NEW DELHI: A CAG report on the functioning of Income Tax department, tabled in Parliament on Tuesday, has raised concern over non-sharing of data with the audit team related to arrears and outstanding demand.
The report (No. 14 of 2024) said there has been a significant non-production of records, with the I-T dept failing to provide information for more than 42% of the requisitioned cases, thereby limiting the scope of audit. “The I-T dept did not provide data on cases closed after March 2020, preventing verification of the correctness of the closure of these cases,” it said.
According to CAG, till March 2021, the accumulated I-T outstanding demand, raised but not realised, stood at Rs 14.41 lakh crore, of which Rs 10.58 lakh crore was shown as ‘under dispute’, representing 73% of the total.
“Audit noticed instances of exaggerated tax demands raised by the I-T dept, such as not allowing credit for taxes already paid by the assessee, levying incorrect interest, and committing mistakes while giving effect to the appeal orders,” the CAG has said.
The report further found that figures of outstanding demand continued to include nullified demands, and the delay in giving effect to appeal orders resulted in the delayed issue of refunds, which resulted in the I-T dept issuing refunds for the inflated demands along with interest, besides harassment to the assessees.
Audit noted several issues and shortcomings relating to incorrect reporting of outstanding demand; failure of or delay in recovery of outstanding demand; systemic issues such as the absence of granular data, lack of risk scoring technique in fixing targets, non-maintenance of dossier reports and weak monitoring and review mechanism
“There has been a steady increase in outstanding demand and the percentage of tax demand termed as ‘difficult to recover’ over total arrear tax demands continued to be abnormally high,” the CAG noted.
The CAG observed delays of up to seven years in giving effect to appeal orders passed by different appellate authorities, with one case still awaiting orders for over 11 years. Delays in passing consequential orders resulted in excess outstanding demand on records; non-levy of interest for the delay in paying tax demand resulted in the underreporting of outstanding demand.
The audit found that though provisional attachment under Section 281B was invoked, no recoveries could be made by the department, and the recovery officers did not invoke specific powers to attach and dispose of the properties, even in high-value cases.
