I-T scanner on corporate results ahead of advance tax filing

Tax dept to start sending letters to companies on Dec 1 seeking reasons for payment shortfall

The income-tax department is monitoring mismatches in revenue growth and advance tax payments by the top 100 companies across sectors, ahead of December quarter filings. 

According to sources, the tax department has identified at least 30 companies that had claimed zero growth for the quarter under consideration, citing various macroeconomic factors such as uncertainties due to the goods and services tax (GST). The firms had said they would pay tax and interest if growth came back in subsequent quarters.

However, officials suspect the companies were suppressing information to understate their advance tax liabilities. Hence the department is verifying the claims by examining companies’ revenues, profit and loss accounts, and operating profits for each quarter in the past three years.

The move comes after the department had seen only marginal growth in advance tax payments by both corporates and individuals in the June and September quarters, despite persuading them to pay by the due date. 

Taxpayers are supposed to make advance payments of 15 per cent of their estimated total tax liabilities by June 15, 45 per cent by September 15, 75 per cent by December 15, and the outstanding on March 15. However, in the past two-three quarters, the tax department observed increasing cases of shortfall and deferment in advance tax filing. Not satisfied with the collection, the Central Board of Direct Taxes (CBDT) is said to have asked its officials to keep a close watch on the September quarter results of large companies.

Advance tax collections in the Mumbai zone, which is home to 45 of the top 100 companies and is responsible for one-third of direct tax collections, grew only 10.6 per cent to Rs 69,000 crore as of September 15. 

“We are matching the growth numbers of the last three years with the advance tax payout in the same period,” said a senior I-T official. According to him, the advance tax payment cannot be an event-driven exercise. It is based on projections of earnings, which corporates/individuals do at the beginning of the financial year.

According to sources, the department will start sending letters on December 1 to the companies, seeking reasons for payment shortfall or perhaps deferring payments. 

An increasing number of self-assessments in the early quarters of the years had also raised doubts about the intention of taxpayers, said another tax official. “Tax laws allow self-assessment but only for the 10 per cent of the total advance tax payment. Such provisions are not for adjusting your expected gains, which you blatantly evade in the projection of the earnings,” official explained.

According to I-T laws, taxpayers are liable to pay interest on deferred advance tax in the case of a shortfall although tax officials are of the view that interest payment on the dues is not justified especially when it is done on purpose. Advance tax should be paid if the tax liability for a financial year is more than Rs 10,000. Such tax must be paid within the same year on the basis of self-assessment.