I-T Department to keep panel of cost accountants
New Delhi, Sep 28, 2023
The department has also brought out detailed rules and the format for cost auditors to report their findings, including an assurance that proper books of account and other documents about inventory have been kept by companies
The Income Tax department will create a panel of professionals for conducting cost auditing on enteprises to ensure the correctness of the tax returns reported, said an official order. Cost auditing will be mandated only on select businesses facing tax proceedings.
The Income-tax (Twenty-Second Amendment) Rules, brought out by the department on Wednesday, said that chief commissioners in the department have to maintain this panel for auditing the inventory of the business facing the proceedings.
The department has also brought out detailed rules and the format for cost auditors to report their findings, including an assurance that proper books of account and other documents about inventory have been kept by companies.
The new rules implement the tax changes introduced in the union budget this year, which mandated assessing officers to get cost auditing of inventory done if he has doubts about the correctness of the accounts. The assessing officer, however, has to seek permission from a senior officer before going ahead with the cost audit. These officials include the principal chief commissioner, chief commissioner or commissioner.
Cost auditing can be done if the transactions are complex and meet certain criteria. Cost audits are usually undertaken to assess the efficiency of resource utilisation. It helps in assessing the accuracy of the cost data and in ensuring that the financial statements accurately reflect costs. It throws more light on raw material purchases, use of energy and extent of finished products which are valuable for assessing officers to ensure that the financial statements are genuine. Cost auditing is important for regulatory purposes but its relevance has over the years diminished as businesses operate in a free market economy and the extent of government subsidy for businesses has come down.