The unprecedented accounting fraud at Satyam Computer Services may have sent various government departments in a tizzy. But detecting such accounting scams may become easier for income tax authorities as they plan to use a computer assisted analysis system to scrutinise tax returns for fishy transactions like bogus purchases and missing invoices.
Called the Computer Assisted Investigation Tool (CAIT), tax authorities also plan to use it to analyse papers seized during search and survey operations as well as review balance sheets of companies. The software will be able to import accounting data from any accounting package and help the department officers to conduct audit and investigation. In fact, based on its analysis, the software will also automatically generate a report about their books of accounts. ?Since almost all business houses have switched to computers for book keeping and accounting, the department?s decision to switch over to a computer aided audit technique will be useful and faster,? said an official in the income tax department. The system, for which the Director General of Income tax (Investigation) has issued a Request for Proposal, would also identify anomalies and exceptions in accounting data that may need further investigation.
In the Rs 7,000 crore accounting fraud that is still unravelling, Satyam Computer Services had furnished bogus certificates of bank deposits and loans to its auditors. These came to light only after its former chairman and founder B Ramalinga Raju went public about the issue. Additionally, the software tool would also be useful in detecting ?hawala? transactions as it will keep a record of all income and expenditure statements. ?The new computer assisted investigation technique will be much more efficient and un-biased compared to the current system,? an official said. At present, the IT department is partially computerised and checks assessment orders manually. To be rolled out in two phases, at first they will be available as standalone software on each assessing officer?s terminal. In the second phase, it will be introduced on a centralised basis and provide all necessary information such as Annual Information Returns, online tax returns and books of accounts of taxpayers to all officers across the country. The department is hopeful of finalising a vendor for the software by the year-end.
The decision to switch over to computer assisted audit comes at a time when the CBDT is planning to computerize all its functions and one of its major jobs is to scrutinize returns. Most developed tax administrations in the world are already using software tools for analysis of computerised accounts and the Indian tax department?s CAIT concept is said to be similar to that being used in Canada and New Zealand.