Unsigned Balance Sheets Not Admissible As Evidence: ITAT

Unsigned balance sheets by auditors or directors of companies cannot be treated as reliable evidence, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) has ruled.

During assessment proceedings, the Income Tax Assessing Officer noted that in the balance-sheet of a particular assessee company, the amount of general reserve was increased by Rs 2,02,27,914 by transferring the amount from the ‘trade payables’ to general reserve, as on March 31, 2011.

The officer also found that an advance of Rs 45,00,000 (which was offered as an advance in earlier years by the assessee) was adjusted with the ‘trade payables’ resulting in a net increase of Rs 2,02,27,914 to the general reserve.

The assessment officer treated the above amount as income as per Section 41(1) of the Act.

In support of their contentions, the assesse company submitted its balance sheets of various assessment years.

The ITAT noted that all these were unsigned balance sheets, which were not signed either by the auditor or by the director of the company.

The assessee company also filed a financial statement for the financial year 2010-11 relevant to assessment at 2011-12 but the notes to accounts were not been appended.

Hence, the ITAT ruled that balance sheets unsigned by auditors as well as directors of a company cannot be treated as reliable evidence.