Special audit under Section 66: when an accountant is appointed against you
A departmental audit by an outside professional, at the department's instance, with the report going to the department.
Section 66 permits an officer not below the rank of Assistant Commissioner, with the prior approval of the Commissioner, at any stage of scrutiny, inquiry, investigation or any other proceedings, having regard to the nature and complexity of the case and the interest of revenue, to direct a registered person to get its records examined and audited by a chartered accountant or a cost accountant nominated by the Commissioner. The direction is in ADT-03, the report is due within ninety days extendable by a further ninety, and an opportunity of being heard must be given on the findings.
The conditions
Prior approval of the Commissioner, and the officer's opinion having regard to the nature and complexity of the case and the interest of revenue. A direction without recorded satisfaction on those grounds is challengeable.
The auditor is nominated by the Commissioner, not chosen by the taxpayer, and the expenses of the examination and audit are determined and paid by the Commissioner.
Ninety days for the report, extendable by a further ninety on an application by the auditor or the registered person and for material and sufficient reason.
An opportunity of being heard on the findings before they are used against the taxpayer, which Section 66(4) requires expressly.
How to handle it
Ask for the direction and the recorded satisfaction. This is one of the few powers where the recorded reasons are commonly absent.
Cooperate fully with the auditor but in writing. A special audit report is built on the taxpayer's own submissions, and an oral explanation appears in the report as the auditor's understanding.
Provide reconciliations proactively. The auditor's job is to reconcile, and an unreconciled position becomes a finding.
Take the hearing under Section 66(4) seriously and answer the report finding by finding before any notice issues.
Where the special audit follows a departmental audit on the same period, take the objection to duplication.
What to do on Monday
Ask for the direction and the recorded satisfaction on the first day.
Deal with the auditor in writing, and provide reconciliations before they are asked for.
Use the Section 66(4) hearing to answer the report finding by finding.
Object where a special audit duplicates a completed departmental audit for the same period.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Can we choose the auditor?
No. The auditor is nominated by the Commissioner.
Who pays for the special audit?
The Commissioner determines and pays the remuneration.
Can a special audit be directed after a notice?
The provision permits it at any stage of scrutiny, inquiry, investigation or other proceedings.
Is a hearing required on the findings?
Yes, under Section 66(4), before the findings are used against you.
Can the direction be challenged?
Where the recorded satisfaction on complexity and revenue interest is absent, or approval was not obtained, yes.
In this cluster
- GST audit under Section 65: the clock, your rights and the first reply
- ADT-01 to ADT-04: the audit paper trail
- The eleven findings that appear in almost every departmental audit
- GSTR-9 and GSTR-9C: reconciliation exposure and correction strategy
- Turnover reconciliation between GST, income tax and the financial statements
- E-invoicing non compliance: consequences and cure
- Section 35(6): tax on goods not accounted for
- Audit objections versus anti evasion investigation: two different files
- Building the audit defence file before the audit begins
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.