Professional Documents
Culture Documents
1. Introduction
2.1 The three fold objectives were laid down by the Central Board of Direct
Taxes in the Year 1972 as under :
(i) To have a preventive and reforming effect in direction of avoiding
mistakes.
(ii) To play the corrective role by pointing out mistakes and ensuring
remedies without loss of time.
(iii) To improve quality of assessments so as to reduce the criticism of the
working of department by statutory audit and the Public Accounts
Committee.
2.2 In order to achieve the stated objectives, the main task of Internal
audit is :
a. to detect the mistake and errors which may occur during the
assessment work so that suitable/appropriate remedial action is
taken to retrieve the loss caused to the revenue;
b. to allow relief to the assessee in case of overcharge/over assessment.
c. to see whether or not prescribed Rules and Procedure laid down are
properly followed and to have reformative effect.
The ultimate aim of Internal Audit is to improve the quality of assessments
by reducing the errors and omissions which are subsequently detected by
Receipt Audit.
2.3 The scope of scrutiny by Internal Audit is now coterminous with that
of the Receipt Audit. However, the scope of checking by internal audit is
broadly to verify the following:
The Audit Officer should not raise vague and ambiguous objections. Cogent
reasons should be given in the Audit Memo by the Audit Officer while
pointing out the mistakes. There must be a mention of under assessment /
over assessment amount as well as tax effect in the Audit Memo.
3.1 There shall be three audit units, the Addl / Jt CIT, the SAP and the
IAP. The minimum number of cases to be audited by each Addl/Jt CIT
(Audit), SAP and IAP per annum shall be as under:
The number of cases mentioned above is only the minimum number of cases
to be audited but each audit unit must try to manage the work in such a
way that as many auditable cases as possible are actually audited. The
CIT(Audit) shall be competent to change the target and norms for SAP/IAP
according to the exigency of the availability of manpower and workload,
subject to the approval of the Pr CCIT concerned. Moreover, the CIT(Audit)
may also ensure that the annual workload is evenly distributed in different
months.
3.2 The Internal Audit plan would be flexible and adjustable according to
the available workload. The cases for audit would be selected through ITBA
system based on the factors like assessed income/loss or refund granted or
claim of exemption / deduction or any other criteria as may be decided by
the ADG(Audit),CBDT with the approval of CBDT. The list of auditable cases
shall be generated on quarterly or monthly basis as may be required. Out of
the list of auditable cases so generated, the CIT(Audit) shall identify cases of
different category to be audited by Addl/Jt CIT or SAP or IAP every month
having regard to the norms applicable to them.
3.3 Till such time as the ITBA becomes fully operational, the CIT(Audit)
shall obtain the list of auditable cases in prescribed format from the CIT(CO)
by 5th of the month following every quarter and assign the auditable cases to
Addl/Jt CIT(Audit), SAP and IAPs as per the norms and targets. Once the
ITBA becomes fully operational, the CIT (Audit) shall generate such list of
auditable cases through ITBA.
4. Planning
5.1 The Assessing Officer shall make the cases available for audit on
requisition from the Internal Audit unit. For the purpose of audit of search &
seizure assessments, the Appraisal reports shall also be shown to Audit
Unit, if so requisitioned.
5.2 The Audit unit shall complete the audit work expeditiously and
forward the objection, if any, in the form of Audit Memo in a format
prescribed at Annexure-A to this Instruction. The Audit Memo shall be sent
to the O/o PrCIT/CIT concerned with a copy each to the CIT(Audit), Addl
CIT(Audit), Range head and the Assessing officer.
5.3 In order to make it convenient to decide an appropriate course of
remedial action and facilitate its settlement, the audit objection shall be
categorized, depending upon the issue(s) raised by the audit unit concerned
in to
(i) Factual mistake, or
(ii) Legal question, or
(iii) Mixed issues
In case more than one issue is raised in an audit memo, each issue has to
be so categorized.
5.4 The audit Memo shall be issued after vetting by Addl CIT(Audit), if the
Revenue effect is more than Rs 1 Cr but less than Rs 10 Cr. In case Revenue
effect is more than Rs10 Cr, the objection shall be vetted by the CIT(Audit).
5.5 The Internal Audit Objections shall be classified, on the basis of
quantum of Revenue effect, into major or minor objection. Consistent with
C&AG parameters, presently the objections with the revenue effect of Rs
4,00,000 or more in respect of Corporation Tax and Income Tax and Rs
40,000 or more in respect of Other Taxes, shall be classified as Major audit
objection. The remaining IAP objections shall be classified as minor. All
pending objections as on the date of issue of this Instruction shall be
reclassified accordingly. In future whenever there is any change in the
classification of major and minor objections by C&AG the internal objections
shall also be re-classified accordingly.
6. Examination of Objections
The procedure for dealing with internal audit objection is outlined below.
6.1 Major Internal Audit Objection
6.1.1 The PCIT/CIT concerned shall examine major audit objection
and communicate to the CIT (Audit), within a month of receipt of
objection, as regards its acceptance or otherwise.
6.1.2 The CIT(Audit) shall consider the reply to the objections which
are not accepted by the PCIT/CIT and take following steps as may be
appropriate:
(i) If the view of the PCIT/CIT is acceptable, then the objection will be
settled as dropped and the decision communicated to the PCIT/CIT
concerned within a month of receipt of his reply.
(ii) If the view of the PCIT/CIT is not acceptable, the reasons for
disagreement would be communicated to the PCIT/CIT concerned
within a month of receipt of reply.
6.1.3 If the PCIT/CIT is still of the view that the objection is not
acceptable, he shall refer the matter, within a month of receipt of
disagreement, to the CCIT concerned for a final view in the matter and
the internal objection shall be dealt with accordingly.
7. Remedial Action:
7.1 In respect of an accepted internal audit objection, if the PCIT/CIT is of
the view that the relevant order under audit requires revision u/s 263 as
remedial action, he shall call for the relevant records and proceed
accordingly. In other cases, he shall communicate his decision not to invoke
section 263 to the Assessing Officer.
7.2 In cases where the PCIT/CIT has decided not to invoke his revision
jurisdiction u/s 263, the Assessing Officer shall examine an appropriate
course in respect of facts of each case and take a suitable action as per his
independent application of mind on the facts of each case.
7.3 The remedial action in cases of accepted objections must be initiated
within six months of receipt of such objections and concluded in a time
bound manner as per Income Tax Act, 1961.
Where the Internal Audit Objection has been accepted, the PCIT/CIT shall
call for an explanation of Officer/staff concerned in appropriate cases and
take suitable action, keeping in view the nature of objection, facts of the
case.
The PCIT/CIT shall also call for explanation of the officers who delayed the
process of remedial action beyond the time line laid down in this instruction
and of those who failed to take remedial action on time, causing irretrievable
loss of revenue.
10.3 However, until the time Audit Module in ITBA system is fully
functional, the ledger card will continue to be maintained in the offices of
the PCIT/CIT concerned as well as the CIT(Audit) in the format as in
existence prior to this Instruction coming into force.
The Addl Director General (Audit), under the Pr DGIT(Admn & TPS), shall
monitor the functioning of the Internal Audit set up of the Department and
shall be the coordinating agency for all CsIT(Audit). The ADG(Audit) shall
also carry out Review and Inspection of internal Audit set up of any Pr CCIT
as approved by the Pr DGIT(Admn & TPS).
The CIT (Audit) shall furnish a list of cases to the Pr.CCIT, where
Major revenue audit objections were accepted in the preceding year
but the Internal Audit had failed to point out the mistake in their
audit, by the 30th April of the year.
This may be brought to notice of all officers working under your jurisdiction
for compliance.
AUDIT MEMO
Office of the
-----------------
-----------------
Dated:-...
Audit Memo No. CIT (Audit)/Station/F.Y. /Audit Memo No./Dispatch
No.
Audit Objection
---------------------
--------------------
Note: *For Major Audit Objections, replies to CIT (Audit) through PCIT/CIT
concerned
For Minor Audit Objections, replies to Addl. CIT (Audit) through Range
Head concerned
No. of Receiv Settle Replie Balan Reven Recei Settl Repl Bala Reven
Objecti ed up d up s sent ce ue of ved ed ies nce ue
ons to the to the but (a+b- effect durin duri sent at effect
pendin end of end of not c) up for g the ng duri the for
g as on the the settle to the objecti mont the ng end objecti
1.4.20. prece prece d up end of ons in h mon the of ons in
...... ding ding to the the Col. th mon the Col. (j)
mont mont end of prece (e) th mont
h h the ding but h
prece mont not (e+g-
ding h settl h)
mont ed
h
PART-II - MINOR AUDIT OBJECTIONS
No. of Receiv Settle Replie Balan Reven Recei Settl Repl Bala Reven
Objecti ed up d up s sent ce ue of ved ed ies nce ue
ons to the to the but (a+b- effect durin duri sent at effect
pendin end of end of not c) up for g the ng duri the for
g as on the the settle to the objecti mont the ng end objecti
1.4.20. prece prece d up end of ons in h mon the of ons in
...... ding ding to the the Col. th mon the Col. (j)
mont mont end of prece (e) th mont
h h the ding but h
prece mont not (e+g-
ding h settl h)
mont ed
h
Annexure B(ii)
No. of Receiv Settle Replie Balan Reven Recei Settl Repl Bala Reven
Objecti ed up d up s sent ce ue of ved ed ies nce ue
ons to the to the but (a+b- effect durin duri sent at effect
pendin end of end of not c) up for g the ng duri the for
g as on the the settle to the objecti mont the ng end objecti
1.4.20. prece prece d up end of ons in h mon the of ons in
...... ding ding to the the Col. th mon the Col. (j)
mont mont end of prece (e) th mont
h h the ding but h
prece mont not (e+g-
ding h settl h)
mont ed
h
PART-II - MINOR AUDIT OBJECTIONS
No. of Receiv Settle Replie Balan Reven Recei Settl Repl Bala Reven
Objecti ed up d up s sent ce ue of ved ed ies nce ue
ons to the to the but (a+b- effect durin duri sent at effect
pendin end of end of not c) up for g the ng duri the for
g as on the the settle to the objecti mont the ng end objecti
1.4.20. prece prece d up end of ons in h mon the of ons in
...... ding ding to the the Col. th mon the Col. (j)
mont mont end of prece (e) th mont
h h the ding but h
prece mont not (e+g-
ding h settl h)
mont ed
h
Annexure-C
Objec
tions
CI pendi
Arrear Total
T Balance ng
CCIT audit Current objections
c Objection objectio for
charg objections audit for
h s settled ns to be more
e as on objections settlemen
ar settled than
01.04.2014 t
ge 6
mont
hs
Total Reve Tota Reve Total Rev Tota Rev To Rev
nue l nue enu l enu tal enu
effec effec e e e
t t effec effe effec
t ct t
CCIT
I
CCIT
II
CCIT
III
2. Minor Audit Objections (below Rs 4 lakh in Income-tax and below
Rs. 40,000 in other taxes)
Objec
tions
pendi
CI Arrear Total
Balance ng
CCIT T audit Current objections
Objection objectio for
charg ch objections audit for
s settled ns to be more
e ar as on objections settlemen
settled than
ge 01.04.2014 t
6
mont
hs
Total Reve Tota Reve Tota Rev Tota Rev To Rev
nue l nue l enu l enu tal enu
effec effec e e e
t t effec effe effec
t ct t
CCIT I
CCIT
II
CCIT
III
Part- G Performance of Addl. CIT (Audit)/JCIT (Audit)
ii. Minor Audit Objections (Below Rs 4 Lakh in Income-tax and below Rs.
40,000 in other taxes) raised by Addl. CIT (Audit)/JCIT (Audit) and
their settlement (all taxes)
3. Objections - -
raised in
current year
upto quarter
end
4. Total for
disposal upto
quarter end
(1+3)
5. Objection
settled during
the quarter
6. Objection
settled upto
quarter end
7. Balance (4-6)
Due date in office of the Addl. Director General (Audit), New Delhi
Pr.
CCIT Arrear Audit Current Audit
Particulars Total
charge Objections Objections
*
No. of Reven No. of Reven No. of Revenu
Mistak ue Mistake ue Mistak e effect
es effect s effect es (Rs. in
(Rs. in (Rs. in lakh)
lakh) lakh)
1. Pending as on 1st - -
April
2. Objections raised in - -
the quarter
3. Objections raised in - -
current year upto
quarter end
4. Total for disposal
upto quarter end
(1+3)
5. Objection settled
during the quarter
6. Objection settled
upto quarter end
7. Balance (4-6)
Part- D
Objections to be classified
Part- E
Due date in office of the Addl. Director General (Audit), New Delhi
20th of month of the following quarter.
Pr. CCIT Charge..
CIT (Audit) Charge*..
* In metro charges where there is more than one CIT (Audit)
Pr.
CCIT Arrear Audit Current Audit
Particulars Total
charge Objections Objections
*
No. of Reven No. of Reven No. of Revenu
Mistak ue Mistake ue Mistak e effect
es effect s effect es (Rs. in
(Rs. in (Rs. in lakh)
lakh) lakh)
1. Pending as on 1st - -
April
2. Objections raised in - -
the quarter
3. Objections raised in - -
current year upto
quarter end
4. Total for disposal
upto quarter end
(1+3)
5. Objection settled
during the quarter
6. Objection settled
upto quarter end
7. Balance (4-6)
S Aud Det Recei Na PA A. Amo Amo Concer Whet Rem Date Dat Fin
. it ails ved me N Y. unt unt ned her edial of e of al
N Me of on of of of Assessi revisi Actio initia settl Rev
o mo the the und tax ng on n tion eme enu
No. IAP Ass er effec officer u/s take of nt e
/ esse asse t 263 n by reme Effe
SAP e ssm requi AO, dial ct
ent red if actio
/ove any n
r
amo
unt
ANNEXURE-F
The Norms of Auditable cases for Internal Audit shall be as per Instruction
No. 3 of 2007 dated 16.04.2007. The Internal Audit Statement is required to
be prepared separately in the following categories:
Category-A Search and Seizure cases
Category-B Foreign Cases
Category-C Non Search and Seizure Cases (Scrutiny Cases)
Category-D Cases with claim of deduction u/s 10, 10A, 10B, 10C,
10(23C), 11, 32, 54 and Chapter VI-A.
Category-E Other Taxes cases,
Category-F TDS Cases
7.3 Registers to be maintained by Range Addl./JCIT and
Assessing Officers
The following register is to be maintained by the Range Addl. CIT/JCIT office
Addl./JCITs Register of internal Audit Objections.
Sr Name IT Date Assessm Gist Accep Tax Last Date Actu D & Date
No of the Circl of ent year of ted or effec date of al CR of
assess e/ Audit /date of Obje not t as for rectifi Tax ent Colle
ee / ward Mem Assessm ctio accep per acti cation ry ction
PAN o ent n ted audi on /
t u/s Reass
obje 263 essme
ctio / nt
n 147
/
154
etc
1 2 3 4 5 6 7 8 9 10 11 12 13
AUDIT PARTY:
S. CIT Name War P A. Date Secti Retur Total Refu Type of Whet
Char of the d/ A Y. of on ned incom nd scrutin her
N
ge asses N asses unde Incom e/ amou y the
o. Circ
see smen r e nt selectio case
le loss
t whic /loss n: is
deter (if
order h (Rs.) CASS/ one
mined appli
/ order AIR of
in the cable
order passe INPUTS Top
assess )
grant d / 100
ment
ing of
order CCIT
refun CIT
APPRO
d Char
VED
ge
/REFU
(Yes/
ND
No)
CASE/
OTHER
S
1 2 3 4 5 6 7 8 9 10 11 12 13
AUDIT PARTY:
S. Nam A.Y CIT AO Audit Date Date Gist Tax effect Status of settlement
e of . Cha Cha Objecti of of of of audit of objection
N
the rge rge on No. Audi Audi Audi objection
o. Asse t t t
ssee Me Me Obje Maj Mino Date Tax Tax
mo mo ctio or r of effect effect
Rece n settle
(Majo (Mino
ived ment
r) r)
in
CIT
s
offic
e
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Annexure-G
STATEMENT XVI
F.Y. 2015-16
No. of ITOs :
(b) The number and tax effect of Internal Audit and Major & Minor
objections raised, settled and pending for each of the five years from 2011-
12 to 2015-16:
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
(iv) Year wise analysis of the age of the pending item at the end of viz. I
year old, 2 year old etc. (alongwith value in crores.)
2012-2013
2013-2014
2014-2015
2015-2016
Total