CAG report discloses irregularities in corporation tax assessments of high value cases

A CAG audit report on Direct Taxes drew attention to 57 instances of significant errors and irregularities in corporation tax assessments of high value cases involving tax effects of Rs 6,304.56 crore.

The report of the Comptroller and Auditor General on Direct Taxes of the Union Government for the year ended March 2021, tabled in Parliament on Wednesday, contains 467 audit observations having a tax effect of Rs 8,413.10 crore.

As per the CAG report, 319 high value cases pertaining to corporation tax with tax effect of Rs 7,788.98 crore have been pointed out. These cases mainly pertained to arithmetical errors in computation of income and tax, errors in levy of interest, irregularities in allowing depreciation/business losses/capital losses, incorrect allowance of business expenditure, unexplained investment/cash credit, etc.

The Ministry/the ITD accepted 165 cases involving tax effect of Rs 5,845.39 crore but did not accept eight cases involving tax effect of Rs 114.73 crore.

However, out of319 cases, the ITD has completed remedial action in 183 cases involving tax effect of Rs 6,506.10 crore and initiated remedial action in 27 cases involving tax effect of Rs 345.34 crore. In the remaining 109 cases, the ITD had not taken/initiated any action as of July 2022, said the report.

“Out of 319 high value cases cited, we draw attention to 57 instances of significant errors/ irregularities in corporation tax assessments involving tax effect of Rs 6,304.56 crore,” said the CAG report.

It observed that the collections from corporation tax decreased by 17.8 per cent, from Rs 5.57 lakh crore in FY 2019-20 to Rs 4.58 lakh crore in FY 2020-21 and Income Tax decreased by 2 per cent from Rs 4.80 lakh crore in FY 2019-20 to Rs 4.71 lakh crore in FY 2020-21.

The arrears of demand decreased from Rs 16.2 lakh crore in FY 2019-20 to Rs 15.1 lakh crore in FY 2020-21. Though total arrears of demand in FY 2020-21 decreased by 6.63 per cent as compared to FY 2019-20, demands classified as “difficult to recover” increased marginally to 98.26 per cent of the total arrears of demands in FY 2020-21 as compared to 97.61 per cent in FY 2019-20, said the audit report.

The CAG recommended application of incorrect rates of tax and surcharge, errors in levy of interest, excess or irregular refunds etc. point to weaknesses in the internal controls in the ITD, which need to be addressed.

20221221-201202

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