NEW DELHI: The income tax department has Rs 11.1 lakh crore in tax arrears till 2017-18, 98% of which the department has termed difficult to recover. A lot of this has been due to the failure of the department to back up with attachment of properties of the accused, the Comptroller and Auditor General has observed in a report tabled in Parliament on Tuesday.
The CAG audit of direct taxes revealed that the time gap from the date of inco-me tax searches to the date of its initial order of attachment of properties rang-ed between 208 days and 1,220 days in the absence ofa prescribed time limit for issuing order of provisional attachment.
“Provisional attachment of properties, prior to the completion of assessment, is a critical tool with the income tax department to facilitate recovery of tax demands from those assessees who attempt to evade tax and to prevent accumulation of arrears,” the CAG has said. It noted that such lax practices have an inherent risk of the assessee alienating properties.
There has been a steady increase (Rs 5,75,340 crore in 2013-14 to Rs 11,14,182 crore in 2017-18) in the accumulation of arrears of tax demand, and the percentage of tax termed ‘difficult to recover’ (categorised by the department) over total arrears continued to be abnormally high ranging from 96% in 2013-14 to more than 98% in 2017-18, the auditor said.
The CAG has recommended to the Central Board of Direct Taxes to formulate a comprehensive SOP to be followed in case of attachment of properties so that the provisions in the I-T Act are not arbitrarily used by assessing officers.
“Audit also noticed deficiencies in respect of the list of assets provided in the appraisal report, which resulted in incorrect attachment of properties. The process of identification of assets was found to be deficient, thereby reducing its effectiveness,” the CAG said.
The report found that the validity period of several orders under Section 281B (attachment of properties) lapsed either before the tax demands raised were fully recovered or even before completion of assessments, which was in violation of the prescribed provisions. The audit could not ascertain whether the concerned assessee had disposed of the attached property in the intervening period when there was no provisional attachment, it said.
It also said that assessing officers did not comply with the CBDT‘s instructions of ascertaining details of all assets in the possession of assessees that could be considered for provisional attachment.
The CAG audit of direct taxes revealed that the time gap from the date of inco-me tax searches to the date of its initial order of attachment of properties rang-ed between 208 days and 1,220 days in the absence ofa prescribed time limit for issuing order of provisional attachment.
“Provisional attachment of properties, prior to the completion of assessment, is a critical tool with the income tax department to facilitate recovery of tax demands from those assessees who attempt to evade tax and to prevent accumulation of arrears,” the CAG has said. It noted that such lax practices have an inherent risk of the assessee alienating properties.
There has been a steady increase (Rs 5,75,340 crore in 2013-14 to Rs 11,14,182 crore in 2017-18) in the accumulation of arrears of tax demand, and the percentage of tax termed ‘difficult to recover’ (categorised by the department) over total arrears continued to be abnormally high ranging from 96% in 2013-14 to more than 98% in 2017-18, the auditor said.
The CAG has recommended to the Central Board of Direct Taxes to formulate a comprehensive SOP to be followed in case of attachment of properties so that the provisions in the I-T Act are not arbitrarily used by assessing officers.
“Audit also noticed deficiencies in respect of the list of assets provided in the appraisal report, which resulted in incorrect attachment of properties. The process of identification of assets was found to be deficient, thereby reducing its effectiveness,” the CAG said.
The report found that the validity period of several orders under Section 281B (attachment of properties) lapsed either before the tax demands raised were fully recovered or even before completion of assessments, which was in violation of the prescribed provisions. The audit could not ascertain whether the concerned assessee had disposed of the attached property in the intervening period when there was no provisional attachment, it said.
It also said that assessing officers did not comply with the CBDT‘s instructions of ascertaining details of all assets in the possession of assessees that could be considered for provisional attachment.
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