Tax on unexplained income

No need to pay tax again, have you heard the concept of cascading effect or double taxation, Income Tax Act does not encourage direct double taxation. 

Once if an Income is taxed, it is no more taxed unless you generate some income (eg: interest) on the principle amount.

Actually this type of income should be shown in AY 2008-09 Return itself as you have paid tax also in that year on demand notice from Department.

So now there is no need to pay any tax & no need to further show this income in current year return also.

Income tax is leveied on accrued income even though it is not actually earned. So it is taxed by Department in AY 2008-09. You cannot claim any credit on previous year taxes.

Income once taxed cannot be taxed again as per this rule Income will not be chargeable to tax.

Dear Siva,

I am not been able to figure out how ur advances have been treated as sales by the department n how u have paid the tax on the same.. i think u should come up with detailed facts. . .i am also in a construction company, from my point of view advances can never be taxed.....

Advances in the sense, receiving the amount earlier it mean pre received amount.

as per my knowledge is concern Advances received will not be taxable, but in construction firms the expenditure incured for the construction up to receiving the total sale concedaration it will be shown as work in progress

what ever the advances received on that the firm has to pay service tax to the department and also pays some advance tax based on the margin in their sales,

after total sale consideration received then only they will show the sales in that year and the tax will be calculated on profits

what ever they have paid advance tax that will be adjusted againest that tax due.

Dear Vishnupriya,

If u wont show this as ur income in ur incometax return how will u justify ur books of accounts .......... as sales of 130 lacs is recorded as sales now and in the year 2008-09 it was jus an advances.................one more issue would arise here is about service tax ?????????? hw will account for it n hw will u pay it?????

In case of service tax also it is similar, as the amount is received in advance it sholud be paid in 2008-09 itself.  Act will deem that, Rs.130.00 Lakhs include the service tax amount collected.

Regarding mentioning of Rs.130.00 Lacs in return:

Let us discuss with a small example, if you receive current year salary + next year salary now itself, you have to pay tax on both current year as well as next year one because in Income Tax Act, it is clearly mentioned due, accrued and received income in a FY will be taxed in AY. So when you paid tax on next year salary in current year, there is no need to show the amount in next year return because it is  already taxed.

hether we have to pay the tax on those adances amount once again,

No, 

let us say

u have received advance 2,50,000 in 2008-09 a.y

on that demand was raised 50,000/- (assuemed) ay 2009-10

Profit & Loss A/c for the year ended 31.03.07

Balance Sheet as at 31.03.07

May be in the year of FY2007-08 u might be paid 50,000/- income tax and also u have incured same expenses 

Profit & Loss A/c for the year ended 31.03.08

Balance Sheet as at 31.03.08

Balance Sheet as at 31.03.08

Profit & Loss A/c for the year ended 31.03.09

Balance Sheet as at 31.03.09

Balance Income tax of 11,800 has to pay in this year

Income From BP  2,00,000

Tax                                61800

Advance Tax                50,000

Sel Ass Tax                 11,800

in Balance SHeet i have shown this Payayble Amount under Provision after Ajusting the Advance Tax Paid Rs.50,000

Thank u friends, But even my problem was not solved

actually in this issue, we have already paid the taxes on advances for the a.y 2008-09 as per the demand notice issued....but

my present issue is

1) whether can i claim  that paid tax as credit  or

2) whether can i show the reduced sales (actual sales - advances received earlier) in the financials in year of actual sale

3) whether can i show the advances as prior period sales during the actual year of sale

Please let me know the best way of approach