The Comptroller and Auditor General of India (CAG) has pointed out significant errors in the assessment of over 350 cases related to corporate tax. It also advised the Central Board of Direct Taxes (CBDT) to put in place a foolproof IT system and internal control mechanism to avoid such recurrences.
In a report tabled in Parliament, the apex auditor of government accounts highlighted 356 high-value cases pertaining to corporation tax with tax effect of over ₹12,400 crore. 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, irregular exemptions/ deductions/ rebates/ relief/MAT credit, incorrect allowance of business expenditure, income not assessed/under-assessed under normal provisions, etc.
‘Significant errors’
Out of these cases, CAG has illustrated 38 instances of significant errors/irregularities in corporation tax assessments involving tax effect of around ₹4,000 crore. It said application of incorrect rates of tax and surcharge, errors in levy of interest, excess or irregular refunds “point to weaknesses” in the internal controls in the Income Tax Department (ITD), which need to be addressed.
It said that the Finance Ministry has taken action to initiate correction in the cases pointed out by the audit. It may be mentioned that these are only a few illustrative cases, test-checked in the audit. In the entire universe of all assessments, including non-scrutiny assessments, such errors of omission or commission cannot be ruled out.
“The CBDT not only needs to revisit its assessments, but also put in place a foolproof IT system and internal control mechanism to avoid recurrence of such errors in the future,” CAG said. Further it said that the tax body may examine whether the instances of “errors” noticed are errors of omission or commission and if these are errors of commission, then ITD should ensure necessary action as per law. The report noted that direct tax receipts decreased by 7.6 per cent in 2019-20 (₹10.51-lakh crore) as compared to 2018-19 (₹11.38-lakh crore). However, the share of direct taxes in gross tax revenue decreased to 52.3 per cent in 2019-20 from 54.7 per cent in 2018-19.
The collections from corporation tax decreased by 16.1 per cent, from ₹6.63-lakh crore in 2018-19 to ₹5.57-lakh crore in 2019-20 and income tax increased to 4 per cent from ₹4.62-lakh crore in 2018-19 to ₹4.80-lakh crore in 2019-20. As per the report, the number of non-corporate assessees increased from 6.20 crore in 2018-19 to 6.39 crore in 2019-20, an increase of 3.16 per cent.
The number of corporate assessees decreased from 8.46 lakh in 2018-19 to 8.38 lakh in 2019-20, registering a decrease of 0.9 per cent.