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Income tax liability when arises?

Srinivas V (Self) (45 Points)

16 May 2021  

Income tax query:Please let me have your views.


Income tax assessment of A Ltd. Is completed by assessing officer determining tax liability of Rs. 100 crores. The additions made are challenged before Commissioner (APpeal). As this is disputed liability, amount of Rs. 100 crores is shown as CONTINGENT liability.

Commissioner (Appeals) rejects company’s appeal. The company files appeal with Tribunal. The Tribunal finds some latches in assessment and hence, remands the matter back to Assessing officer for de novo assessment. 

Now the question is: Tax liability of Rs. 100 crores is a contingent liability or not? Whether the company or auditor has to make any disclosure in the accounts?

 5 Replies

veerendar singh (tax consultant) (2818 Points)
Replied 16 May 2021

Accounting, reporting and disclosures have nothing to do with assessment/appellate orders. contingent liability will be detwrmined as per standards on accounting and reporting.
1 Like

Replied 16 May 2021

The matter of disclosure of contingent liability is a matter of judgement.

as of now there is no demand.

you may choose not to show anything as contingent liability or may recognise 30 %/50 % or so depending on your judgement

Sourav (Student) (23892 Points)
Replied 16 May 2021

Yes it is a contingent liability and Auditor should make an Emphasis note of matter in audit report

CA Raj Doshi (Practising CA) (5528 Points)
Replied 16 May 2021

There is no straight jacket answer. But Sushant ji and Veerendar ji have put things absolutely right

veerendar singh (tax consultant) (2818 Points)
Replied 16 May 2021

Thank you ji

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