Increase in the scope of the scrutiny by the Department's own internal audit organisation. - Income Tax - 357/CBDT

INSTRUCTION NO. 357/CBDT Dated: December 15, 1971 Please refer to the Board's instructions contained in their confidential circular F.No. 83/103/66-ITB dated 23.6.1967, on the subject. 2. The Board feel that the instructions require revision in view of the enormous increase in the scope of the scrutiny by the Department's own internal audit organisation and the increasing coverage by the C A.G's Revenue Audit parties of the assessments made under the various direct tax laws other than Income-tax. On the one hand, the number of mistakes commented on have been considerably more than that envisaged at the time of issuing the instructions in June 1967. On the other hand, the revenue effect in a substantially large percentage of the mistakes relating to the direct taxes other than Income-tax has been must lower than that originally contemplated. In keeping with these change, the following procedure in supersession of that laid down in the Board's confidential circular dated 23.6.1967, should be followed: (1) Record of mistakes: The Commissioner of Income-tax shall maintain a ledger card for each Income-tax Officer regarding the mistakes made by him. Specimen enclosed. Entries will be made in this card when mistakes involving a tax effect of more than Rs.1,000/- reported by either the C A.G's Revenue Audit parties or the Department's own Internal Audit organisation are accepted by the Department. The entries would enable the Commissioner to watch the frequency of the mistakes and the trend as to whether an Income-tax Officer's work is improving. The ledger card will have to be taken into consideration while writing the concerned officer's character roll, but his overall performance during the year should be adjusted without being unduly influenced by the instances of the errors made by him. When a Commissioner feels that despite the mistakes, the performance of an income-tax Officer during a particular year was very good or even outstanding, he should not hesitate to give his unbiased views. When an Income-tax Officer would move on to another charge either on transfer or promotion, the ledger card shall be transferred to the Commissioner of Income-tax in whose jurisdiction he would be working. (2) Explanation of the officers who make mistakes:- The explanation of the officials who make mistakes shall not be called for in a routine manner, except where a mistake has been proposed as a draft paragraph which is likely to be specifically commented on in the C A.G's Audit Report to Parliament. The Public Accounts Committee, who consider the Audit Report, are generally keen on ascertaining whether the mistakes reported by the Audit have been found by the Department to be 'bona fide' ones. For allaying the misgivings of the Committee, as also for securing the best defence against the audit objections, it has been decided that where the draft paragraphs have been received from the C A.G., explanations should be called for from the concerned officials in every Income-tax case as also in the cases under the other direct tax laws with tax effect of at least Rs.1,000/-. In the cases reported by the Internal Audit Parties and those commented on by the Revenue Audit, other than those occurring in the C A.G's draft paras, Commissioners/Addl. Commissioners of Income-tax would be free to decide whether or not an explanation should be called for. Only after taking into account the nature of the mistakes pointed out and the circumstances in which these occur, need such explanations be obtained. Where there is a suspicion about an official's bona fides or where there was prima facie negligence or other impropriety, explanations would of course be called for without fixing any limit as to the tax effect. But as a general rule it would be advisable not to call for explanations where the tax effect is less than Rs. 10,000/- in Income-tax cases and less than Rs.1,000/- in the cases under the other direct tax laws. In respect of the cases figuring as draft paras, the copies of the explanations or the gists thereof should be invariably sent to the Board with the observations of the Commissioner/Additional Commissioner. (3) Quarterly statements regarding cases involving tax effect of Rs. 10,000/- or more:- Under the Board's F.No. 14/4/63-IT dated 19.2.1964, the Commissioners of Income-tax were required to furnish quarterly statements to the Board in all cases of arrear involving in each case a tax effect of Rs. 10,000/- or more. With the introduction of the ledger cards, it will no longer be necessary to furnish such quarterly statements. The instructions dated 19.2.1964 are accordingly cancelled.