Tighter vigilance to avoid audit objections. - Income Tax - 1228/CBDT

INSTRUCTION NO. 1228/CBDT Dated : January 5, 1979 Section(s) Referred: 209 ,210 ,211 ,212 ,218 Statute: Income - Tax Act, 1961 A copy of the draft para 376 proposed by the C AG for inclusion in his Annual report for the year 1977-78 has already been communicated to all CsIT in Board's F.No.236/376/78-A PAC.II dated 2-12-78. However a perusal of the observations proposed to be made by the C AG clearly indicates that there have been lapses in the field in complying with the instructions laid down in chapter XIV(a) of the Office Mannual Volume II, Section II as supplemented by instructions issued from time to time. Most of the mistakes pointed out by the Revenue Audit are of such nature that they could have been avoided by scrupulous adherence to the existing instructions. The CsIT are, therefore, requested to ensure tighter vigilance in matters relating to demand/collection/recovery and adjustment of advance tax so as to avoid similar audit objections in future. 2. Brief instructions in the succeeding paragraphs deal with the mistakes pointed on in each sub-para of the proposed Draft Paragraph and highlight the action through which such objection can be avoided. 3. The main defects brought out by the various subparas of the draft Audit para and the further action to be taken are discussed below:- A.Non-payment of advance tax by persons assessed for first time. If instruction contained in this regard in sub-paras(i),(ii) (iii) of para 6 of chapter XIV (a) of Office Manual Volume II, Section II had been properly followed, the lapses of the magnitude mentioned in the Audit Para could not have arisen. Suitable steps may be taken to ensure that ITOs exercise due care to charge penal interest/impose penalty wherever justified. Where the ITOs are of the view that penal interest is not leviable or is to be waived under rule 40, suitable note should be left in the body of the order as instructed in para 6 of Boards Instructions NO 363 dated 23-12-71 [Bulletin IT/XVIII/Page 235]. B- Non-issue of advance tax notices. Paras 2 to 5 of chapter XIV(a) of the Office Manual prescribe the method to be followed in ensuring that notices are issued in all liable cases. After introduction of Section 209A this year, the modified procedure has been laid down in DOMS Circular NO 31 dated 14-9-78 to similarly ensure that wherever assessees have not filed the statements/estimates under section 209A(1)(a) or as the case may be under section 209A(2), notices under section 210 are issued in time. The Commissioner of Income-tax should ensure that these procedures are followed and no case where there is liability to advance tax escapes attention. C-Non-filing of estimates and non-payments of advance tax by assessees under section 212(3A). The defect pointed out in this paragraph can be avoided through administrative vigilance and by ensuring that defaulters are adequately penalised. D-Non-payments of instalments of advance tax by due dates. Section 218 provides that if any assessee does not pay any instalment on the date or dates specified in Section 211, he shall be deemed to be an assessee in default in respect of such instalment or instalments. Para 12 of Chapter XIV(a) of the Office Manual lays down the procedure to be followed for recovery of instalments in default. It lays down that in such cases penalty under section 221 must be levied and continue to be levied till a regular assessment is made. It is to be stressed in this connection that we must be strict in ensuring prompt payment of instalments and we must promptly penalise the defaulters under section 221. E- Under-estimation of advance tax by the assessees and reduction/postponement of payment of advance tax. The provision of sections 215 and 273(a) should be invoked in cases which justify action thereunder. In this connection, instructions in paras 13 14 of the Office Manual referred to may be borne in mind. F-Short credit for advance tax payment. Several instructions have been issued from time to time emphasising the need for maintaining proper records of the payments made by the assessees under advance tax, self-assessment etc. and for ensuring that credit for such payments has been given to the assessees in the regular assessment. Lapses in this regard can be minimised through adequate administrative control. The Commissioners should ensure that the taxes paid by the assessees are duly accounted for in time and any case of failure to give credit for advance tax payments is viewed seriously and dealt with accordingly. 4. The above instructions may please be brought to the notice of all ITOs in your charge for strict compliance. The IACs working under you should also be instructed to ensure the proper observance of these instructions by the ITOs in their charges. You should also examine the extent to which these instructions are being complied with in the field offices during your periodical inspections of the Income tax offices.