Income Tax Internal Audit-Revised Instruction No. 06/2017 by CBDT

Income Tax Internal Audit-Revised Instruction No. 06/2017. In the light of C&AG observations, CBDT has issued a revised and comprehensive instruction 

Income Tax Internal Audit-Revised Instruction No. 06/2017

In the light of C&AG observations, the working of the Internal Audit set up in the Income tax Department has been reviewed and a revised and comprehensive instruction has been issued.

Key highlights of the Income Tax Internal Audit Revised Instruction :

The key highlights of the Income Tax Internal Audit Revised Instruction are as under:

1. Audit Set up
There shall be an  Internal  Audit set up , under the direct supervision and control of the Pr.CCrr. The Audit structure shall be headed  by a CIT (Audit) in each Pr.CCIT region.

2. Objective and Scope of Internal Audit
The ultimate aim of Internal Audit is to contribute to improve the quality of assessments by reducing the errors and omissions and also prevent detection of mistakes by the Revenue  The scope of audit scrutiny by Internal Audit shall be broadly to verify the following:

• The arithmetical inaccuracy;
• Non-application or wrong application of relevant legal provisions;
• Orders passed not in conformity with  binding judicial  pronouncements/  precedence and also Circulars & Instructions issued by the CBDT;

3. Auditable Cases and Targets
There are three level of audit units , namely the JCIT, the SAP and the IAP. The minimum number of points to be achieved by each JCIT, SAP and IAP per annum shall be as under:

4. Class of cases to be audited by various audit units:
Audit Potential Index to be worked out as under:

API = Assessed  income + 2 x (Exemptions + Deduction ) + 4 x Total Refud granted  (for the relevant Assessment Year)

5. Planning
In view of the 31st December being the revised time barring date for assessments, the Internal Audit units may take up the work of audit of cases in the following manner:

• In the first quatter of the financial year: assessments made in previous FY & current
• In remaining quatters of the financial year: assessments made in current year 

6. Audit Procedure and classification of mistakes
The audit objection shall be categorized , depending upon the issue raised by the audit unit concerned, into following:

• factual , or
• Legal Question , or
• Mixed Issues

7. Examination of Objections
The procedure for dealing with internal audit objection is based on its classification as Major or Minor Internal Audit Objection.

8. Remedial Action:
The remedial action migh include revision u/s 263 or rectification u/s 154

9. Settlement  of audit objections:
The accepted major internal audit objection shall be settled by the CIT (Audit) once the required remedial action has been completed in the case and demand notice issued.

10. Calling for Explanation
Where a Major Internal Audit Objection has been accepted, the PCIT may call for explanation of Officer/staff concerned in appropriate cases, keeping in view the nature of objection and facts of the case, and take suitable action as deemed fit.

Where a Major Revenue Audit Objection has been accepted by the depmtment  in a case which was audited by the internal audit earlier and such objection  was not pointed out by the Internal Audit Officer, the CIT(Audit) may call for explanation of such Internal Audit Officer in appropriate cases and may take suitable action as deemed

11. Monitoring and Regulation  by Pr.DGIT(Admn)
The ADG (Audit) shall also carry out review and inspection of internal Audit set up of any region with the approval ofthe Pr. DGIT(Admn). 

CIT (Audit) shall prepare a list of common/repeated errors noticed in the audit in prececding year to the ADG (Audit) who in turn shall compile and classify such common mistakes for the circulation to all field officers

12. Registers to be maintained:
The record of audit work i .e. the Audit memo , all subsequent communications and its settlement with dates shall be available in ITBA system . The required information like pendency & settlement of major & minor internal audit objections on regular period can be availed from ITBA system as MIS . Pending the time Audit Module in ITBA system is fully functional, the registers in the prescribed format shall be maintained.

Download Complete Revised Instruction on Income Tax Internal Audit Click Here >>