03 October 2013
Sir, While doing the consolidated profit and Loss a/c I missed out to consider one expense account. But in Branch Wise statement i took it correctly and on this basis in Reserves and Surplus A/c of the consolidated statement correct profit amount was considered(after considering the omitted expense amount.). I calculated Income Tax on the Wrong Profit Which appeared in the consolidated statement .
So Please Suggest me that what should i do next???? a) Whether to Revise the Return OR b) Can i claim that omitted expense amount as prior period item for next Assessment Year.....
03 October 2013
Actually if you have prepared consolidated financial statements fully by linking with trail balance you should have get a difference of ommitted amount in balancesheet,,error may be because you may entered some manual entries . . . I recommend to revise return because we need to show consolidation correctly as you said it was considered in branches and not considered in consolidation . . i recommend for Revised Return
03 October 2013
Sir, Is there any better option than revising the return, because if i revise it after considering the expense, refund of Rs 13,00,000/- will be there. So there is a chance for scrutiny.
09 August 2024
Given the situation where you missed including an expense in the consolidated Profit & Loss account, leading to incorrect income tax calculation, here are your options and considerations:
### **Option A: Revise the Return**
**1. **File a Revised Return:** - **Eligibility:** You can file a revised return to correct the omission of the expense. Under Section 139(5) of the Income Tax Act, a revised return can be filed if there is a mistake or omission in the original return. - **Deadline:** For the Assessment Year 2023-24 (for FY 2022-23), the deadline to file a revised return is generally up to March 31, 2025 (for AY 2023-24). However, for previous assessment years, the deadline would have been based on the relevant provisions.
**2. **Revised Return Process:** - **Login to the Income Tax E-Filing Portal:** - Go to the [Income Tax e-Filing website](https://incometax.gov.in/). - **Select Revised Return:** - Choose “e-File” > “Income Tax Return” > “Revised Return.” - **Provide Details:** - Enter the original return acknowledgment number. - Amend the Profit & Loss account to include the omitted expense. - **Submit the Revised Return:** - Ensure that the revised return reflects the correct profit and tax calculation.
**3. **Consideration:** - If the revised return results in a refund (e.g., Rs 13,00,000/-), the tax department may scrutinize the revised return, especially if there is a significant change. However, this is a standard process, and filing a revised return is a legitimate way to correct errors.
### **Option B: Claim the Omitted Expense as Prior Period Item**
**1. **Prior Period Item:** - **Definition:** Expenses related to earlier periods that are discovered in the current year can be classified as prior period items. You can claim these in the current year’s Profit & Loss account, but it will not correct the previous year’s tax return.
**2. **Implications:** - **Income Tax Impact:** By treating the omitted expense as a prior period item in the current year, you will adjust the current year’s profit but will not amend the previous year’s tax liability. - **Disclosure:** This treatment should be properly disclosed in the financial statements and notes.
**3. **Consideration:** - **Accuracy:** If the omitted expense is significant, it is generally better to correct it in the period to which it pertains. This ensures accuracy in financial reporting and tax calculation.
### **Recommendation:**
**Revise the Return** is generally the preferred option if the omission of the expense significantly impacts your tax liability. This method ensures that your tax records accurately reflect the true profit and corresponding tax payable. Here’s why:
- **Accuracy:** Revising the return ensures that the financial statements and tax calculations for the affected year are correct. - **Compliance:** Filing a revised return aligns with legal compliance and reflects accurate tax liabilities.
**Prior Period Item** can be considered if revising the return is not feasible or if the expense is minor relative to the overall figures. However, this method may not be as accurate as correcting the previous year’s return.
### **Steps to Proceed:**
1. **File the Revised Return:** - Amend the consolidated Profit & Loss account to include the omitted expense. - Submit the revised return to correct the income tax calculation. - Monitor for any potential scrutiny and be prepared with explanations and documentation.
2. **Documentation:** - Maintain detailed records and justifications for the revision. - Ensure all adjustments are well-documented in the financial statements.
**Consultation with a Tax Professional:** It may be beneficial to consult with a tax professional or accountant to navigate the revision process and to ensure compliance with all relevant provisions.
By taking these steps, you will correct the error and ensure that your financial statements and tax filings accurately reflect the company's financial position.
CAclubindia
