CAG seeks to investigate corporate tax undervaluation: The Tribune India

Tribune press service
New Delhi, December 21

The Comptroller and Auditor General (CAG) arrested the Income Tax Department (ITD) for “material errors or irregularities” in corporate tax assessments.

Pointing out that while a test audit of just a few cases showed irregularities of nearly Rs. 4000 crore, the CAG requested an investigation by the Central Direct Taxation Board (CBDT) into whether such errors were inadvertently made or were commission errors.

“If these are commission errors, then the ITD should ensure the necessary measures in accordance with the law,” he observed in the direct tax compliance audit report presented to Parliament on Tuesday. .

The CAG also noted that corporate tax collections have declined from over 1 lakh crore from Rs. 6.63 lakh crore in 2018-19 to Rs. 5.57 lakh crore in 2019-2020. But the income tax increased by 0.18 lakh crore, from Rs. 4.62 lakh crore in 2018-19 to Rs. 4.80 lakh crore in 2019-20.

The number of companies rated also decreased from 8.46 lakh to 8.38 lakh during the same period.

The CAG had examined 356 high-value corporate tax cases with a tax effect of Rs. 12,476.53 crore. He found errors worth Rs. 3,976.56 crore. These were mainly arithmetic errors, irregularities in the depreciation authorization, irregular deductions and incorrect allocation of business expenses.

Of the 356 high value cases, the CAG found an incorrect deduction at an ineligible rate of 100 percent instead of 50 percent implying a tax effect of Rs. 1,262.76 crore.

Unassessed income for a bank under the Foreign Currency Conversion Reserve (FCTR) balance resulted in a tax effect of Rs. 774.72 crore.

In addition to recommending an investigation, the CAG said the errors indicate weaknesses in ITD’s internal controls that need to be corrected. The CBDT should also put in place a foolproof IT system to prevent such errors from happening again in the future, she advised.