Question

X manufacturing company produces cement and cement products. It has rich and broad product mix which caters to the needs of both construction companies as well as ultimate consumers. The company's product mix consists of 25 product lines and each product line has more than 10 products. The company has more than 250 registered market outlets in North India. With a workforce of more than 450 employees the company generated sales revenues of rupees 14 million last year. On 15 June 2016 the company submitted its financial statements - profit and loss account and balance sheet of the previous year to income tax officer(ITO) for assessing its tax liability. After examining the company's financial statements, the ITO returned the statements to the company with the remarks that it has failed to prepare its financial statements as per established norms. The remarks of the ITO lef the owner of the company to seek help from a tax consultant. consequently the company approach a tax consultant who examined the company's financial statements and the accounting system and submitted his observation as
All sales receipts are credited to the personal account of the owner from which 80% of the revenue generated is transmitted to company account in the first week of every month. The owner records the revenue from sales on the day cash is received.
The company has charged depreciation of rupees .10 million on its plants and equipments during the last year by using straight line method. The company has charge depreciation for this set plant and equipment on the basis of the declining balance method for the first two years of its operation however the company replaced the declining balance method last year by sum of the years digit method.
The company valued if one of the equipment at rupees 10,00,000 in the balance sheet of the previous year at its scrap value as if it is going to close the business during the current year. The equipment was procured by the company five years ago for rupees 5500000. The depreciation charged on the said equipment till date has been rupees 20 lakh.
The company purchased used crushing equipment for rupees 4500000 from JK Cements and the same has been recorded in its book for rupees 60 lakh which in the opinion of the company's chief accountant is the equipment's market value.
The company has set off a portion of its loss of rupees 780000 which it suffered in 2014 against the profit of the previous year. According to the owner of the company, the setting of the loss against the profits has been in response to the company's board decision taken by it as its annual meeting in January 2015.
The company purchased a building during the previous year for rupees 80 lakh but recorded the same in the books of accounts for rupees 6300000. This has been done just to reduce the wealth tax liability.
The company has recorded some items of assets and an item of liability in its balance sheet which are not substantiated by any documentary evidence. commenting on such items, the company's Managing director states that certain items of the balance sheet do not need any evidence as they have been purchased from government and semi government organisation.

After a careful investigation, the tax consultant recommends that the company's existing accounting system may either be modified or replaced by a computer aided accounting system that is designed in tune the accounting principles and standards.
Discussion Questions
identify and examine the rationale behind the remarks of the income tax officer.
comment on the observations of the tax consultant in the context of accounting principles and standards of reporting. Suggest also the measures that the company needs to take in order to meet the demands of the remarks made by the ITO.
i want more clear and easy answer for both questions seperately.

Answer 1

Answer:

it's to big give me a short