CBDT Issues Revised SOP for Handling Internal Audit Objections | Discontinues Raising Audit Observations

Instruction No. 2/2023, dated 09-09-2024

The Central Board of Direct Taxes (CBDT) has issued revised instructions regarding the Standard Operating Procedure for handling Internal Audit Objections. 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 with tax laws. The instruction has been issued, superseding all previous instructions on internal audits, including Instruction No. 6/2017 dated 21-07-2017.

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. The aim is to identify errors or omissions and raise an ‘objection’ through an Audit Memo. The practice of raising an ‘Audit Observation’ has been discontinued.

These instructions come into effect immediately and will apply to pending internal audit objections also.

This instruction guides the following:

• The procedure for re-checking;
• The list of auditable cases and the manner of their allocation;
• The conduct of audit;
• The procedure for handling audit objections;
• Remedial actions on such audit objections;
• Settlement of objections;
• Reports;
• Quarterly monitoring;

Further, it also provided that all actions pertaining to an audit objection must be performed only through the Internal Audit Module of Income Tax Business Application (ITBA). Actions on objections for TP and TDS cases, to the extent that they cannot be performed on ITBA for technical reasons, may be conducted outside ITBA using the designation-based mail ID.

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