The Apex CAG auditor today stopped the Income Tax Department for not adopting a uniform approach to dealing with cases of fictitious donations or false purchases that cause loss of revenue to the government.
“The evaluation officers (AO) were unaware of the investigation wing’s report and did not initiate the necessary follow-up actions by rejecting the amounts of the fake donations or the fake purchases, which resulted in the loss of income,” said one official. Comptroller and Report of the Auditor General (CAG) presented in the Parliament.
He also noted that the OAs allowed or did not arbitrarily allow amounts related to false transactions, applying discretion that was not available to them. Fictitious donations or fake purchases are used as an instrument to launder black money.
He also highlighted the problem of the exaggerated demands of certain corporate advisers such as SBI, Bank of Baroda, Bank of India, IDBI Bank, HDFC, Kotak Mahindra Bank, Air India, Insurance & Credit Guarantee Ltd, etc., to achieve their collection objectives of income by resorting to methods that were irregular and unjustified.
“The lawsuits thus collected were reimbursed in the next financial year along with the interest under section 244A, which eventually placed a heavy burden on the public treasury in the form of preventable interest paid on reimbursements,” the report said.
The audit found irregularities in 2,203 cases related to the fiscal effect of Rs 549.56 crore related to non-compliance with the provisions of the Act / Rules / CBDT circulars, etc., he said, adding that such irregularities accounted for more than 12% of the total of audited cases.
The report, which contains 457 audit observations with a tax effect of Rs 4,186.8 crore, over the past five years, the income tax department recovered Rs 4,951.51 crore from the claim filed to rectify errors in the assessment that CAG had indicated.