Returns and Assessments Chapter- 17
The CIR may call for any record or documents including books of accounts maintained for
conducting audit of the income tax affairs in respect of such person or any other person:
Provided that-
the CIR may, after recording reasons in writing call for record or documents including books
of accounts of the taxpayer; and
the reasons shall be communicated to the taxpayer while calling record or documents
including books of accounts of the taxpayer:
Provided further that the CIR shall not call for record or documents of the taxpayer after expiry
of 6 years from the end of the tax year to which they relate.
For the purpose of sub-section (2), the Commissioner may conduct audit proceedings
electronically through video links, or any other facility as prescribed by the Board. [Section
177(2A)]
Audit on the basis of sectoral Benchmark Ratios prescribed by the Board [Section
177(2AA)
Where a taxpayer—
(a) has not furnished record or documents including books of accounts;
(b) has furnished incomplete record or books of accounts; or
(c) (c) is unable provide sufficient explanation regarding the defects in records, documents or
books of accounts,
(d) it shall be construed that taxable income has not been correctly declared and the
Commissioner shall determine taxable income on the basis of sectoral benchmark ratios
prescribed by the Board.
Explanation.—The expression “sectoral benchmark ratios” means standard business sector
ratios notified by the Board on the basis of comparative cases and includes financial ratios,
production ratios, gross profit ratio, net profit ratio, recovery ratio, wastage ratio and such other
ratios in respect of such sectors as may be prescribed.”;
After completion of the audit, the CIR shall, after obtaining taxpayer’s explanation on all the
issues raised in the audit, issue an audit report containing audit observations and findings. After issuing the audit report, the CIR may, if considered necessary, amend the assessment
under sub-section (1) or sub-section (4) of section 122, as the case may be, after providing an
opportunity of being heard to the taxpayer u/s 122(9). The fact that a person has been audited in a year shall not preclude the person from audit
again in the next and following years.
The Board may appoint a firm of Chartered Accountant’s or a firm of Cost and Management
Accountants’ to conduct an audit of the income tax affairs of any person or classes of persons
and the scope of such audit shall be as determined by the Board or the CIR on a case to case
basis.
Any person employed by a firm may be authorized by the CIR, in writing, to exercise the
powers for the purposes of conducting an audit.
Where a person fails to produce before the assessment authorities any accounts, documents
and records or any other relevant document for the purpose of audit the CIR may proceed to
make best judgment assessment and the assessment treated to have been made on the basis
of return or revised return filed by the taxpayer shall be of no legal effect. Explanation: For the removal of doubt, it is declared that the powers of the CIR under this
section are not only independent of the powers of the Board u/s 214C but also not restricts the
powers of the CIR to call for the record or documents including books of accounts of a taxpayer
for audit and to conduct audit under this section.