TaxTMI 
TaxTMI 
Revised Instruction on Internal Auditing
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....et up, under the direct supervision and control of the Pr.CCIT. The Audit structure shall be headed by a CIT (Audit) in each Pr.CCIT region. In the metro charges of Delhi, Mumbai, Kolkata and Chennai, there shall be two CsIT (Audit) each. The CIT (Audit) shall have their headquarters at the same station as that of the Pr.CCIT. Each CIT (Audit) will have one JCIT (Audit) [for the purpose of this Instruction, JCIT shall include Addl. CIT]. Each JCIT(Audit) shall have one SAP (Special Audit Party) unit headed by DCIT/ACIT (Audit) and as many IAPs (Internal Audit Party) headed by ITO(Audit) as are mentioned in Cadre Restructuring Plan, 2013. The JCIT will supervise the work of SAPs and IAPs working under him, apart from audit of cases which are categorized and assigned to him for audit. 2.2 In case of AOs (assessment units) of International Taxation, Transfer Pricing, Central Charges, Exemption etc. stationed in the territorial jurisdiction of a Pr.CCIT/CIT(Audit) which is different from the jurisdiction of the Pr.CCIT/CIT(Audit) where the controlling PCIT of such AOs is stationed, the responsibility for Internal Audit of all such assessment units will be of the local CIT(Audi....
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....ghtage of 1 and corporate case of 1.2) 4.2 The audit of regular or complete scrutiny case shall be counted 1 point whereas audit of 'limited scrutiny' case shall be 0.5 point as the scope of audit is also limited as mentioned in para 3.3 above. The target mentioned above is only the minimum number of points to be accumulated and each audit unit must try to manage the work in such a way that as many auditable cases as possible are actually audited. 4.3 The CIT (Audit) shall be competent to change the target and norms for SAP/IAP according to the exigency of the availability of manpower and workload, subject to the approval of the Pr.CCIT concerned. Moreover, the CIT (Audit) may also ensure that the annual workload is evenly distributed in different months of the financial year. 4.4 The Internal Audit plan would be flexible and adjustable according to the available workload of high risk cases. The cases for audit would be selected through ITBA system based on the factors like assessed income/loss, or refund granted, or claim of exemption/deduction, or any other criteria as may be decided by the CBDT. The list of auditable cases shall be generated th....
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....be assigned by CIT (Audit) to JCIT, SAP and IAPs. While assigning the cases to audit units, the CIT (Audit) may take into consideration, the following factors: (i) Preference for audit is given to high risk cases (ii) The target of minimum number of cases to be audited by audit unit has to be evenly distributed over the year. (iii) At least some cases from all assessment units (AOs) should be audited. (iv) In multi-station regions, cases from all stations are audited. (v) The cases audited are a reasonable mix of corporate and non- corporate cases as also complete and limited scrutiny. (vi) Sectors of business that have more potential for audit during the relevant year be preferred. (vii) Appropriate number of cases of International tax, Exemption, TDS are subjected to audit. (viii) Any other factor that may increase the effectiveness of internal audit. 5.5 In the ITBA environment, the CIT (Audit) shall simply identify and mark the cases in the system itself to be audited by JCIT, SAP and IAPs. The marked cases shall be visible to the audit unit c....
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....ork of audit of cases in the following manner: (i) In the first quarter of the financial year: assessments made in previous FY & current FY. (ii) In remaining quarters of the Financial year: assessments made in current year 7. Audit Procedure and classification of mistakes 7.1 The Assessing Officer shall make the assessment records available for audit on requisition from the Internal Audit unit. In post-ITBA scenario, requisitions would be made through the system. It shall be the responsibility of the Assessing officer to deliver the records to the Audit unit. In search & Seizure cases, the Appraisal Report shall also be made available to audit, if requisitioned. 7.2 The Audit unit shall complete the audit work expeditiously and forward the objection, if any, in the form of 'Audit memo' in a format prescribed at Annexure-A to this Instruction. The Audit memo shall be sent to the office of PCIT (for the purpose of this instruction, PCIT shall include CIT) concerned, with a copy each to the CIT (Audit), JCIT (Audit), Range head and the Assessing officer. 7.3 In order to make it convenient to decide the appropriate course o....
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.... reply. (ii) If the view of the PCIT is not acceptable, the reasons for disagreement shall be communicated to the PCIT concerned within one month of receipt of his reply. 8.1.4 If the PCIT on consideration of the response of CIT(Audit) is still of the view that the objection is not acceptable, he shall intimate the reasons for his view to the jurisdictional CCIT within 15 days, who will consider both the views and issue the final decision on acceptance or non-acceptance within 15 days. 8.2 Minor Internal Audit Objection 8.2.1 In respect of Minor audit objection, the Range head shall, based on report from Assessing Officer, examine the objection and communicate its acceptance or otherwise to the JCIT(Audit) within one month of receipt of such objection. In case objection relates to JCIT (Special Range), the JCIT being himself the AO, shall examine and communicate with JCIT (Audit). 8.2.2 Where the objection is not accepted, the JCIT (Audit) shall consider the reply of the Range Head or JCIT (Special Range), as the case may be, and take following steps as may be appropriate: (i) If the view of the Range Head/JCIT (Sp....
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....hs of initiation of the proceeding as per Income-tax Act, 1961. 10. Settlement of audit objections: 10.1 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. 10.2 The accepted minor audit objection shall be settled by the JCIT (Audit) after considering the reply of the Range head concerned about completion of remedial action. 10.3 Pr. CCIT shall review the progress of settlement of internal objections in the CCIT Regions under his administrative control on quarterly basis and take necessary steps to achieve Action Plan targets for the year in this regard. He shall submit a report within a fortnight of each quarterly review to the Member (A&J),CBDT. 11. Calling for Explanation: 11.1 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. 11.2 The PCIT may also call for explanation of the officers who delayed the process ....
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.... different CsIT (Audit). 13.4 In order to reduce the incidence of errors, the CIT (Audit) shall prepare a list of common/repeated errors noticed in the audit in preceeding two quarters in April and October every year to the ADG (Audit) who in turn shall compile and classify such common mistakes for the circulation to all field officers. 13.5 The CIT (Audit) shall also submit to the ADG (Audit) in April and October every year, a list of mistakes detected by the receipt audit in cases where Internal Audit was already done. The ADG (Audit) shall in turn compile all such mistakes for circulation to all the field officers and also to the internal audit officers. 14. Registers to be maintained 14.1 The record of audit work i.e. the Audit memo, all subsequent communications and its settlement etc. 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. 14.2 However, until the time Audit Module in ITBA system is fully functional, the registers in the format as prescribed in the existing Instructions shall....
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....Assessing Officer Annexure-A AUDIT MEMO 1 Unique objection No. To be generated by ITBA 2 Name of the assessee 3 PAN 4 Status 5 Assessment Year 6 Ward /Circle/Special Range 7 Section & Date of order under audit 8 Name & Employee code of AO who made the order under audit 9 Date of Internal Audit 10 Audit Unit 11 Amount of under assessment/over assessment 12 Revenue effect Tax + interest 13 Category - Factual/Legal/Mixed 14 Section(s) involved in objection 15 Issue in objection in brief (150 character) (drop down list preferable) Audit Objection - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Name & Signature of the officer No: CIT(Audit)/. . ./FY /. . . . (audit unit)/Memo No. / Date: dd/mm/yy Annexure-B Monthly report of Pendency of objections Report for the : [PCCIT/CCIT/DGIT/PCIT/CIT(Audit)]drop down Status as on : [normally as on last day of the previous month/any specific date] PART-I....