Income tax riad / search seizure

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This query is : Resolved

CA Priyank Singhi (Querist)

01 January 2013 Hello Friends,
I wanted to know the accounting treatment in case of a Raid / search seizure. For eg. a person discloses an income of 1 crore for previous years (say 2007-08, 08-09, 09-10) after raid and accordingly has to pay 40 lakhs as tax, interest and penalty. How should this be treated in the books of account for Current year.

CA. Subhash Dangi

CA. Subhash Dangi (Expert)

01 January 2013 If a person discloses an income of Rs.1 crore on raid / search cases, either he might have created the corresponding assets or have the sources of income.
Entries for Assets can be passed if same are created. If sources of income are ascertainable, same can be treated as his Capital employed.
In case of Tax payment, it shall be treated as Drawings in his books of accounts.

CA Priyank Singhi

CA Priyank Singhi (Querist)

01 January 2013 The concerned assessee is a company.

CA. Subhash Dangi

CA. Subhash Dangi (Expert)

01 January 2013 As far as assets and income are concerned, same can be appropriated to respective years in books of accounts based on evidence and facts, documents etc.,

Income tax payment may first account as revenue expenditure by debiting to profit & loss account and same can be disallowed while filing ITR.

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Amey Satish Gogate

Amey Satish Gogate (Expert)

02 January 2013 Respective Assets (or Cash if cash is seized)will be debited and appropriate amount will have to be taken as income

Normal entry will have to be passed for tax expense

If no order finalizing tax liability is received from dept then till such order is received, then account for asset seized as Deposit/asset seized

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