The Comptroller & Auditor General of India's (CAG's) report on the Revenue receipts from Direct Taxes of the Union Government for the Financial Year 2009-10 was placed in Parliament on March 18, 2011. The salient features from the report are briefly discussed .

Considering the workload, the disposal in many areas needs to be accelerated. Further, the number of taxpayers (341 lakh) in the background of the population of nearly 1.2 billion and mounting tax arrears are matters of concern. The most redeeming features of the performance are very good collections, showing a growth of 32.2 per cent and very low cost of collection of 0.7 per cent only.

Tax GDP ratio increased from 4.6 per cent in 2005-06 to 6.1 per cent in 2009-10, though it fell by 0.5 per cent in 2009-10 vis-à-vis previous year. Revenue foregone, consequent to tax preferences, increased by 150.1 per cent from Rs 48,168 crore in 2005-06 to Rs 1,20,483 crore in 2009-10. This shows heavy resort to exemptions/deductions in the tax system.

Low taxpayer base

Though there has been growth in taxpayers from 297.9 lakh in 2005-06 to 340.9 lakh in 2009-10, it needs to be stepped up very much further. Effective collection rate of corporation tax was 22.8 per cent in 2008-09, which was lower than 33.9 per cent of statutory rate.

Efficiency in collections needs concerted attention. At the end of 2009-10, as much as Rs 2.3 lakh crore remained uncollected. What is more a matter of concern is steep rise from year-to-year despite the tax department having powers of attachment of properties, to appoint receivers for the management of assessees' properties, imprisonment, etc.

Disappointing features

The most disappointing feature in Department's working has been concerning prosecutions. In 2009-10, 12,060 prosecutions were launched, but disposal of 599 cases only (5 per cent of the total pendency), out of which, 276 cases resulted in acquittal, cannot be considered a good performance by any standards, defeating the very purpose of creating deterrence by such measure.

Disposal of refund cases only (equal to 59.6 per cent of the workload) too is disappointing. Delay in such cases lead to payment of interest of Rs 12,950.8 crore in 2009-10. The disposal of appeals by the CITs(A) has been slow – 526 appeals per CIT(A) as against the expected disposal of 720 appeals.

The amount locked up in appeals at higher levels (ITAT, High Court and Supreme Court) was Rs 91,087 crore in 60,246 cases in 2009-10. The disposal of such appeals needs to be speeded up.

The functioning of Internal Audit Wing of the CBDT has been below the mark not only in quantity but also in quality.

Mistakes were detected by CAG's team even in cases, which had been audited by Internal Audit parties.

Audit has been since years, pointing out mismatch concerning companies – their number in Income-tax records during various years – has been around 50 per cent of those on the records of Registrar of Companies. But, the Income-Tax Department has been unable to give any satisfactory reply to such a mismatch. There has also been substantial variations in the views of the CAG and CBDT in regard to irregularities noticed. The objectives of CAG and Tax Department, being the same, to avoid revenue loss, a more realistic, dedicated and constructive approach is called for – not merely repetitive exercises – so that the same do not get reduced to mere rituals.

(The author is a former chairman of CBDT.)

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