Case Study: Tax Assessment Response and Financial Reconstruction for a Retail Business
Reconstructing transaction evidence, supporting disputed figures, and responding to a Rs 38 lakh tax assessment addition
Executive Mandate Summary
Key Transaction & Governance Challenges
- •Tally records and financial statements existed, but they were not structured to independently explain every bank credit, transaction and expense to an assessing officer.
- •Rs 14 lakh of bank credits did not initially correspond clearly with recorded sales, creating a potential unexplained-income exposure.
- •Rs 16 lakh of claimed expenses lacked sufficient documentation in the original assessment submission, despite a substantial portion being genuine business expenditure.
- •An Rs 8 lakh difference between GST turnover and ITR turnover required transaction-level reconciliation and explanation.
Northrop Execution Architecture & Methodology
Executive Mandate Overview
A multi-store retail business with Rs 5.5 crore annual turnover received an assessment notice proposing Rs 38 lakh of additions. The challenge was not simply responding to the notice, but reconstructing the financial evidence necessary to establish the source and nature of the disputed transactions.
Reconstructing the Bank-to-Books Trail
Northrop performed a transaction-level reconciliation of the Rs 14 lakh of unexplained deposits. Rs 9.2 lakh was traced to recorded sales where deposits had been aggregated, while Rs 3.1 lakh represented customer advances already reflected as liabilities. Rs 1.7 lakh remained unsupported.
Rebuilding Expense Documentation
The Rs 16 lakh expense dispute was examined line by line. Rs 11.8 lakh was supported through previously unsubmitted documentation, while another Rs 2.6 lakh was supported through supplier confirmations and bank evidence. Rs 1.6 lakh remained disallowable.
GST-ITR Reconciliation
The Rs 8 lakh turnover difference was decomposed into timing differences, exempt supplies and an arithmetic error in the GSTR-9 return. This converted a broad turnover mismatch into specific, explainable reconciliation items.
Verifiable Institutional Outcomes & Value Realized
- Bank deposits were traced to recorded sales where multiple days of cash collections had been aggregated into single bank deposits.
- Deposits were linked to customer advances already recorded as liabilities in Tally.
- Rs 11.8 lakh was supported through original documentation and a further Rs 2.6 lakh through secondary evidence.
- The turnover difference was explained through timing differences, exempt supplies and an identified GSTR-9 arithmetic error.
Ashish Chaudhary
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