sales and sales return

It would depend upon the contract between the parties.

AS-9 is to be looked upon in this case which contemplates revenue should be regonised when significant risks and rewards are transferred.

In case of sister concerns, the risk that transactions are sham and bogus is more than usual.

X has recorded the transaction as Sales and Sales return. It is not necessary for Y to record the transaction as purchases or purchase return, since Y has not acknowledged it.

No transaction has taken place X & Y. In this case, X has made a mistake of generating the invoice and has corrected it by booking the sales return.

The net debit & crdit to the P & L remain the same. Hence no problem even to the auditor

It is for this reason that the income tax years have been kept uniform for all assessees as In case of sister concerns, these transactions were although sham and bogus wer accounted in the above manner.

It is like you should account for a bounced cheque or not.