Number of tax assesses goes up, direct tax collections jump: CAG

The number of non-corporate assessees increased from 4.37 crore in 2016-17 to 5.38 crore in 2017-18, marking an increase of 23.1 per cent, the Comptroller and Auditor General (CAG) of India said on Tuesday.

On the other hand, the number of corporate assessees increased from 7.13 lakh in 2016-17 to 7.99 lakh in 2017-18, registering an increase of 12.1 per cent, it said in its report on direct taxes that was tabled in Parliament.

Direct taxes increased by 18 per cent in 2017-18 to Rs 1.53 lakh crore as compared to 2016-17. However, the share of direct taxes in gross tax revenue increased to 52.2 per cent in 2017-18 from 49.5 per cent in 2016-17.

The collections from corporation tax increased by 17.8 per cent from Rs 4.85 lakh crore in 2016-17 to Rs 5.71 lakh crore in 2017-18. Income tax collections increased to 19.9 per cent from Rs 3.41 lakh crore in 2016-17 to Rs 4.08 lakh crore in 2017-18.

The arrears of demand increased from Rs 10.4 lakh crore in 2016-17 to Rs 11.1 lakh crore in 2017-18.

The appeals pending with the Commissioner of Income Tax (Appeal) increased from 2.9 lakh in 2016-17 to 3 lakh in 2017-18 and the amount locked up in these cases was Rs 5.2 lakh crore, said the CAG report.

"There have been persistent and pervasive irregularities in respect of corporation tax and income tax assessments cases over the years," it said.

"Recurrence of such irregularities, despite being pointed out repeatedly in the earlier audit reports, points to structural weaknesses on the part of the department as well as the absence of appropriate institutional mechanisms to address this."

Such irregularities were particularly noticeable in the assessment charges in Maharashtra and Delhi. The Income Tax Department recovered Rs 183.3 crore during 2017-18 on the basis of observations pointed out by audit.

The CAG audited 6,778 cases and found that in 1,527 scrutiny assessments cases or 22.5 per cent claim of exemption on account of agricultural income was allowed without adequate documentation and verification of supporting documents.

"As such, it was not possible to determine whether the system in place was robust enough to ensure that assessees were being allowed an exemption for agricultural income only after adequate examination in the process of assessment," said the report.

It said the Central Board of Direct Taxes (CBDT) may consider amending the provision to make prior approval a pre-condition for foreign donation by a charitable trust or institution.

Significantly, the CAG said that the Income Tax Department lacks a system of information sharing among its various charges leading to assessments of group companies getting completed in a standalone manner, thereby missing the sight of important issues which have a bearing on the determination of taxable income.

"The CBDT not only needs to revisit its assessments but also put in place a fool-proof IT system and internal control mechanism to eradicate so-called errors," it said. "

The IT system for direct taxes needs to be designed in such a way that it should ensure zero or a minimal physical interface between the assessee and the tax officers.