Rule 114 makes the Transfer Pricing Officer audit compliance with the agreement for each year covered, report within six months of receiving the annual compliance report, and sets that regular audit of covered transactions is not done unless the agreement is cancelled.
114
Rules 2026 · Rule 114
Compliance audit of agreement (advance pricing agreement)
Rules 77-130
The audit (sub-rules 1 to 3). The Transfer Pricing Officer having jurisdiction over the assessee audits compliance for each year covered. The Officer may require the assessee to substantiate compliance — including satisfaction of the critical assumptions, correctness of supporting data and consistency of applying the transfer pricing method — and to submit information or documents. The compliance audit report, with findings on compliance, goes to the Principal Chief Commissioner of Income-tax (International Taxation) for a unilateral agreement, or the competent authority of India for a bilateral or multilateral one.
Next steps (sub-rules 4 to 6). Where the assessee has failed to comply and cancellation is required, the Principal Chief Commissioner forwards the report to the Board. The report is due within six months from the end of the month in which the annual compliance report is received by the Officer. The Officer does not undertake regular audit of the covered transactions if an agreement has been entered into under rule 109, except where the agreement is cancelled under rule 116.