Remedial action in case of audit objections. - Income Tax - 1598/CBDT

INSTRUCTION NO. 1598/CBDT Dated: February 1, 1985 Reference is invited to Instruction No.828(F.No.236/272/74-A PAC-II) dated 24-2-75 drawing attention to the earlier standing instructions of the Board that even in arguable cases, CsIT should ensure that departments option should be kept open so that there is no loss of revenue due to failure to take remedial action, if and when an audit objection is finally accepted. Attention is also invited to Circular F.No. RA-6/320/76-DIT dated 22-8-77 issued by the DI(IT A) laying down that even in these cases where the Board decides not to accept the audit objection, remedial action has to be kept open or, where necessary, completed unless it is finally settled with audit. 2. Taking remedial action as a precautionary measure where a Receipt Audit objection has not been accepted, has come up for consideration before the board at its meeting held on 11-2-80. The D.I. (Audit), has vide his F. No. Audit-9/80-81/DIT dated 23-5-80 circulated a copy of the minutes of the meeting of the board held on 11-2-80 to all the Commissioners. 3. After further consideration of the matter at the meeting of the Board held on 28-9-84 the following instructions are issued :- Remedial action may be invited in all cases where objections are not accepted and Audit has not dropped the objections within 3 months of receiving the Department's reply except where they are clearly covered under Board's instructions mentioned below in para (a). After initiating appropriate remedial action u/s.263, 147 or 154, the matter may be examined after taking into account the audit objection, Audit's rejoinder after the Departments reply the assessee representations and the relevant judicial decisions. If on such examination it is still found that the audit objection is not acceptable, remedial action in respect of minor objections may be dropped with the approval of Range IAC. As for major objections where the tax effect in income-tax or sur-tax cases is below Rs.25,000 or below Rs.5,000 in other direct taxes cases remedial action can be dropped with the approval of the IAC(Audit). Where the tax effect exceeds the limits stated above, action may be dropped with the approval of the CIT. However, if the A.G. proposes to include the objection in the Audit Report the remedial action may be dropped only with the approval of the board. While dropping the remedial action, the following guidelines should be followed: (a) Where the validity of Boards instructions has been questioned by Audit by way of a Draft para the CIT should immediately bring such audit objection to the notice of the Board. Then the concerned section of the Board which had issued the instruction will re-examine the Instruction in the light of the audit objection. If on such re-examination Audits view is found unacceptable, Audit will be informed accordingly and no remedial action need be taken as a precautionary measure. However, if Audits view is found to be correct, instruction will have to be suitably modified, amended or withdrawn. Such instruction should normally be issued with prospective effect. If the instruction is however modified with retrospective effect, remedial action should be taken. (b)Where there is a decision of a High court or a Tribunal which has a direct bearing on the point raised by Audit and which is contrary to the view of Audit remedial action may be dropped if the decision has been accepted by the Department on merits. (c)Where there is a decision of a High court or a Tribunal rejecting the view of Audit but the Department has not accepted the decision remedial action may be completed. However Audit may be informed that the decision of the High Court or Tribunal is a contrary to the view taken by Audit and therefore the point raised cannot be considered as a mistake or an irregularity. (d) Where the objection is purely one on facts and no legal issues are involved remedial action may be dropped if the facts found on examination are contrary to what is stated by Audit. 4. The above instructions may please be brought to the notice of all the officers concerned working in your jurisdiction.