Rs 3,486.38 cr irregularity in CBDT audit: Auditor

The Comptroller and Auditor General of India has noted that the audit by the Central Board of Direct Taxes during 2004-05 included 683 cases of major irregularities involving under-charging of tax to the tune of Rs 3,486.38 crore.

"Most of these observations relate to the application of incorrect rates of tax, incorrect valuation of closing stock, excess allowance of business expenditure, omission to assess capital gains, excess exemptions, incorrect deductions and arithmetical mistakes, leading to under-assessment of income either in the hands of corporate entities or individual and firms," the report said.

An audit of the assessment of all direct taxes conducted between April 1, 2004 to March 31, 2005 revealed 15,874 cases of under-assessment and 112 cases of over-assessment involving an effect on revenue to the extent of Rs 6,522.34 crore and Rs 144.64 crore respectively.

The CAG noted that while the action plan of the revenue department for 2004-05 provided for 90 per cent disposal of all major audit observations and 80 per cent for current major audit observations, the actual achievement was only 33 per cent and 23 per cent respectively, of the targets fixed.

Referring to individual cases, the CAG said that in the assessment of the Maharashtra State Electricity Board for the year 2001-02, the department allowed it undue benefit of depreciation of Rs 266 crore and excess carry forward of loss of the same amount which involved potential short levy to the extent of Rs 105.27 crore.

Similarly, in the case of Life Insurance Corporation of India in 2001-02, the tax was incorrectly computed at the rate of 10 per cent as against the applicable rate of 20 per cent on the distributed profits of Rs 319.71 crore and the surcharge at the rate of 10 per cent was also not levied.

The mistake resulted in a total tax short-levy of Rs 58.07 crore.

In the case of ICICI Bank Ltd for the assessment year 1996-97, it was allowed a deduction of Rs 11.77 crore on account of provision for bad and doubtful debts.

The omission resulted in incorrect allowance of deduction aggregating to Rs 169.77 crore involving under-assessment of income to that extent and thereby a tax short-levy of Rs 78.10 crore.