The Comptroller and Auditor General of India (CAG) has flagged significant gaps in the handling of income tax assessments, even as the department managed to recover Rs 3,588.79 crore by rectifying errors highlighted in earlier audits.
According to the CAG's report for 2022-23, as of February 28, 2024, nearly 59,352 cases from earlier years remained unsettled due to pending replies from the income tax department. These cases, primarily related to corporation tax, carry a potential tax impact of Rs 6,252.06 crore.
Audit Findings and Errors
The unsettled cases point to recurring errors in levy of interest, depreciation claims, carry-forward of business losses, and irregular allowances of expenditure. The audit also found instances of unexplained investments, arithmetic errors in tax computation and other discrepancies.
The CAG further highlighted 194 high-value cases with a combined tax effect of Rs 1,677.15 crore, stressing the need for urgent resolution.
Department Response and Corrective Action
The income tax department has taken action to rectify several issues pointed out by the audit, leading to the recovery of thousands of crores. However, the CAG cautioned that errors of omission and commission continue to occur in both scrutiny and non-scrutiny assessments.
"The CBDT not only needs to revisit the assessments completed during the year but also put in place a foolproof IT system and internal control mechanism to avoid recurrence of such errors," the report stated.
Way Forward
The report underscores the importance of strengthening internal controls and modernising assessment systems within the department. Experts believe that while recoveries are encouraging, the sheer volume of unsettled cases indicates the need for systemic reforms and proactive monitoring.
With billions of rupees in potential tax revenue at stake, the CAG's findings place renewed focus on the efficiency, transparency, and accountability of India's tax administration.
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