Corporate tax: the CAG detects major errors in more than 350 cases


The Comptroller and Auditor General of India (CAG) reported significant errors in the assessment of over 350 corporate tax cases. He also advised the Central Commission for Direct Taxes (CBDT) to set up a foolproof IT system and an internal control system to avoid such recurrences.

In a report tabled in Parliament, the Supreme Government Auditors highlighted 356 high-value corporate tax cases with a tax effect of over 12,400 crore. These cases mainly concerned arithmetic errors in the calculation of income and tax, errors in the collection of interest, irregularities in the authorization of depreciation / business losses / capital losses, exemptions / Irregular MAT deductions / rebates / relief / credit, incorrect charging of business expenses, unrated / undervalued income under normal provisions, etc.

“Important errors”

Of these cases, CAG illustrated 38 cases of material errors / irregularities in corporate tax assessments involving a tax effect of around ₹ 4,000 crore. He said the application of incorrect tax and surcharge rates, errors in charging interest, excess or irregular repayments “signal weaknesses” in the internal controls of the Income Tax Department ( ITD), which need to be corrected.

He said the finance ministry had taken steps to initiate corrections in the cases reported by the audit. It can be mentioned that these are only a few illustrative cases, verified by tests during the audit. In the entire universe of all reviews, including reviews without review, such errors of omission or commission cannot be ruled out.

“The CBDT must not only review its assessments, but also put in place a foolproof IT system and internal control mechanism to prevent such errors from recurring in the future,” CAG said. In addition, he said that the tax administration can examine whether the cases of “errors” found are errors of omission or commission and if they are errors of commission, then the ITD should ensure. the necessary measures in accordance with the law. The report notes that direct tax revenue decreased by 7.6% in 2019-2020 (₹ 10.51 crore lakh) compared to 2018-2019 (₹ 11.38 crore lakh). However, the share of direct taxes in gross tax revenue declined to 52.3% in 2019-2020, from 54.7% in 2018-19.

Corporate tax collections decreased by 16.1% from 6.63 lakh crore in 2018-19 to 5.57 lakh crore in 2019-2020 and income tax increased to 4% from 4.62 lakh crore in 2018-19 to ₹ 4.80-lakh crore in 2019-20. According to the report, the number of non-corporate reviewers increased from 6.20 crore in 2018-2019 to 6.39 crore in 2019-2020, an increase of 3.16%.

The number of companies assessed fell from 8.46 lakh in 2018-2019 to 8.38 lakh in 2019-2020, registering a decrease of 0.9%.


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