Guidelines for remedial action in case of Revenue Audit objections. - Income Tax - 1928/1995

INSTRUCTION NO. 1928/1995 Dated: August 7, 1995 It has come to the notice of the Board that despite existing instructions making it mandatory for taking remedial action in case of Revenue Audit objections, steps are not taken by the Assessing Officers to initiate remedial actions. The proforma reports, sent on the draft paras proposed to be included - in the Annual Report of the C AG, contain tentative remarks such as "being initiated", "instructions are being issued for taking remedial action" etc. Sometimes it is stated that no remedial action is being taken as the "objection is not accepted" which clearly violates the instructions presently holding the field. viz., remedial action should invariably be initiated in all cases of Revenue Audit objections. In order to reiterate the importance of taking prompt remedial action in the interest of revenue and in supersession of all earlier instructions of the Board on taking remedial action, following guidelines are being laid down. 1. Remedial action should invariably be initiated as a precautionary measure in respect of all audit objections, even if the objection is not accepted by the CIT. where an objection is accepted, suitable remedial action should be initiated and completed expeditiously. 2. Once the remedial action is initiated, it can be dropped with the approval of the CIT if the objection raised is one of facts and the facts stated to the audit are found to be incorrect. 3. If, however the issue raised by Audit pertains to interpretation of statute or involves conflicting High court decisions, the remedial action should be dropped only with the prior approval of the Board. For this purpose, a reference should be sent to the Board (A PAC) section soon after the receipt of 'Statement of Facts' (SOF) stating cogently the reasons for proposed dropping of remedial action, where there is a decision of the jurisdictional High Court against the view of the audit but not accepted by the Department the High Court or the Supreme Court should be moved for staying the operation of the judgement. 4 Remedial action need not be initiated in audit objection where the Assessing Officer has acted in conformity with Board's Instruction\Circular. Such matters should immediately be referred to the concerned sections of the Board for examination and decision indicating clearly the date of expiry of limitation of taking remedial action. 5. While processing draft paras received from the Office of the C AG it has been noticed that the mistakes pointed out by Audit, though outside the scope of prima facie adjustments as per the first Proviso to Section 143(1)(a) do need to be rectified in the interest of revenue. For instance in cases where Audit-points out-excess set-off of loss or carry forward of loss, records should be linked and remedial action should invariably be taken even though the objection is not accepted. There can be similar instances under sections 32, 32A, 43B or deductions under Chapter VI-A such as 80-HHA, 80-HHC, 80-I, 80-O etc. 6. Remedial action should be initiated and completed where the Board specifically instructs the CIT to do so and the compliance report sent to the Board within three months. These guidelines for taking remedial action may please be brought to the notice of all the officers working in your charge.