Re: whether cash sales out of opening stock not accepted by AO and addition made u/s 68 if accepted for VSVS permits assessee to reverse book entry of sales and add quantity of such goods sold(not accepted as genuine by A0) in revised financial
Assessee had been running an industry which was locked out and fuel material lying unusable was sold in cash in period prior to ‘note bandhi’ was held as non genuine by AO and addition has been made u/s 68. Appeal is pending. For the sake of settling dispute if party chooses VSV then in that event whether it will be justified to revise books of accounts reversing cash sales not accepted and its effect into inventory of goods (i.e adding back quantity sold earlier not accepted as genuine) and such revalued stock in revised accounts can be allowed to be treated opening stock next year. Is there any other problem in doing so?
From our understanding, if the amount was disclosed in sales and tax has been paid on profit earned, the same cannot be taxed again under section 68 of the Act. Therefore, prima facie the case seems to have merit.
If the assessee avails the benefit of the scheme. Whether consequential entries in the books of account can be passed or not is debatable . Each case may have to be judged from the facts of the case . Issue is raised before the CBDT in number of matters. We hope we may get some clarification on the issue of consequential entries in the books of account .
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