The Central Board of Direct Taxes (CBDT) has issued Instruction No. 2/2024 on September 09, 2024, revising the Standard Operating Procedure (SOP) for handling internal audit objections in tax assessments. These new instructions replace previous guidelines (including Instruction No. 6/2017) and aim to improve audit efficiency, accountability, and compliance within the tax system.
The internal audit mechanism has been established to prevent errors, ensure timely remedy and for enhancing the quality of assessments. The evolving landscape of operations and responsibilities in the Department, especially in the faceless environment, has necessitated that the internal audit procedures be updated to ensure its efficiency while enhancing accountability and promoting compliance to tax laws. Accordingly, in supersession of all existing instructions on internal audit in general and Instruction No.6/2017 dated 21-07-2017 in particular, the instructions as follows are issued.
1.2 These instructions come into effect immediately and will be applicable to pending internal audit objections also.
1.3 In these instructions, the term:
(i) 'Act' refers to the Income Tax Act, 1961.
(ii) 'Auditee Officer' refers to the officer who passed the order under audit or his successor-in-office, except for orders passed in a faceless manner, where it refers to the Jurisdictional Assessing Officer ('JAO').
(iii) 'Auditor' refers to Addl. CIT/Jt. CIT (Audit), DCIT/ACIT (Audit), ITO (Audit) or any other officer authorised by the PCCIT or the PCIT/ CIT (Audit).
2.0 AUDIT SET UP
2.1 Internal Audit set-up is under the direct supervision and control of the PCCIT. It comprises PCIT/CIT (Audit), Addl. CIT/Jt. CIT (Audit), DCIT/ACIT (Audit), ITO (Audit) or any other officer authorized by the PCCIT or the PCIT/CIT (Audit).
2.2 For charges such as International Taxation, Transfer Pricing, Central Charges and the Exemption Wing, the responsibility for Internal Audit will lie with the PCIT/CIT (Audit) reporting to the PCCIT in whose territorial jurisdiction the Auditee Office is located.
3.0 OBJECTIVES AND SCOPE OF INTERNAL AUDIT
3.1 The audit scope extends to all matters that should have been correctly carried out in accordance with applicable legal provisions, instructions, circulars, prescribed procedures and guidelines. It aims to identify errors or omissions and raise an 'objection' through Audit Memo. The scope includes verifying arithmetical accuracy, adherence to judicial pronouncements/ precedents and other relevant issues. The objection should be well-founded with cogent justification.
3.2 The practice of raising an 'Audit Observation' is discontinued. Any significant issue noticed, other than audit objection, should be communicated by the auditor to the jurisdictional PCIT/CIT through the PCIT/CIT (Audit).
Complete Official copy of the Instructions has been attached
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