Special Audit and Inventory Valuation under Income-tax
Introduction
The Assessing Officer (AO) may direct an assessee to get accounts audited or inventory valued if the complexity of accounts, volume of transactions, or nature of business necessitates such action. This power is exercised in a faceless manner.
Conditions for Special Audit or Inventory Valuation
The AO can issue such a direction if:
- There are doubts about the correctness of accounts.
- The accounts involve complexity or a high volume of transactions.
- The business activity is specialised and requires further verification.
- The audit or valuation is necessary in the interest of revenue.
The Principal Chief Commissioner/Chief Commissioner or Principal Commissioner/Commissioner must approve the direction, and the assessee is given an opportunity to be heard.
Appointment of Auditor or Valuer
- A Chartered Accountant is appointed for auditing accounts.
- A Cost Accountant is appointed for inventory valuation.
- The appointment is made from a panel of Accountants and Cost Accountants maintained by the tax authorities.
Submission of Reports
- The audit report must be submitted inForm 6B, and the inventory valuation report in Form 6D .
- Reports must be filed electronically within the time prescribed by the AO, extendable up to 180 days.
Payment of Audit Expenses
- The Central Government bears the cost of the audit or valuation.
- As perRule 14B, remuneration is fixed between ₹3,750 to ₹7,500 per hour, based on the time spent.
Consequences of Non-Compliance
Failure to comply may result in:
- Best Judgment Assessment by the AO.
- Penalty underSection 271and prosecution under Section 276D.
Faceless Proceedings
- As perSection 142B, the Faceless Inquiry or Valuation Scheme, 2022, ensures that notices for special audits and valuations are issued electronically through an automated system.[Notification No 19/2022, dated 30-03-2022]
- Artificial intelligence and machine learning assist in random allocation of cases.