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Dear Sir,
M/s XYZ is a Partnership Firm.
During Previous Year, an Enforcement Survey was done by the Vat Authority.
They found that there was variation in Stock and Cash. The Physical Stock verified by them was lower than the Stock Ledger as per book.
Due to Stock Variation, they took the variance in stock as Undisclosed Sales, and also charged VAT (+Penalty) on the Undisclosed Sales.
They treated it as Sale without Bill and charged Tax accordingly and also 20% Penalty on the Tax Amount. Similarly, they charged VAT (+Penalty) on Variance in Cash.
Now, the problem is regarding Income Tax Treatment of the Stock Variation, VAT & Penalty.
Am I Right? If,I
1. Take Penalty as Revenue Expenditure and Disallowed in 44AB report.
2. Make an entry for Cash Sales for Stock Variation amount.
3. I am afraid, If I show Cash Sales in the Books of Accounts for the Short Stock, Will ITO not Challenge the Books of Accounts.
4. In Sales Tax Quarterly Returns, no effect of VAT Survey has been reflected.
Clarify me Please about the Treatment in XYZ Books for the Above Query for Income Tax Purpose.
Can somebody throw light on my issues that how to treat this concealed Sale and Tax & Penalty in filing Income Tax Return as well as Sale Tax Return.
Thanks in Advance
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