114. Compliance audit of agreement.—

(1) The Transfer Pricing Officer in respect of arms‘ length price and having the jurisdiction over the assessee shall carry out the compliance audit of the agreement for each of the year covered in the agreement.

(2) For the purposes of sub-rule (1), the Transfer Pricing Officer may require—

(a) the assessee to substantiate compliance with the terms of the agreement, including satisfaction of the critical assumptions, correctness of the supporting data or information and consistency of the applicationof the transfer pricing method; and

(b) the assessee to submit any information, or document, to establish that the terms of the agreement has been complied with.

(3) The Transfer Pricing Officer shall submit the compliance audit report, for each year covered in the agreement, to the Principal Chief Commissioner of Income-tax (International Taxation) in case of unilateral agreement and to the competent authority of India, in case of bilateral or multilateral agreement, mentioning therein his findings as regards compliance by the assessee with terms of the agreement.

(4) The Principal Chief Commissioner of Income-tax (International Taxation) shall forward the report to the Board, where there is finding of failure on part of assessee to comply with terms of agreement and cancellation of the agreement is required.

(5) The compliance audit report shall be furnished by the Transfer Pricing Officer within six months from the end of the month in which the Annual Compliance Report referred to in rule 113 is received by such officers.

(6) The regular audit of the covered transactions shall not be undertaken by the Transfer Pricing Officer, if an agreement has been entered into under rule 109, except where the agreement has been cancelled under rule 116.