Rule 172 — Procedure for purposes of determining expenses for audit or inventory valuation. Made under s.268, s.515 of the Income-tax Act, 2025.
Rule 172 gives effect to Section 268 and Section 515 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) requires every Chief Commissioner of Income-tax, for the purposes of section 268(5)(i) and (ii), to maintain a panel of accountants, out of the persons referred to in section 515(3)(b), and a panel of cost accountants, out of the persons referred to in section 268(13).
Sub-rule (2) fixes the money. Where the Assessing Officer directs an audit under section 268(5)(i) or an inventory valuation under section 268(5)(ii), the expenses of, and incidental to, the audit or inventory valuation — including the remuneration of the accountant or cost accountant and of the qualified assistants, semi-qualified and other assistants engaged by him — shall not be less than Rs. 3,750 and not more than Rs. 7,500, both inclusive, for every hour of the period specified by the Assessing Officer under section 268(8), (9) or (10). Sub-rule (3) requires that period to be specified in terms of the number of hours required for completing the report.
Sub-rules (4) and (5) provide the check on the bill. The accountant or cost accountant must maintain a time-sheet and submit it to the Chief Commissioner of Income-tax or Commissioner of Income-tax along with the bill, and that authority must ensure that the number of hours claimed for billing purposes is commensurate with the size and quality of the report submitted.
Section 268 lets the Assessing Officer direct a special audit or an inventory valuation by an outside professional, and the Act provides for the expenses to be determined. Left unregulated, the choice of professional and the size of his fee would both sit with the officer who ordered the exercise. Rule 172 removes the first by requiring a standing panel maintained at Chief Commissioner level, and bounds the second with an hourly band and a time-sheet that a superior authority has to test against the report actually delivered.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Floor for expenses of, and incidental to, the audit or inventory valuation | Not less than Rs. 3,750 per hour | For every hour of the period specified by the Assessing Officer under section 268(8), (9) or (10); inclusive of the remuneration of the accountant or cost accountant and his assistants | Rule 172(2) |
| Ceiling for those expenses | Not more than Rs. 7,500 per hour | Both limits inclusive; a cap on the hourly rate, not the rate itself | Rule 172(2) |
| How the period is to be specified | In terms of the number of hours required for completing the report | The period referred to in rule 172(2) | Rule 172(3) |
The band is a band, not a rate: Rs. 3,750 and Rs. 7,500 are the floor and ceiling for every hour, both inclusive, and the figure actually payable is fixed within them. Because the payment is hourly, the real control is the number of hours, and that is set by the Assessing Officer when he specifies the period under section 268(8), (9) or (10), which sub-rule (3) requires him to express in hours needed to complete the report. The time-sheet in sub-rule (4) and the commensurability test in sub-rule (5) are how an inflated claim is caught, and they are addressed to the Chief Commissioner or Commissioner, not to the assessee. The panel requirement matters too: the professional has to come from the panel maintained under sub-rule (1), drawn from the persons the Act itself qualifies in sections 515(3)(b) and 268(13).
An Assessing Officer directs a special audit under section 268(5)(i) and specifies the period as 100 hours required for completing the report. The expenses of, and incidental to, that audit must fall between Rs. 3,750 and Rs. 7,500 for each of those hours, both figures included, so the sanctioned amount lies between Rs. 3,75,000 and Rs. 7,50,000. The accountant submits a time-sheet with his bill, and the Chief Commissioner has to satisfy himself that the hours claimed are commensurate with the size and quality of the report before the bill is passed.
The assessee meets it only through the direction for special audit or inventory valuation under section 268 and the cost that follows it; the rule itself is met by the accountant or cost accountant, in the panel he is empanelled on, the time-sheet he keeps and the bill he submits.
shall not be less than Rs. 3,750 and not more than Rs. 7,500 (both inclusive) for every hour of the period as specified by the Assessing Officer
The Chief Commissioner of Income-tax or the Commissioner of Income-tax shall ensure that the number of hours claimed for billing purposes is commensurate with the size and quality of the report submitted by the accountant or cost accountant.
