854/CBDT. - Income Tax - 854/CBDT

INSTRUCTION NO. 854/CBDT Dated : January 19, 1975 Reference is invited to Board's instructions contained in their confidential Instruction No. 357 (F.No. 238/1/70-IT(Audit) dated 15-12-1971 on the subject mentioned above. 2. The present system of calling for the explanation of the officers on the mistakes noticed by Audit appears to have affected adversely the objective examination of the objections and their early settlement as well as initiation of timely and proper remedial action wherever necessary. Instances have come to the notice of the Board where, instead of properly examining the objections on merits, officers expended considerable time and energy and also exercised ingenuity to resist even obviously correct objections, on the ground that two views were possible. In this process, the appropriate remedial action was either lost sight of or was taken half-heartedly with out sufficient care and attention. 3. Keeping in view what is stated in para 2 above and the recommendation in para 6.172 of the Direct Taxes enquiry Committee (wanchoo Committee) Report, the Board have reviewed the present practice of calling for explanations of officials. 4. It is considered essential that there should be a shift of emphasis on early and objective examination of the objection and the initiation of timely and proper remedial measures to safeguard the interests of revenue. To ensure this, the following procedure in supersession of that laid down in the Board's confidential Instruction dated 15-12-1971, should be followed hereafter: (i) The present system of maintaining ledger cards should continue; (ii) Explanation of the ITO should be obtained where the IAP/Revenue Audit have pointed out a mistake involving revenue of Rs. 10,000/ or more in Income-tax or Rs.1000 or more in other taxes, if the mistakes arise from any one or more of the following reasons; (a) Failure to follow departmental instructions; (b) Failure to follow binding judicial decisions; and (c) Palpable mistakes or mistakes arising from gross negligence or malafide action. (iii) Explanation of ITO should be invariably obtained where failure to take timely and adequate remedial action in respect of objection raised by IAP/Revenue Audit and the failure further on the part of ITO to take timely and adequate remedial action which further failure leads to irretrievable loss of revenue. For example, where the mistake is of the order of say Rs. 2000 revenue of income-tax, and is palpable or arose from failure to follow obligatory instructions or binding judicial pronouncements, Cs.I.T. may not all for not questioning the ITO if he fails again to rectify the mistake in time or move the higher authorities for remedial action to recover the lost revenue. 6. Please acknowledge receipt.