CAG detects 'irregularities' worth Rs 4,000 cr in corp tax assessments

Tribune News Service

New Delhi, December 21

The Comptroller and Auditor General (CAG) has pulled up the Income Tax Department (ITD) for “significant errors or irregularities” in corporate tax assessments.

Pointing out that if a test audit of only a few cases showed irregularities of nearly Rs 4,000 crore, the CAG sought a probe by the Central Board of Direct Taxes (CBDT) to find out if such errors were committed inadvertently or were errors of commission. “If these are errors of commission, then the ITD should ensure necessary action as per law,” it observed in the Compliance Audit Report on Direct Taxes presented in Parliament on Tuesday.

The CAG also noted that collection from corporate tax decreased by over Rs 1 lakh crore — from Rs 6.63 lakh crore in 2018-19 to Rs 5.57 lakh crore in 2019-20. But income tax collection increased by 0.18 lakh crore — from Rs 4.62 lakh crore in 2018-19 to Rs 4.80 lakh crore in 2019-20.

The number of corporate assessees also decreased from 8.46 lakh to 8.38 lakh in the same period.

The CAG had examined 356 high-value corporate tax cases with tax effect of Rs 12,476.53 crore. It found errors worth Rs 3,976.56 crore. Mainly they were arithmetical errors, irregularities in allowing depreciation, irregular deduction and incorrect allowance of business expenditure.

Of the 356 high-value cases, the CAG highlighted incorrect allowance of deduction at an inadmissible rate of 100% instead of 50% involving tax effect of Rs 1,262.76 crore.

The income not assessed for a bank on account of balance under Foreign Currency Translation Reserve (FCTR) involved a tax effect of Rs 774.72 crore.

Besides recommending a probe, the CAG said the errors point to weaknesses in the internal controls in the ITD which need to be addressed. The CBDT should also put in place a fool-proof IT system to avoid recurrence of such errors in the future, it advised.

356 high-value cases under scanner

• Collection from corporate tax decreased by over Rs1 lakh crore — from Rs 6.63 lakh crore in FY19 to Rs5.57 lakh crore in FY20
• The number of corporate assessees also decreased from 8.46 lakh to 8.38 lakh in the same period
• The CAG had examined 356 high-value corporate tax cases with tax effect of Rs12,476.53 crore. It found errors worth Rs3,976.56 crore

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