CAG finds ₹18,799 crore unexplained income escaped assessment in 589 cases

This audit examined the compliance of the Income Tax Department with provisions for taxing unexplained transactions (Sections 68-69D and 115BBE) in assessments completed between FY 2018-19 and 2022-23. It focused on whether the correct high tax rates and surcharges were applied to income from unexplained credits, investments, and expenditures.

Union Government, Department of Revenue – Direct Taxes (Income Tax Department)

• Total tax effect of discrepancies identified: ₹ 25,085 crore across 1,902 audit observations.
• Under-assessment/under-charge of tax in 1,728 cases totaling ₹ 23,769 crore.
• Over-assessment/over-charge of tax in 174 cases totaling ₹ 1,316 crore.
• Incorrect application of tax rate/surcharge in 926 cases with a tax effect of ₹ 4,707 crore.
• Income not accurately taken to tax computation statements in 331 cases with a tax effect of ₹ 1,230 crore.
• Incorrect set-off of losses against unexplained additions in 56 cases with a tax effect of ₹ 349 crore.
• Unexplained transactions escaping assessment in 589 cases with a tax effect of ₹ 18,799 crore.
• Department accepted/rectified issues in 1,643 cases (₹ 13,258 crore), did not accept in 39 cases (₹ 2,349 crore), and did not reply in 220 cases (₹ 9,478 crore).
• Recommendations include reviewing potential assessment cases, implementing foolproof IT systems, fixing responsibility for errors, and issuing Standard Operating Procedures (SOPs) for consistency.

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