When Income Tax Officer can give direction for Audit under Income Tax Act

If the following conditions are satisfied the assessing officer may direct the assessee to get his accounts audited by an accountant nominated by the chief commissioner. Such direction can be issued under sec. 142(2A). However, the assessing officer shall not direct the assessee to get the books of accounts audited unless the assessee has been given a reasonable opportunity of being heard.

Conditions –    

  1. Direction can be issued only with the previous approval of the chief commissioner/ commissioner.
  2. Such direction can be issued only if having regards to the nature and complexity of the accounts of the assessee and interest of revenue, the officer thinks that it is necessary so to do.
  3. Such direction can be issued at any stage of proceeding before the assessing officer.                                

Audit report should be submitted within the prescribed time-

The audit report shall be submitted within the certain time by assessee. The assessing officer has power to extend such period on an application made by the assessee or without an application. However the aggregate period shall not exceed 180 days.

Audit fees-

The audit fees and expenses shall be determined by the chief commissioner/commissioner and paid by the assessee.

Where any direction is issued under section 142(2A) by the assessing officer to an assessee to get the accounts audited, the expenses of, and incidental to, such audit shall be determined by the chief commissioner in accordance with the prescribed guidelines, the expenses shall be paid by the central government.

Consequences of failure of get books audited-

Failure to comply with
direction under sec. 142(2A) to get of books of accounts audited entails a best judgment under sec 144. Besides, it attracts penalty under section 271 and prosecution under section 276D.



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