Accounting treatment for addition on a/c of scrutiny 145(3)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 February 2014 I am working in Pvt Ltd Company enganged in the business of civil contract works. Recently we received scrunity notice under CASS u/s 143(2). for a/y 2011-12 & 2012-13. On verification of books AO rejected books u/s 145(3) and income arrived on estimation basis and as result addition arrived for both years. Now my question is since we are aggreed to pay tax on the addition so made can I pass the following entry .The addition in respect of earlier can be brought as a Cash Balance during the current year? If so under what section in IT Act,1961. Pl refer Accounting Standard also.

Cash A/c Dr XXX
Reserves & Surplus Cr XXX
(Entry towards addition )

Reserves & Surplus Dr XX
To Cash/Bank cr XX
(Entry towards payment of tax)
Kindly advise

CA Sanjeev Kumar

CA Sanjeev Kumar (Expert)
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23 February 2014 In reference to the above, you are mentioning that income has been increased by AO, that means, taxable income is increased and therefore the tax liability thereon.

Now, the accounting entry should be as below :

Current Tax Dr. xxxx
Cash/Bank Cr xxxx
(booking tax expense for the section-143(3))

P&L a/c Dr xxxx
Current Tax Cr xxxx
(booking tax expense as per AS-22)

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