Income tax return is not properly filed

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

26 November 2014 In filing the ITR6 for AY 2012-13 (under scrutiny Asst.) figures of P/L account has not properly filled up i.e only 4 figures filled but the net profit has not altered and remain same as audited financial statements.
Now ITO asks that no opening stock as well no closing stock.

Please advice how this situation to be handled. Is there any case law in favour of assessee?

Thanks in advance

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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26 November 2014 but wat is the reason for improper disclosure and no stock records.

Querist : Anonymous

Querist : Anonymous (Querist)

26 November 2014 No reason, but who has filed the return has filed like this

stock adjustment + direct expenses+purchase in purchase column.

indirect expenses in other expenses column

and depn in depn column.

Net profit before tax remain same.

Now, Assessing officer, is taking plea that last year closing stock is not appearing in current years opening stock.

this is the fact

Querist : Anonymous

Querist : Anonymous (Querist)

18 December 2014 No Answer?
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Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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31 July 2024 Handling discrepancies in the Income Tax Return (ITR) can be challenging, especially under scrutiny. Here’s how you can approach the situation:

### Steps to Address the Situation

1. **Explanation to Assessing Officer (AO)**:
- Prepare a detailed explanation for the discrepancies in the ITR, particularly addressing the issue of opening and closing stock.
- Emphasize that the net profit before tax remains the same as in the audited financial statements, and the discrepancies are due to clerical errors in filling the return.

2. **Reconciliation Statement**:
- Prepare a reconciliation statement showing the audited figures and the figures reported in the ITR. This will help in explaining how the discrepancies arose and that the net profit remains unchanged.

3. **Revised Return**:
- Check if it’s possible to file a revised return for the Assessment Year (AY) 2012-13. If the time limit for filing a revised return has passed, this option may not be available.

4. **Documentation**:
- Provide supporting documents like the audited financial statements, tax audit report, and any other relevant documents that corroborate your explanation and show that the discrepancies are unintentional.

5. **Case Law References**:
- There are several case laws where courts have taken a lenient view in case of genuine clerical errors if the overall tax liability is unaffected. You can refer to these cases to support your explanation:

a. **CIT v. Arun Textiles** [2008] 300 ITR 286 (Mad):
- The court held that clerical mistakes in the return which do not affect the tax liability should be treated leniently.

b. **CIT v. Bharat Nidhi Ltd.** [2005] 276 ITR 268 (Delhi):
- The court observed that inadvertent errors, if explained satisfactorily, should not lead to penal consequences.

c. **CIT v. Jai Prakash Singh** [1996] 219 ITR 737 (SC):
- The Supreme Court observed that procedural irregularities should not affect the substantive rights of the taxpayer.

6. **Consult with a Tax Expert**:
- Given the complexities involved, it would be prudent to consult with a tax professional or a Chartered Accountant who can help you navigate through the scrutiny process and represent your case effectively before the AO.

### Drafting a Response to AO

When drafting a response to the Assessing Officer, include the following points:

- **Introduction**: Briefly introduce the issue and acknowledge the discrepancies in the ITR.
- **Explanation of Discrepancies**: Explain the clerical errors and how they occurred. Provide a detailed reconciliation statement showing the audited figures and the figures reported in the ITR.
- **Impact on Net Profit**: Emphasize that the net profit before tax remains unchanged and consistent with the audited financial statements.
- **Supporting Documents**: Attach copies of the audited financial statements, tax audit report, and any other relevant documents.
- **Case Law References**: Cite relevant case laws that support your explanation and request for a lenient view.
- **Conclusion**: Request the AO to consider the explanations and documents provided and to accept the audited financial statements as correct.

Here’s a sample draft:

---

**To,
The Assessing Officer,
[Address],
[Date]**

**Subject: Clarification Regarding Discrepancies in ITR for AY 2012-13**

**Respected Sir/Madam,**

This is in reference to the scrutiny assessment proceedings for the Assessment Year (AY) 2012-13, where discrepancies have been identified in the Profit and Loss (P/L) account figures filed in the Income Tax Return (ITR-6).

We acknowledge that due to clerical errors, certain figures in the P/L account were incorrectly filled. However, we would like to emphasize that the net profit before tax remains consistent with the audited financial statements.

**Explanation of Discrepancies:**

1. The opening stock and closing stock figures were not correctly entered in the ITR.
2. The stock adjustment, direct expenses, and purchase were combined under the purchase column.
3. Indirect expenses were reported under the other expenses column.
4. Depreciation was accurately reported under the depreciation column.

**Reconciliation Statement:**
(Provide a detailed reconciliation statement here)

**Impact on Net Profit:**
Despite the discrepancies in the reporting of individual items, the net profit before tax remains unchanged at ₹[Net Profit] as per the audited financial statements.

**Supporting Documents:**
1. Audited financial statements for FY 2011-12.
2. Tax audit report.
3. Detailed reconciliation statement.

**Case Law References:**
We refer to the following case laws which have taken a lenient view on clerical errors:
1. **CIT v. Arun Textiles** [2008] 300 ITR 286 (Mad)
2. **CIT v. Bharat Nidhi Ltd.** [2005] 276 ITR 268 (Delhi)
3. **CIT v. Jai Prakash Singh** [1996] 219 ITR 737 (SC)

**Conclusion:**
We request your kind consideration of the above explanations and the supporting documents provided. We assure you that the discrepancies were unintentional and do not affect the overall tax liability. We request you to accept the audited financial statements as correct and consider the errors as clerical in nature.

Thank you for your understanding and cooperation.

**Yours sincerely,**

[Your Name]
[Your Designation]
[Company Name]

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By following these steps and providing a clear and detailed explanation, along with supporting documents and relevant case law references, you can address the discrepancies in your ITR effectively.

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