Special audit of cost of inventory - may be done by a cost accountant in practice
Standing Committee on Finance, in its 49th report (para 3.15, page 94) on the Direct Taxes Code Bill, 2010, presented to Hon’ble Speaker on 9 March, 2012 has included following suggestions received from different Chambers/Organisations: - changes in the proposed Clause 33 – Gross earnings:
1. The inventory valuation should be subject to a special type of audit investigation to be done by the department in doubtful cases.
2. This may be done on selection basis, preferably by fixing some threshold limit of turnover, say Rs. 20 crores and above, beyond which, the assessing officers of the income tax department can select some units for scrutiny to strengthen the hands of the revenue authorities.
3. This type of special audit should be done in the line of sec 142(2A) of ITA 1961 or clause 151(2) of DTC Bill, 2010 or Sec 14A and 14AA of the Central Excise Act, 1944, which are all intended to provide preventive check and control on corporate / assesses so that there exists an in-built control system of proper inventory valuation.
4. Such special audits may be ordered for at least 10-15% of total assesses of the income tax department by executive orders to be issued by CBDT so that the preventive control works as moral check on assesses to show correct valuation of inventory in order to keep transparency in final accounts.
5. ―Special audit of cost of inventory “may be done by a ―cost accountant in practice” as per meaning of the cost and works accountants act, 1959.
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