Procedure for “remedial action where Revenue Audit Objection is accepted” to be followed carefully: CBDT

The Central Board of Direct Taxes (CBDT) has instructed that the Procedure for remedial action where Revenue Audit Objection is accepted should be followed very carefully by the Income Tax Officers. The Process has been prescribed in Instruction No. 7/2017.

Action when Objection is acceptable:

5.3 Where the Revenue Audit objection is accepted, the PCIT shall decide if the relevant order under audit requires revision u/s 263 as remedial action. If yes, he shall call for 1he relevant records and proceed to initiate action u/s 263.

5.4 In other cases, the PCIT shall communicate his decision not to invoke section 263 to the Assessing officer who shall examine the facts of each case and take a suitable action as per his independent application of mind on the facts of each case.

5.5 In case the Assessing Officer decides to choose section 154 as the appropriate remedial measure in 5.4 above, he shall initiate the action after approval of the Range head.

5.6 The remedial ac1ion in case of accepted audit objection shall be initiated within three months and shall be completed within further period of six months from initiation. The objection shall he treated as settled once the intimation of completion remedial action and issue of demand notice is given to concerned CAG officer.

Thus, the prescribed procedure requires the PCIT to decide if the order with respect to which objection is raised, warrants revision u/s 263 of the IT Act, 1961 where the objection is acceptable depending upon facts of the case (refer para 5.2 of Instruction no. 7/2017). It is only if the Pr.CTT decides not to invoke section 263 that the AO is required to examine the facts of the case and take suitable action as per his independent application of mind. In case the AO decides to invoke section 154, action is required to be initiated after approval of the Range head as per para 5.5 of the Instruction.

It is noticed that many a time, section 154 of the IT Act, 1961 is routinely invoked even in cases where the mistake is not apparent from record or in cases where action u/s 263/147 is warranted, resulting in avoidable unfavourable judgements at the appellate stage.

In view of the above, all the field authorities are requested to ensure that the procedure prescribed in Instruction No. 7/2017 is followed scrupulously and remedial action is taken under appropriate section of the Income Tax Act, 1961 after due application of mind.

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