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

Who it concerns: Union Government, Department of Revenue – Direct Taxes (Income Tax Department)

What the auditor found

• Total tax effect of discrepancies identified: ₹ 25,085 crore across 1,902 audit observations.
• Under-assessment/under-charge of tax in 1,728 cases amounting to ₹ 23,769 crore.
• Over-assessment/over-charge of tax in 174 cases amounting to ₹ 1,316 crore.
• Incorrect application of tax rate and 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 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 a foolproof IT system, fixing responsibility for errors, and issuing Standard Operating Procedures (SOPs) for consistency.

Also in the document

• CAG found that in 589 cases involving ₹ 18,799 crore, Assessing Officers did not invoke provisions for unexplained transactions despite the transactions being bogus or unexplained, resulting in income escaping assessment.
• CAG noted that 1,777 out of the 1,902 cases reported were not reviewed by the Department's Internal Audit.
• CAG observed that in 17 instances, internal audit was conducted only after the CAG's audit had already been completed, indicating prescribed procedures were not followed.
• CAG stated that discrepancies suggest Assessing Officers did not exercise adequate due diligence in fulfilling statutory duties.