Apex auditor CAG today pulled up Income Tax Department for not adopting a uniform approach to deal with cases of fictitious donations or bogus purchases causing revenue loss to the government. “The Assessment Officers (AOs) did not take cognisance of report of the investigation wing and failed to initiate necessary follow up actions by disallowing the amounts of the fictitious donations or bogus purchases, which resulted in the loss of revenue,” said a Comptroller and Auditor General (CAG) report tabled in Parliament. It also noted that AOs were allowing or disallowing amounts pertaining to bogus transactions arbitrarily, applying discretion that was not available to them. Fictitious donations or bogus purchases are used as a instrument to launder black money. It also highlighted the issue of exaggerated demands on certain corporate assessees like SBI, Bank of Baroda, Bank of India, IDBI Bank, HDFC, Kotak Mahindra Bank, Air India, Deposit Insurance & Credit Guarantee Ltd etc, to achieve its revenue collection targets by resorting to methods that were irregular and unwarranted. “The demands so collected were refunded in the next financial year along with interest under section 244A, which eventually put a heavy burden on the exchequer in the form of avoidable interest paid on refunds,” the report said.
Audit found irregularities in 2,203 cases involving tax effect of Rs 549.56 crore related to non-compliance of the provisions of the Act/Rules/CBDT circulars etc, it said, adding that such irregularities accounted for more than 12 per cent of total cases audited. The report, which contains 457 audit observations having tax effect of Rs 4,186.8 crore, in the last five years, the income tax department recovered Rs 4,951.51 crore from demand raised to rectify errors in assessment that CAG had pointed out.