CAG detects Rs 44-k cr tax loss for govt in FY18-FY19

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September 25, 2020 8:23 AM

The audit said assessment orders had irregularities in allowing depreciation/business losses/capital losses and instances of incorrect allowance of business expenditure.

CAG, LTCG, TDS,income tax department, TDS creditAdditionally, the report pointed out discrepancy in the IT system which calculated interest on late tax payment by assessee or interest owed to the taxpayers due to delay in refund.

The Comptroller and Auditor General (CAG) found that income-tax department had under-assessed income in a sample of scrutiny assessment cases, leading to a lower tax demand by over Rs 44,000 crore. The CAG audited nearly 3.32 lakh such cases for financial years 2017-18 and 2018-19.

The report tabled in the Parliament on Wednesday said recurrence of irregularities, despite being pointed out repeatedly in audit reports, is indicative of non-seriousness of the department. “It also points the lack of effective monitoring and absence of an institutional mechanism to respond to the systematic and structural weaknesses leading to revenue leakage,” it said.

The audit said assessment orders had irregularities in allowing depreciation/business losses/capital losses and instances of incorrect allowance of business expenditure. Moreover, in many cases excess or irregular refunds/interest on refunds had been approved.

Further, many taxpayers faced harassment because of mismatch in tax deducted at source (TDS) in more than 17 lakh returns. “Due to such mismatch TDS credit is denied to the assessee (taxpayer) despite receipt of the revenue by the department or presence of Form 16/16A issued by deductor in support of his claim. This results in disallowance of refunds and also in creation of infructuous demands for tax resulting in avoidable harassment to the taxpayer,” CAG noted.

Additionally, the report pointed out discrepancy in the IT system which calculated interest on late tax payment by assessee or interest owed to the taxpayers due to delay in refund. Although the system allows manual intervention by assessing officers (AOs) to correct interest calculation, the report said that in many cases AOs blocked refund due to the assessees by modifying the interest component causing undue hardship and
harassment.

“Audit noticed 1,130 instances where modification by AOs in interest amount resulted in blockade of refund amounting to Rs 4,395.7 crore which was due to be payable to the concerned assessee,” it said. The Audit report noted that the returns of assessees who traded in the shares of penny stock companies were neither selected for scrutiny nor reopened for scrutiny despite the department having information of LTCG claims.

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