Settlement of audit objections. - Income Tax - 1552/CBDT

INSTRUCTION NO. 1552/CBDT Dated: February 8, 1984 The growing pendency of Major Audit Objections raised by Receipt Audit Parties has been causing concern to the Board for some time now. The number of Major Receipt Audit Objections awaiting settlement as on 1.4.83 was 23,197; till September, 83, the additions are 2,890; as against the total number of 26,037. 2504 only have been settled till Sept.83, leaving a balance of 23,533 . Out of the Major Audit Objections, pending on 30.9.83, 9,459 are stated to be pending with the A.Gs. for settlement. From the Draft Paras received in the Board's Office, it is found that a large number of objections involving substantial revenue are pending for settlement for want of remedial action in the field. It is also noticed that a number of contentious points which could be sorted out are pending due to lack of communication between the Department and the Receipt Audit. As seen from the above figures even though the Department has sent final replies in a substantial number of objections these have not been finally settled by the Receipt Audit. Efforts have apparently not been made by the field formations to ascertain the reasons for the same so that clarifications required, if any, could be sent to enable the settlement of the objections. 2. P.A.C. in its 75th Report, 1981-82 (Seventh Lok Sabha), has recommended that the Board should undertake a study of the average time taken in the disposal of Major Audit Objections. Pursuant to this recommendation, the DOMS has after a study of the settlement of such objections, suggested a closer co-ordination between the counterparts in the Revenue Department and the Audit Department (C AG's Office), namely between the IAC (Audit) and Sr. DAG/Jt. Director, CIT and AG/D.S., CBDT and the Receipt Audit Wing of the C AG for expeditious settlement of the Audit Objections. 3. Even though the IACs (Audit) and the CsIT have been meeting their counterparts of the Receipt Audit with a view to the settlement of audit objections, it is considered necessary in the light of the above recommendation to put it on an organisational basis. Accordingly, a meeting was recently held with the officials of the C AG's office. During the meeting it was brought to our notice that the present practice generally adopted by the Income Tax Officers was to give a reply to the Audit Memos stating this would be looked into and a reply sent in due course. This, it was pointed out, results in causing avoidable delay in the settlement of the audit objections, leading to accumulation of arrears of objections, on the one hand, and making the settlement of the objections difficult, due to time-bar etc., in due course, on the other. In this connection, reference is invited to Para 6 of the Board's Instruction No.159 F.No.5/6/69-IT(Audit) dated 16.4.1970 and Instruction No.612 F.No.236/392/72-A PAC dated 7.9.1973. Timely and proper answers to the audit memos at the time of local audit cannot therefore, be over-emphasised and should be ensured. On their part, the C.A.G.'s Office have issued necessary instructions to their field offices that the audit memos should be issued to the Income-tax Officers, as and when they are written up and not at the fag end of the local audit, so that the Income-tax Officers have sufficient time to provide categorical replies to the audit Memos confirming the facts therein. In this connection a copy of C.A.G's Circular No.41-IT/1983, to their field offices is enclosed. It was decided at the meeting that an interdepartmental machinery should be set up to expedite settlement of audit objections and to sort out contentious issues. The machinery to be set up would be at three levels as suggested by the DOMS. 4. A monthly meeting of the IAC(Audit) and the DAG/Senior DAG/Joint Director should be held to discuss the various issues in their charges. They would inter alia, reconcile statistics of pending objections, discuss with a view to settle objections having large revenue effect and attempt to eliminate or atleast reduce the areas of dispute involving common points. They could also discuss administrative problems like production of records by the ITO accommodation for audit parties, the order in which the ITO, charges are to be audited by Receipt Audit, etc. 5. A quarterly meeting of Cs.IT and AGs/Directors of Audit will be held to discuss the issues not resolved at the meetings of the IACs (Audit) and Senior DAGs/Joint Directors. Other related points for expediting settlement of objections could also be taken up at this meeting. In Multi-Commissioners charges efforts should invariably be made to involve the concerned Commissioners for a quicker settlement of objections in all the charges. 6. It was also decided that bi-monthly meeting would be held between DS(PAC), CBDT, and Joint Director (Receipt) of the C AG to discuss subject-wise issues, agreement on which could result in settlement of all such issues. Matters requiring reference to the Ministry of Law could also be pursued at these meetings. 7. The outcome of the meetings at the first and second level will be communicated to the CBDT in quarterly reports General issues which require the attention of the CBDT and which have to be taken up with the C AG should also be included in the quarterly reports which should be furnished in triplicate in the enclosed proforma. 8. CsIT and IACs (Audit) are requested to take necessary steps to implement the above decision. The first quarterly report will be sent so as to reach Member (R A) by 15th April, 1984, with a copy to the Director of Inspection (Audit).