This is a big reform for hapless tax payers . But the change in rule to handle the audit objection will also provide smiles on face of revenue officials who usually rejects 90 % auidt objection. It is also a fact , telling from experiance , that the aucit objections are raised by people who are not dealing with tax laws at field level , yet they become the ultinmate decider of the right of wrongs on a tax assessment.
So much so that the CBDT instrucion no 9/2006 which is applicable till now contains most ridiculous instruction that even if the audit objection is not accepted, remedial action need to be taken. So the result is that CIT or A.O do not agree and the sufferer is tax payer because he/she /it will have to go through the grind. Now , in terms of Tax Simplifcation Committee Report , the CBDT has now deleted the Point 4 & 5 which contained main instruction to deal with audit objection including the adverse appeal decisions by CIT(A) in case of audit objection. The New Circular is effective immediately.
New Way to Handle Audit Objection
Now the audit objection will be dealt as under instrcution 9/2006 with referring to 4 & 5 number points which are deleted and in place of them , the handling of auidt objection will be as under :
- If Pr.CIT /CIT believes audit objection is correct about a point of fact or law, it should be accepted. In that case remedial action as is appropriate should be taken.
- Time limit of 2 months from Local Audit Report (LAR) is set for appropriate remedial action
- The time limit of six months from the date of start is fixed for disposal of remeidal action.
- No second appeal is necessary if the PR.CIT/CIT does not find any reason fro filing appeal even if there is an audit objection which was not accepted by authorities.
Read the Circular on Audit Objection
CIRCULAR NO.8/2016 [F.NO.246/95/2013-A&PAC-I], DATED 17-3-2016
Instruction 9 of 2006 lays down the guidelines and procedure for attending to Revenue Audit Objections. The Instructioninter-alia mandates the initiation of remedial action in case the Revenue Audit Objection is not accepted by the Department. The Board has considered the effect of such remedial action and its ultimate fate in appeal. Accordingly, to mitigate the effects of the Instruction, para 4 and para 5 of the Instruction are deleted with immediate effect and replaced by the following:
4. Remedial Action:
| (i) | An Audit objection should be accepted and remedial action should be taken in a case where the audit abjection relating to an error of facts or an issue of law is found to be correct. | |
| (ii) | Appropriate remedial action should invariably be initiated within two months of the receipt of the Local Audit Report, and necessary orders should be passed within six months thereafter. | |
| (iii) | Where the PCIT/ CIT does not accept the Audit objection, he may record his reasons for doing so and inform the AG accordingly within two months from the date of receipt of the LAR. No remedial action needs to be taken in such cases. |
5. Second appeal in cases involving Revenue Audit Objection:
The adverse order of the first appellate authority in cases involving revenue audit objections should be carefully scrutinised by the PCIT/CIT, and appeal should not be preferred if the order is justified either in law or on facts. Reasons for not filing appeal may be recorded by the PCIT/CIT.
[button color=”” size=”” type=”round” target=”” link=”https://app.box.com/s/yg8t66ffvgcu95crllo3hkhwidpj1pg1″] Download Circular 8/2016[/button]