If an assessee in his books treats & records demand draft as cash in hand. Whether the same is allowable under income tax act.
3 Replies
Sathya
(Articled Clerk)
(118 Points)
Replied 02 February 2011
In my opinion,
Demand draft received which are to be deposited in the bank shall be included in cash in hand until
the next working day. When the draft is deposited in the bank, Bank A/c shall be debited and by
crediting cash in hand.
I.T. Act doesn't prevent this treatment. Its note-worthy that income should be recognized on accrual or
cash basis, whichever is consistently followed. In the given circumstance, Income should be
recognised when the demand draft is received.
ashoka r d
(senior audit assistant)
(82 Points)
Replied 02 February 2011
in the given case we cannot treat a demand draft as cash. that has to be deposited into the bank. then in the books we have record the source of the receipt that all.
CA PARAS BAFNA
(Practising CA )
(33428 Points)
Replied 02 February 2011
No, Demand Drafts may be treated as Cheques in Hand Rather than cash in Hand.
The accountant will always have a risk of negative cash balance in the cash book and if it remained unoticed the assessee may be penalised for undisclosed income.
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