Audit objections and settlement thereof - Income Tax - 499 / CBDT

INSTRUCTION NO. 499 / CBDT Dated : January 20, 1973 It is stated that the large pendency of Revenue Audit objections has been causing concern and as a measure to reduce this to feasible extent, the Revenue Audit have been consulted whether an objection should be treated as settled as soon as rectificatory action has been taken, without waiting till the collection of the additional demand ascribable to the audit objection. A large number of Revenue Audit objections are shown as pending even after rectificatory action because the collection of consequential additional demand is delayed due to either time having been allowed to the assessee for the payment of additional demand or till the disposal of appeal or due to the fact that the assessment in question has been set aside on appeal and fresh assessment is pending. Sometimes even if the appeal has been decided in favour of the Department, the assessees remain recalcitrant and refuse to pay the demand which they may contest in further appeal. Moreover, the demand ascribable to an audit objection gets merged with the other outstanding arrears of the assessee and it becomes difficult to spot out whether the demand ascribable purely to the audit objection has been paid. 2. Having regard to the above-noted circumstances, the Revenue Audit have agreed that their audit objections may be treated as settled as soon as appropriate rectificatory/revisionary action has been taken and additional demand raised, but this is subject to the following conditions: (i) The P.A.C. (Fifth Lok Sabha) in para 2.79 of their 50th Report have recommended for issuing " suitable instructions to the Commissioners that where an audit objection has been accepted by the Department either at the Commissioner's level or at the Ministry's level, any order of Appeals preferred, if such contrary findings of the Appellate Assistant Commissioner are not justified either in law or facts" . This may be kept in view. (ii) In cases of demands raised at the instance of Revenue Audit, it should be the responsibility of the Internal Audit to watch the recovery and the Internal Audit should include a special report on recoveries/refunds made in respect of Revenue Audit objections; since the Reports of the Internal Audit are to be scrutinised in Revenue Audit, there will be an additional safeguard. DI(IT Audit) may take necessary steps in this behalf. (iii) "Settling" an audit objection after its acceptance, does not mean that it is "dropped". Thus the A.G. for consideration of a draft para even in respect of such "settled" cases, where on account of any principle involved, or the magnitude of the amount or for any other reason he feels that the attention of the Board/or of the Government /or of the Parliament has to be drawn to the irregularity. 3. The Board desire that the position as agreed to by the Revenue Audit and detailed above may be carefully followed hereafter and the pendency of Revenue Audit objections revised/dealt with accordingly; the above noted three conditions stipulated by the Revenue Audit, should be kept in view.