“We also observed cases where sustainability of additions made in the assessment orders was nil at the appellate stage,” the top government auditor wrote.
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A sample analysis by the Comptroller and Auditor General (CAG) revealed that more than three fourths of the income additions sought by the taxman under search and seizure don’t stand the test of judicial scrutiny at the levels of CIT Appeals/appellate tribunals. “We also observed cases where sustainability of additions made in the assessment orders was nil at the appellate stage,” the top government auditor wrote.
The CAG found that income-tax department’s inadequate handling of search and seizure cases had a monetary impact of Rs 3,729 crore in the 1,291 cases that were audited. The cases audited by CAG found that they lacked uniformity in making additions during assessments apart from non-compliance of CBDT’s instructions and orders in many cases. It noted that in some instances income escaped assessment due to incomplete assessments within specified time limit and in several other cases department failed to levy appropriate penalty.
As for deletion made by appellate bodies in these cases where additional income had been added, the report noted that it was primarily because existing judgments were not considered by assessing officer during assessment in some cases while provisions under which additions made were not clearly mentioned in assessment order in some other instances.
Additions were often made on assumptions instead of seized documents and papers and in some cases addition of undisclosed income was made in assessment year other than the relevant assessment year, the audit found. The report also held inadequacy in the relevant laws, which was used by assessees in search and seizure cases, to take undue benefit thus adversely impacting the quality of assessments.
Further, the lack of co-ordination between different wings of the department as well as with other government agencies/authorities played a part in poor quality of assessment, the report said. “There were instances where the information available with one department/other government agency was not shared with I-T department or vice versa. As a result, the issues that emanated from search could not be examined with corroborative evidence,” it said.
Further, there were cases where timely action was not taken by the concerned agencies or authorities due to delayed sharing of vital information. “Besides, there was no proper mechanism in the tax department to identify the additions of new assessees in tax net due to search and seizure operations/assessments and also to monitor the filing of returns regularly by them,” the audit report said.