Quality tax audit scheme: a move to finetune tax assessment

The Central Board of Direct Taxes recently framed a scheme for ensuring quality tax assessments by its officers across India. In the preface to the scheme (issued in December 2009), the CBDT has expressed its concerns on the need for improving the general quality of tax assessments conducted by its officers. While in the past, the CBDT had issued instructions to the range heads (the country is divided into different revenue ranges) to monitor the quality of the tax assessments falling under their jurisdiction, there was no comprehensive plan in place for improving and monitoring the overall quality of tax assessments. While there are separate audit wings, an internal audit mechanism and the Comptroller & Auditor General audits, this scheme is a first of its kind aimed at improving quality of tax assessments by the revenue officers. Although the need for a plan to improve the quality of tax assessments has existed for several years, the CBDT has finally implemented a scheme effective from January 2010.

As per the scheme, the range head has to monitor at least five assessment cases for each of the revenue officers (assessing officers) falling under his jurisdiction. The cases will be jointly selected by range heads and assessing officers. The range heads would give appropriate directions for the guidance of assessing officers regarding the course of investigation to be adopted for completing these assessments in a proper manner and would also monitor the assessment proceedings in these identified cases. Once the assessments are completed, the assessing officers would send a copy of the assessment order to their range heads and to the concerned commissioner of income-tax. Also, monitoring, the scheme deals with quality assessments. The scheme mentions that for quality assessment, the assessing officer has to clearly identify the issues arising for consideration, has to give sufficient opportunity to the taxpayer to give his response, has to evaluate and analyse the response in detail and accordingly give his finding and conclusion in accordance with provisions of the law, resulting in substantial additions to income declared by the tax payer.

The scheme mentions that the cases identified for monitoring by the range head are expected to comply with this criteria of quality assessments and also authorises the chief commissioners of income tax to set monetary thresholds for assessments to qualify as quality assessments, normally not being less than Rs 5lakh, excluding recurring adjustments. Other than the identified...

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