, you must insist the banker to issue a certificate of Interest that have accrued as on the last day of the Financial Year in respect of each FDR and account the same accordingly.

The following example will help you understand the implication of FDR:

Suppose Mr. X made a FDR for Rs. 10 Lakhs @ 12% for 5 Years on 01.07.2012. The FDR is a cumulative one which means that the Interest will be paid at Matturity on 30.06.2017. As on 31.03.2013 the Interest that have accumulated till date is Rs.90000 and Bank has Deducted Rs.9000 as TDS. So you have to reflect the Value of FDR in your books = 10 Lakhs + 90000- 9000 = 10,81,000. Interest of Rs.90,000 will be credited to the Profit and Loss account, and TDS of Rs.9000 will be as Asset which will be claimed at the filing of your IT Return.

In the above case you will se that in the Books of Bank the FDR will be valued at Rs. 10 Lakhs only, but if must be reflected in the Assessee's Books at Rs.10,81,000/-.

If you keep track of each and every FDR, there will be no double taxation of Interest amount.

As regards concealment, I think it is just difference of opinion. Difference of opinion is not a valid ground for levy of penalty for concealment.

I am not too sure about whether it is concealment or not.

HIMANSHU SHARMA

STUDENT

117 Points Joined August 2011

Originally posted by : HIMANSHU SHARMA
	we follow receipt basis of accounting on interest on FDR instedad of accural basis of accounting, and regularly followed as per section 145, at the time of assessment assessing officer added interest on accural basis in total income, treated as seperate income in the head of other source and raise demand u/s 271 (1) (c) concealment panelty. Advice on points. 1. If we paid panelty as per order on accural basis, what about the tax amount which were paid on interest income in next year on received basis, is it double taxaton, what is procecure for refund the same, revise return not possible. 2. advice for ground of appeal to ITAT Appeal waiting for reply